“Officially, Djibouti has no quarrel with the United Arab Emirates, nor with Dubai,” insists a government official, offering a thin smile.

The diplomatic nicety follows a landmark victory at the London Court of International Arbitration (LCIA).

On 29 September last year, the court ruled in Djibouti’s favour for the first time in a legal saga that has poisoned relations between the two nations for nearly a decade.

The dispute centres on the Doraleh Container Terminal (DCT). In 2018, Djibouti abruptly tore up a management contract with the Emirati giant DP World, sparking a bitter international legal battle.

The latest ruling saw British judges dismiss a $1bn claim for damages brought by the Emiratis against their former partner, Port de Djibouti SA (PDSA).

In the capital, the decision was toasted not just as a legal vindication, but as a long-awaited act of “revenge”.

Since 2009, a string of legal setbacks had threatened to tarnish the country’s reputation among foreign investors.

At one point, even Washington grew jittery, spurred by Emirati warnings that the terminal might fall into Chinese hands.

Officially, Djibouti has no quarrel with the United Arab Emirates, nor with Dubai

Those fears were largely put to rest in 2019 when General Thomas Waldhauser, then head of US Africa Command, told a Senate committee that the port was, quite simply, better managed by the Djibouti government.

The LCIA ruling is a stinging rebuke for DP World. Having lost its foothold in Djibouti, the company has spent years attempting to establish ‘bridgeheads’ around the Bab el-Mandeb strait to break Djibouti’s regional hegemony.

Between 2017 and 2018, the UAE utilised DP World to plant military and logistical flags in Assab, Eritrea and Berbera, in the breakaway region of Somaliland.

The Emirati retreat, Riyadh’s masterstroke

These were strategic moves: a bid to gain the upper hand in the war against Houthi rebels in Yemen while simultaneously attempting to siphon off the lucrative Ethiopian transit trade that remains Djibouti’s lifeblood.

However, the Emirati gambit has faced headwinds. While they remain in Berbera, the 2024 memorandum between Somaliland and Ethiopian Prime Minister Abiy Ahmed – intended to provide Addis Ababa with a sea exit – has stalled.

Two years on, Berbera lacks the infrastructure to match Djibouti.

As the UAE’s influence hits a plateau, Saudi Arabia is stepping into the breach. In March 2026, the Saudi-owned Red Sea Gateway Terminal (RSGT) is expected to sign a 30-year concession to develop the port of Tadjourah in northern Djibouti.

With an initial $180m investment, the Saudis aim to handle 2m tonnes of cargo by 2028, with hopes to scale to 5m. For local officials, the message to Dubai is clear: “This is a free warning,” says one insider.

The relationship with Riyadh is currently at an all-time high. The Saudi Fund for Development (SFD) is bankrolling the new Hassan Gouled International Airport – a cornerstone of President Ismaïl Omar Guelleh’s economic vision as he prepares to run for a sixth term this April.

A ‘win-win’ sovereignty

The bond between the two states is built on more than just infrastructure; it is forged in geopolitical loyalty.

In 2017, Djibouti sided firmly with Riyadh during the diplomatic blockade of Qatar.

It was a risky move – Qatar had been a key ally in Djibouti’s border dispute with Eritrea – but it has paid dividends.

Riyadh’s subsequent mediation between Guelleh and Eritrea’s Isaias Afwerki in 2019, though yielding little in long-term diplomacy, cemented the Saudi-Djibouti axis.

Today, while the Emiratis look toward Sudan and the Qataris attempt to rebuild ties through philanthropic foundations, Saudi Arabia is embedding itself into the Djiboutian economy.

For the tiny republic, the Saudi partnership offers a rare win-win: a way to dilute its heavy financial dependence on China, while helping Riyadh check the growing regional influence of Turkiye.

In the shifting sands of the Horn of Africa, Djibouti has proven that being small does not mean being a pawn.

By positioning itself at the centre of Gulf rivalries, it has made itself too important for anyone to ignore.