The Türkiye–Somalia Oil Agreement serves as a double-edged sword for Somalia’s trade landscape. On one hand, it signals international confidence, potentially attracting foreign direct investment (FDI) and catalyzing trade infrastructure development. On the other hand, the agreement’s asymmetrical provisions—such as Türkiye’s ability to recover up to 90% of oil revenues as cost recovery and retain profits—raise concerns about economic sovereignty, equitable resource distribution, and the potential crowding out of diversified FDI. Thus, while the deal could unlock new trade opportunities, it also poses significant vulnerabilities that must be managed through robust governance and strategic economic planning.
Türkiye has emerged as one of Somalia’s most consistent and assertive international partners. Beginning with its humanitarian intervention during the 2011 famine, Türkiye has since deepened its footprint through investments in infrastructure, military training, and public service delivery. Its involvement in managing Mogadishu’s airport and seaport, as well as financing major construction projects, has positioned Türkiye as a central development partner in Somalia’s reconstruction.
In March 2024, Somalia and Türkiye entered into a landmark oil and gas cooperation agreement, granting Türkiye’s state-owned Turkish Petroleum Corporation (TPAO) rights to explore and develop hydrocarbon resources in Somalia’s onshore and offshore territories. This agreement is part of a broader strategic partnership encompassing defense, infrastructure, and economic collaboration.
For a country emerging from decades of civil conflict, political instability, and underdeveloped institutions, this agreement has been hailed by supporters as a potential economic game-changer. If executed transparently and strategically, it could provide the capital, expertise, and political momentum necessary to exploit Somalia’s oil and gas reserves, modernize trade infrastructure, and elevate its geopolitical relevance.
However, the terms of the deal have also triggered critical scrutiny. Key provisions allow Türkiye to recover up to 90% of annual production revenues in the name of cost recovery, while profits can be booked and retained offshore. This risks limiting Somalia’s fiscal returns in the early phases of production and raises concerns about transparency, revenue leakage, and accountability.
In what follows, the article explores the key trade-related dimensions of the agreement, including implications for the balance of payments, port and logistics services, FDI inflows, and regional trade integration.
Market Entry and Structural Gaps
For the first time in its post-conflict economic trajectory, Somalia is positioned to enter the global oil and gas export market. Natural resource exports, especially hydrocarbons, have historically provided low-income countries with a fast track to increased export volumes, foreign exchange inflows, and external visibility. For Somalia, the agreement with Türkiye marks a significant entry point into the global commodity markets—its first formal attempt to position itself as a hydrocarbon-exporting state.
However, the transition from resource potential to meaningful economic development is rarely linear. Experiences from other emerging oil producers reveal that participation in global markets without strong institutional safeguards can produce misleading macroeconomic signals—particularly in the balance of payments—and may entrench structural trade dependencies rather than reduce them.
In Somalia’s case, the asymmetry between export volumes and actual financial returns—when combined with the country’s heavy reliance on imports and underdeveloped industrial base—raises critical questions about the extent to which transformative trade outcomes are realistically achievable under current conditions.
According to the terms of the agreement, the volume and nominal value of petroleum exports will be credited to Somalia’s trade account, boosting headline export statistics and enhancing its image as a resource-exporting country. Yet this statistical benefit obscures a deeper imbalance in financial flows. TPAO is entitled to recover up to 90% of annual production as “cost petroleum” a mechanism allowing it to recoup operational, logistical, and security expenditures before profits are shared with the Somali state. In practice, this means that while oil and gas exports may appear substantial on paper, the bulk of financial returns in the early years will remain with the Turkish operator. These earnings are likely to be recorded under Türkiye’s income account or foreign investment income not Somalia’s fiscal receipts or foreign reserves.
To ensure that the trade balance reflects genuine national gains, Somalia must implement robust and transparent revenue-tracking mechanisms and renegotiate future production-sharing agreements to limit prolonged cost recovery periods and allow for earlier state participation in profit flows.
Additionally, the agreement risks reshaping Somalia’s import structure in ways that could exacerbate existing trade imbalances. Somalia already depends heavily on imports to meet domestic demand. In 2023, the country’s total imports were valued at approximately $8.0 billion USD, with Türkiye among its top trading partners according to the World Bank. The growth of the oil sector will likely intensify this trend. A sharp increase in imports especially capital goods, technical equipment, and high-value consumer products required for oil-related infrastructure without a corresponding rise in domestic value addition or employment creation, could widen Somalia’s trade deficit in the short to medium term.
Expansion of Port Trade and Logistics Services: Dual-Use or Sector-Locked Infrastructure?
A less discussed but highly consequential aspect of the Türkiye–Somalia oil agreement is its potential to transform Somalia’s trade-related infrastructure. Oil exports will require the construction or upgrading of specialized infrastructure—including deepwater ports, storage terminals, loading facilities, pipelines, and inland transport networks.
These investments may create “dual-use capacity,” meaning that the infrastructure built for the energy sector can also support non-energy trade, such as agricultural exports, industrial goods, or regional logistics services. Somalia’s ports—particularly Mogadishu, and potentially Hobyo or Barawe—could evolve into strategic nodes that serve not only hydrocarbons but also broader regional commerce.
The integration of modern customs systems, enhanced port security, and digitized trade logistics could also improve Somalia’s performance in international trade indices and reduce informal transaction costs. This would be a major gain for Somali businesses and international investors alike.
However, there is also a risk of “infrastructure capture,” where investments are narrowly tailored to the needs of a single sector or foreign operator, leaving other sectors marginalized. For example, if pipelines and terminals are built solely for crude oil with no consideration for general cargo or container handling, the infrastructure will serve a limited purpose.
Therefore, the Somali government must ensure that infrastructure design is inclusive and strategically aligned with national development plans. The goal should be to create multi-purpose corridors that stimulate broad-based economic growth, beyond narrow energy-sector expansion.
Foreign Direct Investment (FDI): Strategic Confidence
One of the immediate effects of the Türkiye–Somalia agreement is the signaling effect it has on international investors. The presence of a G20 country in Somalia’s hydrocarbons sector—backed by state capital, political risk guarantees, and security cooperation—may change international perceptions of Somalia’s investment climate. This could unlock follow-on investments in ancillary sectors such as infrastructure, services, and manufacturing.
However, FDI is a double-edged sword. If dominated by a single bilateral actor in a capital-intensive sector, it may deter or crowd out diversified investment flows. Smaller or more risk-averse entities may be discouraged by the concentration of influence Türkiye now holds over a critical sector. This is especially relevant in Somalia, where state institutions are still developing and regulatory capture remains a concern.
Moreover, the agreement may set a precedent for opaque or unbalanced investment frameworks, which could further alienate potential investors seeking fair and predictable terms. For Somalia to avoid this, it must create a robust investment code, harmonize regulatory frameworks, and offer a level playing field to all foreign and domestic investors.
Intra-African Trade: Regional Model
The Türkiye–Somalia oil deal, if executed strategically, could become a catalyst for Somalia’s deeper integration into regional economic frameworks such as the East African Community (EAC), the Intergovernmental Authority on Development (IGAD), and ultimately the African Continental Free Trade Area (AfCFTA). By increasing Somalia’s trade capacity, encouraging investment in cross-border infrastructure, and reinforcing its place within regional value chains, the deal could position Somalia as a more active and reliable participant in intra-African trade.
Somalia’s proximity to Ethiopia, Kenya, Uganda, and South Sudan all of which face energy access challenges positions it well to become a hub for refined petroleum products, power transmission, or logistics services. This would represent a strategic shift from aid-dependent bilateralism toward intra-African commercial diplomacy, where trade corridors and shared energy infrastructure foster mutual economic interests.
According to the African Development Bank and UNECA, intra-African trade accounted for just 14.4% of total African exports in 2022—significantly lower than intra-regional trade in Europe (69%) and Asia (59%). For Somalia, leveraging its strategic location and potential oil resources can facilitate deeper integration into regional markets. By developing infrastructure that connects with neighboring countries, Somalia can enhance trade flows and participate more actively in regional value chains.
If Somalia leverages the oil sector to develop multi-use infrastructure and connects it with regional corridors, it could cement its position as a trade and energy gateway in the Horn of Africa. However, this opportunity requires coordinated diplomacy, reliable governance, and regional agreements to ensure that benefits are equitably shared and politically sustainable.
Resource Nationalism in a Fragile State
A core question raised by critics is whether Somalia can truly exercise sovereignty under the current agreement terms. While sovereignty is not diminished by foreign investment per se, the extent to which Somalia influences decision-making, manages revenues, and monitors compliance will determine whether the agreement is a partnership or a dependency.
Resource nationalism—the idea that natural resources belong to the people and should serve national development—is increasingly popular in African policy circles. In countries like Ghana and Namibia, governments have renegotiated deals or created local content policies to ensure greater national benefit. Somalia may need to follow suit—particularly if domestic expectations for resource ownership and benefit-sharing grow.
Given its institutional fragility, Somalia faces a dilemma: foreign investment is needed to kickstart the sector, but over-reliance on one actor could weaken the state’s ability to govern its own resources. Transparency, parliamentary oversight, civil society engagement, and international technical support will be essential in managing this delicate balance.
Conclusion and Recommendations
The Türkiye–Somalia oil agreement marks a historic moment for Somalia’s economic trajectory. It represents the first serious step toward monetizing the country’s vast, untapped hydrocarbon resources. If implemented wisely, the deal could open new trade corridors, stimulate infrastructure development, and attract broader foreign investment.
But success will not be automatic. The agreement contains structural imbalances that could result in delayed fiscal gains, offshore profit retention, and sectoral capture by a foreign power. Somalia must urgently strengthen its institutional capacity, renegotiate unfavourable terms, and align oil development with national development goals.
Ultimately, the difference between opportunity and vulnerability lies in governance. A well-governed Somalia could turn its energy wealth into a foundation for sustainable, diversified trade. A poorly governed one risks repeating the “resource curse” seen elsewhere in Africa.
To ensure that the Türkiye–Somalia oil agreement yields inclusive and sustainable benefits, a set of targeted recommendations is warranted:
- Strategic Infrastructure Planning: All energy-linked infrastructure should be designed for dual-use purposes to avoid sectoral lock-in. Investment in multi-modal transport networks, inter-port connectivity, and digital trade facilitation systems should be prioritized to serve broader national trade needs.
- Transparent Revenue Management: Somalia must adopt international best practices for resource revenue governance, including adherence to the Extractive Industries Transparency Initiative (EITI), the creation of a sovereign wealth fund, and the establishment of independent auditing and oversight mechanisms that involve civil society and parliamentary bodies.
- Investment Diversification and Competitive Neutrality: To mitigate the risks of investment concentration, Somalia should articulate a robust and transparent investment code that ensures competitive neutrality, protects investor rights, and fosters a level playing field across sectors and actors.
- Institutional Strengthening and Legal Capacity: Long-term sectoral governance will depend on building the capacity of Somali institutions to negotiate, implement, and enforce complex commercial agreements. Targeted support should be directed toward legal drafting, contract management, dispute resolution, and environmental and social safeguards.
- Regional Economic Integration: Somalia should actively use this agreement to align itself with regional economic frameworks. Developing corridor-based trade agreements, harmonizing technical standards, and linking energy and logistics infrastructure with neighboring countries can help Somalia become a reliable actor in regional value chains and energy markets.
By Juweria Mohamed Ibrahim “Garacade”
Coordinator, Office of the Rector, SIMAD University
