Italy’s Banking Power in Eritrea: A Story of Diplomatic Value and Financial Privileges

Establishing a Presence in Eritrea

In 1959, Italy’s Banco di Roma made a significant move by establishing a presence in Eritrea, a newly formed province within the Ethiopian Empire. This marked a turning point in Ethiopia’s economic relations with Europe, providing an alternative to the strict regulations imposed by US and British authorities.

Diversifying Sources of Hard Currency

According to sources, Minister of Commerce Ylma Deressa saw the Italian bank as a means to diversify sources of hard currency, allowing Eritrea to reduce its dependence on Anglo-American influence. The presence of Banco di Roma was seen as a way to maintain good relations with Italy while promoting economic development in the region.

Entangled in Ethiopian Politics and Diplomacy

However, the bank’s operations soon became entangled in the complex web of Ethiopian politics and diplomacy. As Eritrea’s federal arrangement came to an end in 1962, and it was incorporated into the Ethiopian Empire, Banco di Roma found itself operating in a juridical limbo.

Seeking Diplomatic Intervention

In response, the bank sought diplomatic intervention from the Italian government, seeking to preserve its existing privileges at any cost. Emperor Haile Selassie ultimately accepted an exemption for Banco di Roma, allowing it to maintain full control over its Eritrean subsidiaries while operating within the province’s borders.

Creating a Semi-Independent Financial Enclave

The arrangement was seen as a way to create a semi-independent financial enclave, bypassing the formal hierarchy that submitted commercial banks to the authority of the National Bank of Ethiopia. The bank’s status depended on an imperial decree, which allowed it to make informal payments disguised as commercial loans to the Crown and its local associates.

A Key Player in Maintaining Good Relations

From the perspective of the Ethiopian ruling class, these levies were not dissimilar to traditional tributes paid by semi-independent enclaves across the country. In return for its privileges, Banco di Roma was seen as a key player in maintaining good relations between Italy and Ethiopia while promoting economic development in Eritrea.

A Story of Complex Diplomatic Interests

The story highlights the complex interplay of diplomatic interests and financial power in shaping international relations during the Cold War era.