How Iran's retaliation threatens Kenya's economy, security

The Middle East plunged into a new and dangerous chapter after the United States and Israel launched coordinated military strikes against Iran Saturday, killing Supreme leader Ayatollah Ali Khemenei.

Explosions rocked the Iranian capital Tehran, with satellite images showing extensive damage at the secure compound of the Supreme Leader. Iranian state media confirmed Saturday evening the killing of the 86-year-old who had held power for 36 years.

Alireza Arafi, 67, replaces Khamenei. Iran formed a three-person leadership council: Arafi, President Pezeshkian and Chief Justice Mohseni-Eje’i. They are splitting Khamenei’s powers between them until the Assembly of Experts picks a permanent supreme leader.

The attack triggered waves of retaliatory missile attacks across the region from Iran bringing global aviation to a standstill. 

For Kenya, thousands of kilometres from the frontlines, the shockwaves are arriving with alarming speed and with both economic and security implications. Motorists and businesses, are the most immediate consequence of this escalating conflict and will be felt at the petrol pump. Oil prices have already spiked as the strikes disrupted Gulf shipping routes, including the Strait of Hormuz, through which much of Africa’s imported fuel passes. The strait, a narrow waterway between Iran and Oman, handles about 21 million barrels of oil per day, roughly 20 per cent of global consumption.

Transit suspension

Shipping data now shows that major container vessels and oil tankers are turning back from the strait rather than risk transit. Hapag-Lloyd, a leading German international shipping and container transportation company, headquartered in Hamburg became the first major shipping line to formally announce the suspension of transits through the Strait of Hormuz, warning customers of delays, diversions, and schedule disruptions. The affected vessels include container ships operated by CMA CGM and Maersk, all of which have aborted their planned passages.

Kenya’s vulnerability to these disruptions is acute. The country relies almost entirely on imported refined petroleum, with the Middle East serving as the primary source. In March 2023, Kenya entered into a government-to-government deal with Saudi Aramco, Abu Dhabi National Oil Company, and Emirates National Oil Company (ENOC) to supply all monthly petroleum imports under a 180-day credit arrangement designed to ease dollar demand and stabilise the shilling at the time. In January, this arrangement was extended to early 2028, and includes strategic plans by Saudi Aramco to transform the Mombasa petroleum refinery into a modern oil storage hub. The arrangement now faces an uncertain future if the conflict widens and disrupts Gulf supply lines.

Trade and Industry CS Lee Kinyanjui acknowledged the threat. “The conflict in the Middle East will have a direct impact on Kenya’s export basket,” he stated. “We enjoy thriving trade with Middle East countries, where supplies of meat, vegetables, coffee, tea and flowers top the list.”

The numbers tell a sobering story. Kenya and the UAE signed a Comprehensive Economic Partnership Agreement on January 14, the first such trade deal between the UAE and a mainland African country. The UAE is Kenya’s second-largest source of imports and its sixth-largest export destination.

However, trade with the region has already proven risky. The Kenya National Chamber of Commerce and Industry revealed in January that Kenyan traders lose approximately Sh6.78 billion annually due to unpaid products and lost containers in the UAE market.

The current conflict threatens to compound these losses. With Dubai International Airport, the world’s busiest for international passenger traffic, and Al Maktoum International both suspending all operations indefinitely, the airfreight corridors that carry Kenyan flowers and vegetables to Gulf markets have been severed. Kenya Airways has announced the temporary suspension of its flights to Dubai and Sharjah following the closure of United Arab Emirates airspace.

Kinyanjui acknowledged the government’s concerns while pointing to longer-term strategy. “In a world increasingly dependent on one another, disruption to trade and travel can have far-reaching consequences, even in faraway lands. While we hope for a speedy resumption to normalcy, the reality of geopolitics remains unpredictable,” he said.

The government, he added, is consulting with critical stakeholders to ensure that Kenya’s trade position is not adversely affected and that alternative routes can be established to serve markets in the interim.

Diplomatic balancing act

The conflict places Kenya in a difficult diplomatic position. On one hand, the US remains a critical trade and security partner. Under the African Growth and Opportunity Act, Kenya enjoys duty-free access for thousands of products – a preferential window that supports over 66,000 direct jobs in the apparel sector alone.

On the other hand, Iran represents one of Kenya’s fastest-growing frontier markets. Kenyan exports to Tehran, primarily high-quality black tea, surged to Sh6.8 billion in 2023 – a more than four-fold increase over five years. A high-level Kenyan delegation concluded a landmark visit to Tehran just two months ago, seeking to rejuvenate a historic trade relationship and expand cooperation into technology and agriculture.

President Donald Trump has threatened to impose a 25 per cent tariff on any nation trading with Iran, a move that would neutralise Kenya’s AGOA benefits and force Nairobi to choose between a resurgent tea market and vital access to American consumers. The warning, posted on Trump’s Truth Social platform, arrives at a diplomatically sensitive moment for Kenya.

“The timing could not be more delicate,” a senior official at Foreign Affairs ministry involved in the talks, told The Standard yesterday, speaking on condition of anonymity because of his role in the trade discussion. “We are in the process of reactivating a major export market. This threat introduces a layer of risk that neither traders nor policymakers can ignore.”

The government now finds itself walking a geopolitical tightrope. “Our instructions are to continue implementing the agreed roadmap with Iran, but with heightened awareness,” the official added. “We are monitoring the US situation closely. We cannot afford to lose the American market, but we cannot ignore the potential of the East.”

US bases in the crosshairs

Perhaps the most alarming dimension of this conflict for Kenya is the security threat lurking much closer to home. The US maintains two significant military installations in the region that could become targets in a wider confrontation.

Camp Lemonnier in Djibouti is the only permanent US military base in Africa, hosting approximately 4,000 personnel and serving as the headquarters for Combined Joint Task Force-Horn of Africa.

On Kenyan soil, the Manda Bay airfield in Lamu County is currently undergoing a 71 million dollar runway expansion project funded by the US State Department. US Africa Command’s General Dagvin Anderson, who attended the groundbreaking ceremony in January, described the project as an investment in joint security that “enhances the security for Kenya, but also enhances the security for all of us”. Kenya’s Defense ministry called it a “pivotal strategic capability upgrade that significantly enhances operational reach, heavy airlift capacity, and forward logistical sustainment for joint and partner military operations”.

But the base has a painful history. In 2020, al-Shabab militants launched an attack on Manda Bay airfield, killing Army Specialist Henry Mayfield Jr and two Defense Department pilot contractors. The insurgents overran the site before an AFRICOM quick-reaction force based out of Djibouti could reinforce the base.

With Iran’s Supreme Leader now confirmed dead and the Islamic Revolutionary Guard Corps vowing, “the most fiercest offensive operations” against American and Israeli targets, the threat of proxy attacks has escalated. Iran’s network of allied militia groups across the region, including in Somalia and Yemen, may act independently or intensify efforts against US forces and interests. The potential for al-Shabab, which has longstanding if informal ties to Iran-aligned networks, to exploit the chaos for its own purposes cannot be dismissed.

The conflict also raises the spectre of increased terror activities across East Africa. Iran’s Parliament National Security Commission Secretary Bahram Saeidi issued a chilling warning: “We have set fire to US bases in seven countries, and that was only a warm-up.”

For Kenya, which has suffered numerous attacks linked to al-Shabab, the risk is twofold. First, the conflict could energise radical elements within the region, providing propaganda opportunities and recruitment incentives. Second, security forces that would normally focus on counterterrorism may be stretched thin or redirected to address potential threats to US facilities, creating gaps that militant groups could exploit.