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NAIROBI, June 30 (Reuters) - Eritrea and Djibouti struck a deal earlier this month to end their two-year border dispute. It was a move that caught most analysts by surprise.
The two Red Sea nations, who overlook vital shipping lanes linking Europe and Asia, have engaged in occasional border skirmishes since June 2008 when Djibouti said Eritrea crossed the border and began occupying its territory.
Following the Qatar-brokered deal, which has been praised by the United Nations and African Union, Djibouti announced that Eritrea had pulled out of its territory. Here are some question and answers about why Eritrea may have changed its outlook.
In December, the United Nations Security Council passed Resolution 1907, slapping sanctions on Eritrea which it accused of destabilising the volatile Horn of Africa.
The U.N. imposed the punitive measures for Eritrea's alleged support of rebel groups in nearby Somalia -- where 21,000 people have died in a three-year insurgency -- and for refusing to pursue a peaceful resolution with Djibouti.
On Monday, U.N. chief Ban Ki-moon said the border deal was a "move in the right direction" for Eritrea, and many observers have been quick to draw the link with the U.N. sanctions.
But some say it is out of character for Eritrea to have so quickly succumbed to international pressure.
"It is unlikely (the deal) has much to do with the sanctions. The leadership is still absolutely outraged that these sanctions were imposed," Richard Reid, a Horn of Africa expert at the University of London, told Reuters.
While the 6-month-old sanctions may not have dictated the move, analysts agree longer term measures will heap pressure on Asmara, its few allies, and on foreign companies operating there, especially in its burgeoning mining industry.
Eritrea is seen on the threshold of a gold mining boom that could drive its struggling, agriculture-based economy.
"The situation in Eritrea is pretty dire, the economy is in free-fall," Nairobi-based Ernst Jan Hogendoorn, International Crisis Group's Horn of Africa director, told Reuters.
Some 16 foreign companies are now operating in the young industry. Canada's Nevsun Resources Ltd is expected to be the first to start producing gold later this year, followed some 12 months later by Australia's Chalice Gold Mines. The sanctions forced some company leaders to defend their multi-million dollar involvements.
In May, a U.S.-commissioned report said mining companies should be deterred from working in the country.
"Prolonged sanctions could actually hurt them when it comes to this mining boom," said Reid, who added that it may have contributed to Eritrea pursuing the deal.
Analysts agree that Eritrea feels dangerously isolated and its top priority has become reaching out beyond the region in an effort to build broader alliances for its protection.
"In the last 12 months (Eritrea) has been trying to form these relationships outside the Horn: Qatar, Iran, a little with Israel ... (and) getting friendly with Egypt," Reid said.
"They are trying to shore up a diplomatic and political front against a region and an international community that they feel will back Ethiopia no matter what Ethiopia does," he said, adding Eritrea was constantly wary of its rival.
In 1998-2000 Eritrea and Ethiopia went to war over a border dispute and the conflict cost some 70,000 lives.
"Eritrea will have learned the lesson of 1998 ... no one was willing to stand up and fight in their corner," Reid said.
"It is very plausible that in an effort to reach out to the Qataris they were willing to listen to their overtures about the border dispute," Hogendoorn said. (Editing by Richard Lough and Myra MacDonald)