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Ethiopia is a key ally of the Western world, especially the U.S., which considers it asan important regional security partner in the global war on terror. However, in theregion of the Horn of Africa its role and ties are much more complex. Bordering withEthiopia in the north, Eritrea, which after a long civil war gained its independencefrom Ethiopia itself, does not maintain good relations with Addis Ababa. Behind theborder in the west, after the division of the Sudan, the situation is also far fromstability. Another important problem is a disagreement between Addis Ababa,Khartoum and Cairo over the use of waters of the Nile. In the east, the borderlandwith Somalia generates not only border conflict, but also an internal one. The paperattempts to answer questions about the role played by Ethiopia in the region of theHorn of Africa, taking into account its complicated relations with its neighbours aswell as its emerging new challenges in the field of internal and international security.The analysis presented in the article is based on qualitative data gathered duringextensive field research conducted in Ethiopia (2011, 2012, and 2014) and Somalia(2011) as well as the already existing quantitative data provided by internationalorganizations, governments and research institutions. The paper is developed with theuse of historical method, as well as critical analysis of literature on the subject,official documents and the press.