(Bloomberg) -- The United Nations lifted almost decade-old sanctions on Eritrea, potentially boosting the once-isolated Red Sea nation’s economy as it rebuilds relations with giant neighbor and long-time foe Ethiopia.

The UN Security Council announced the move Wednesday, ending an embargo first imposed in 2009 on accusations Eritrea backed armed groups including an al-Qaeda affiliate in Somalia. Eritrea, which has fought Ethiopia and Djibouti in the past two decades, described the claims as baseless and politically motivated. For five consecutive years, UN investigators said they’ve found no evidence of Eritrean support for Somalia’s al-Shabaab.

The step could help Eritrea, which a government survey says is home to 3.2 million people, unlock opportunities for its mainly agrarian economy where few foreign companies operate and that’s mostly isolated from the international banking system. The one-party state, roughly the size of Pennsylvania, enacts mandatory conscription for adults and in recent years has been a major source of migrants fleeing to neighboring nations and Europe.

Eritrea in July signed a peace accord with Ethiopia, ending a stalemate following a 1998-2000 war that claimed as many as 100,000 lives, and Ethiopian rebels hosted by Eritrea’s government have returned home. As the nation rebuilds relations with Djibouti and Somalia, President Isaias Afwerki, who’s ruled since independence from Ethiopia in 1993, has hailed a “season for peace” in the Horn of Africa region.

The UN Security Council has previously demanded that Eritrea disclose information about Djiboutian fighters missing in action after border clashes in 2008, who are presumed prisoners of war. UN investigators this year reported they’d found no further information regarding their fate or whereabouts. They also said that a military base in Eritrea used by the United Arab Emirates contravenes the arms embargo.

To contact the reporter on this story: Nizar Manek in Addis Ababa at nmanek2@bloomberg.net

To contact the editors responsible for this story: Paul Richardson at pmrichardson@bloomberg.net, Michael Gunn

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