Since independence, Djibouti has maintained close relations with France and the Arab world, receiving significant foreign aid and development assistance from both sources. In addition, much of the country's trade is with France. In 1991, following the fall of the Siad Barre and Mengistu governments in Somalia and Ethiopia, an estimated 100,000 refugees of both countries came into Djibouti. In 2000, a three-year drought brought in 50,000 more Somalian refugees. Adding to this, Somalia has extended territorial claims over Djibouti in the past and harbored FRUD insurgency rebels. In 2000, Guelleh's government hosted both the Somali Reconciliation Conferences and the Arta Conference, which brought together various Somali clans and warlords. These efforts to promote reconciliation in Somalia have led to the establishment of the Transitional National Government (TNG) in Somalia. Guelleh appears optimistic that the TNG will move toward bringing peace and stability to Somalia.
Having been born in Ethiopia, Guelleh enjoys the support of that country and promises greater economic integration. He campaigned on a program of increased ties with Ethiopia for economic and territorial security. As the fighting between Ethiopia and Eritrea increased, relations between Ethiopia and Djibouti were strengthened. The two countries have been desperately dependent on each other for survival, and Guelleh had announced his intention to seek an economic and political federation with Ethiopia. However, close ties with Ethiopia resulted in conflict with Eritrea in November 1998, when Djibouti severed diplomatic relations with Eritrea on grounds that the latter provoked conflict with Ethiopia. With the Ethiopia-Eritrea war of 2000, Guelleh, with the hope of remaining nominally neutral, reconsidered his relationship with Eritrea, and sought to renew relations with that country. In 2001, Eritrean President Isaias visited Djibouti and Guelleh made a reciprocal visit to Asmara to establish if not friendly, at least neutral, relations.
Djibouti's relations with the United States have been strong, as the Djibouti government has generally been supportive of U.S. and Western interests. This was demonstrated both during the Persian Gulf war of 1990–91 and in Guellah's offer of the full support of his nation in the U.S. initiated War on Terror, a response to the 11 September 2001 terrorist attacks on the U.S. Pentagon in Washington, D.C., and the World Trade Center in New York. As a victim of past international terrorist attacks, Guelleh takes a pro-active position among Arab League members to support coalition efforts against terrorism. However, in early 2003, Guelleh was among those leaders who opposed military action against Iraq (being proposed by the United States) without a United Nations (UN) resolution. Despite his opposition to military action, in 2002 and 2003, Guelleh allowed the United States to construct a military base on Djibouti land. The Horn of Africa is a base for U.S. military operations with proximity to the Middle East. The million-dollar military project was controversial because it did nothing to alleviate the extreme poverty of Djiboutians living near the new base. On 11 December 2002, President Guelleh hosted a visit from U.S. secretary of defense Donald Rumsfeld during Rumsfeld's visit to military installations in the region.
Djibouti is a member of the Arab League, as well as the African Union (known until July 2001 as the Organization of Africa Unity—OAU), and the Intergovernmental Authority on Development (IGAD).