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ebgp multihop command only applies to loopbacks?

If I pair up two routers using eBGP using loopbacks as the source and one router between them, the

ebgp-multihop 2

command lets them come up as neighbors. This should not work however as they are more than 2 hops away.

For example I have the following network:

 

bgp question.png

The configuration on each router is:

ROUTER 1
----------
interface Loopback1
ip address 1.1.1.1 255.255.255.255
!
interface Serial0/0
ip address 80.80.80.1 255.255.255.0
clock rate 2000000
!
router bgp 1
no synchronization
bgp log-neighbor-changes
neighbor 2.2.2.2 remote-as 2
neighbor 2.2.2.2 ebgp-multihop 2
neighbor 2.2.2.2 update-source Loopback1
no auto-summary
!
ip route 2.2.2.2 255.255.255.255 Serial0/0



ROUTER 2
----------
interface Loopback1
ip address 2.2.2.2 255.255.255.255
!
interface Serial0/1
ip address 90.90.90.1 255.255.255.0
clock rate 2000000
!
router bgp 2
no synchronization
bgp log-neighbor-changes
neighbor 1.1.1.1 remote-as 1
neighbor 1.1.1.1 ebgp-multihop 2
neighbor 1.1.1.1 update-source Loopback1
no auto-summary
!
ip route 1.1.1.1 255.255.255.255 Serial0/1



ROUTER 3
----------
interface Serial0/0
ip address 80.80.80.2 255.255.255.0
clock rate 2000000
!
interface Serial0/1
ip address 90.90.90.2 255.255.255.0
clock rate 2000000
!
ip route 1.1.1.1 255.255.255.255 Serial0/0
ip route 2.2.2.2 255.255.255.255 Serial0/1
!

In this instance the neighborship comes up. Not that I'm complaining but shouldn't I need

ebgp-multihop 3

to get this working?

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