Yemen's economic war

Fight for control of trade and natural resources heightens armed conflict
Niño caminando en Aden, Yemen, una zona que ha sido afectada por la guerra desde 2015

OCHA/Giles Clarke  -   Child walking in Aden, Yemen, an area that has been affected by war since 2015.

Both sides have been accused of corruption and diverting funds intended for citizens.

The Yemeni population has been suffering a terrible war for seven years that has plunged the country into the most serious humanitarian crisis in the world according to the United Nations. Killings, bombings, sexual assaults, looting and torture are some of the very serious human rights violations committed in Yemen while hostilities continue between the Houthis, backed by Iran, and the international coalition led by Saudi Arabia.

Armed conflict always has a negative effect on the economy, and Yemen is no exception. The Arabian Peninsula country is not only suffering from a military confrontation, but is also witnessing a trade war between the actors involved. In addition to the destruction of infrastructure and the collapse of trade, which accentuate the economic crisis, the two sides, both the Houthis and the internationally recognised, Riyadh-backed government of Abd Rabu Mansur Hadi, are fighting to dominate or reinforce their control over the country's financial sectors and natural resources, in this case oil. The ambition of the main actors in the conflict to gain an economic foothold further impoverishes the population and accentuates the economic and humanitarian crisis, while a small wealthy section of the population benefits from the war and its effects.

AFP/MOHAMMED HUWAIS - Un joven yemení lleva ayuda alimentaria distribuida por la fundación de desarrollo Yadon Tabney, en Sanaa, el 17 de mayo de 2020
AFP/MOHAMMED HUWAIS - A Yemeni youth carries food aid distributed by the Yadon Tabney Development Foundation, in Sana'a, 17 May 2020.

Yemeni economic analyst Abdul Hameed al-Masajdi told Al-Arab that the economic factor has become "a cornerstone for the sustainability and prolongation of the war". He warns that the conflict could turn into a "double struggle for power and wealth". Al-Masajdi notes that the "oil and banking sectors are the most important areas in which warlords on both sides of the conflict grow and prosper". Regarding the Houthis in particular, the economist notes that the rebels obtain resources and looted money in exchange for the impoverishment of society. These funds are used to achieve three objectives. Firstly, to create companies to launder this money, but also to gain political influence and control areas under their control. Finally, and most fundamentally, to buy ammunition, weapons and fuel for the front. There is also a share of resources, especially oil, which the Houthis sell on the black market.

Authorities loot humanitarian aid to Yemenis

Yemeni political researcher Faris Al-Bayl agrees with the economic analyst, asserting that the "war economy contributes greatly to the resurgence and expansion of the conflict, with its multiple fronts and consequences". In this context, it is worth noting the absence and weakness of political institutions and their inaction on these economic challenges. Indeed, authorities on both sides have been accused of corruption, stealing money and humanitarian aid directed at the civilian population.

AFP/ MOHAMMED HUWAIS - Los yemeníes recogen la ayuda humanitaria del Programa Mundial de Alimentos (WFP)
AFP/ MOHAMMED HUWAIS - Yemenis collect humanitarian aid from the World Food Programme (WFP)

According to a report published by the UN earlier this year, Houthi rebels diverted at least $1.8 billion in 2019. These funds were intended for the government to provide basic services to citizens. However, Hadi's government has also been accused by the UN of diverting money intended for civilians. According to the UN, $423 million from Saudi Arabia donated to the country to buy rice and other foodstuffs was diverted by the Yemeni government. The UN panel of experts denounced the "indifference" of the Houthis and the government to the devastating effect of the economic downturn.

In areas controlled by the Iranian-backed Shia militias, economic measures such as tax collection or other revenues are being used to finance their armaments and not to help citizens. Moreover, "the government of Yemen, in some cases, is engaging in money laundering and corruption practices that negatively affect access to adequate food supplies for Yemenis, in violation of the right to food," the report stresses.

REUTERS/KHALED ABDULLAH- La gente se agolpa para obtener raciones de comida de una cocina de caridad en Sanaa, Yemen, el 20 de julio de 2020
REUTERS/KHALED ABDULLAH - People crowd for food rations from a charity kitchen in Sanaa, Yemen, 20 July 2020.

The World Food Programme (WFP), a UN agency, also denounced the theft of humanitarian aid destined for the Yemeni population by "all sides in the conflict". WFP director David Beasley said that only 40 per cent of donations reach needy citizens in the Houthi-controlled capital of Sana'a. Beasley also points out that only a third receive aid in the northern stronghold of the rebel militia. There have also been reports of the looting of health aid for diseases such as cancer, the only hope for sick people due to the country's lack of health facilities.

The oil business unites the Yemeni government and the Houthis as price rises choke citizens

The recent journalistic investigation by the International Consortium of Investigative Journalists (ICIJ) called "Pandora's papers" revealed that the Hadi government and the Houthis are partners in the oil trade. The ICIJ found documents showing that Ahmad Saleh Al-Issi, a key economic adviser to President Hadi, co-owns a company that conducts oil business in Houthi rebel-held territory. Al-Issi has denied the allegations, stressing that since the foreign military intervention began he has not conducted any business activity in rebel-held areas. However, the ICIJ investigation showed his links to several Houthi traders.

AP/HANI MOHAMMED - Los rebeldes hutíes en Yemen han bloqueado la mitad de los programas de entrega de ayuda de las Naciones Unidas en el país devastado por la guerra 
AP/HANI MOHAMMED - Houthi rebels in Yemen have blocked half of UN aid delivery programmes in the war-torn country.

On the other hand, while the warring parties engage in oil-related trade, the price of oil is rising, accentuating the economic crisis and worsening Yemenis' standard of living. This price increase has led many citizens to take to the streets in towns such as Aden and Hadramaut to denounce the deteriorating social and economic conditions and protest against the collapse of the national currency. In Taiz, in the centre of the country, demonstrators chanted slogans pointing to the failure of the government and the international coalition to help alleviate the economic crisis. 

In early December, the price of the dollar reached 1700 rials, up from 215 rials to the dollar in 2015. "The rise in the price of the dollar against the local currency contributed to a record increase in fuel prices, as well as the lack of competition in the oil import process and the absence of price controls," Youssef Saeed Ahmed, an economics expert, told Al-Arab. This rise had a negative impact on the sale of basic goods and foodstuffs such as fish, vegetables and fruit, and thus the purchasing power of the majority of the population became non-existent," he added.

ACNUR/RASHED AL-DUBAI - Un miembro de ACNUR habla con niños desplazados en Yemen
ACNUR/RASHED AL-DUBAI - A UNHCR staff member talks to displaced children in Yemen.

Lately, the value of petrol in government-controlled areas has risen sharply, reaching unprecedented levels. A 20-litre can of petrol has reached 22,000 rials, the equivalent of 18 dollars, double the price in October. This increase affects all sectors of the population and even hinders the normal development of educational activities in schools and universities. Teachers are unable to teach or students are unable to travel to school because of the high cost of transport. "It is unfortunate and painful that hundreds of students are unable to continue their studies due to the inability of hundreds of families to provide support in addition to university fees," Bushra Hajed, a student at the University of Aden, told Al-Arab.

"We cannot continue to live in the midst of this great crisis," laments Ali Mohsen al-Hasani, editor-in-chief of the Yemeni media outlet 24 Post. He explains how the increase in fuel prices over the past few months has been reflected in commodities and basic goods and foodstuffs, "doubling the poor living conditions of Yemenis". It also points out the reasons behind this dire situation.

REUTERS/KHALED ABDULLAH - Los estudiantes asisten a una clase en una escuela cerca de su pueblo natal de al-Jaraib en la provincia noroccidental de Hajjah, Yemen
REUTERS/KHALED ABDULLAH - Students attend a class at a school near their home village of al-Kharaib in the northwestern province of Hajjah, Yemen.

"The reasons for the catastrophic deterioration in the economic aspect are due to bad economic practices, such as wasting resources, not rationalising expenditures and stopping the work of institutions and economic sectors". The state oil company, Safer E&P Operations, suspended work on three oilfields east of Marib. Several energy experts have warned that this decision could deteriorate the humanitarian situation in the country. Last February, a new front in the Yemeni conflict erupted in Marib, a city rich in oil and gas where the government is struggling to maintain its control in the face of the Houthi advance.

Oil revenues account for 30 per cent of GDP and 70 per cent of the resources of the general state budget. In addition, crude oil accounts for 90 per cent of exports, which have been halted due to the war.

AFP/MOHAMMED HUWAIS - El presidente yemení Abd Rabbuh Mansur al-Hadi
AFP/MOHAMMED HUWAIS - Yemeni President Abd Rabbuh Mansur al-Hadi
The battle for Marib represents the fight for oil

The wealth of Yemen's north has caused the hottest spot in the war to shift to Marib. The region contains large reserves of oil and gas, so the Houthis are intensifying their efforts to seize the city as government forces, backed by the international coalition, try to keep it under their control. The Safer oil refinery near the city has the capacity to produce 10,000 to 20,000 barrels of oil per day. Marib is also particularly important to government forces as it is the last stronghold in the north

The Houthis began their offensive in February and have intensified their attacks since September, causing "civilian casualties, further displacement and restrictions on civilian movements", according to the UN Office for the Coordination of Humanitarian Affairs. Since September, 40,000 people have been forced to flee the city due to the fighting. One of the most recent massacres of civilians occurred in October, when Houthi missiles killed at least 30 people, although more than 100 citizens were killed the previous month, in September.

AFP/MOHAMMED HUWAIS - Combatiente rebelde hutí
AFP/MOHAMMED HUWAIS - Houthi rebel fighter
Hadi's government seeks economic aid from Saudi Arabia, its great ally

In the midst of the economic collapse and the devaluation of the national currency, President Hadi decided in early December to send a letter to Saudi Crown Prince Mohammed bin Salman with the aim of receiving financial assistance. Hadi told his partner in Riyadh of Yemen's dire economic difficulties due to "the war unleashed by the Iranian-backed Houthi militias". Yemen has lost $90 billion in economic output and more than 600,000 people have lost their jobs because of the war. In addition, 58 per cent of the population lives in poverty. 

According to Yemeni political sources, Hadi asked the Saudi government for new funds for the Central Bank of Yemen to halt the devaluation of the rial. According to The Arab Weekly, Hadi took this decision after several members of the government threatened to resign, which could weaken state institutions in the midst of the war with the rebels. However, the known corruption of the authorities "no longer encourages allies to provide support, especially in the absence of tangible reforms", warns Yemeni economic analyst al-Masajdi to The Arab Weekly. "I believe that President Hadi's letter comes within the framework of pressure on the Saudi leadership to support the Central Bank of Yemen with a new deposit, without the government making any effort to propose economic reforms," the analyst believes. Al-Masajdi recalls that Riyadh "has previously supported Yemen with two funds, in addition to a financial donation related to oil derivatives".

AFP/ ESSA AHMED  -   Campamento en Abs, en la provincia de Hajjah del norte del Yemen, el 3 de septiembre de 2020.
AFP/ ESSA AHMED - Camp in Abs, in the Hajjah governorate of northern Yemen, on 3 September 2020.

Since 2015, the year the war began, more than 3 million have fled their homes according to UN figures. Moreover, 80% of the population is in need of humanitarian aid and protection. However, international institutions do not predict a change in Yemen's future. A new report by the United Nations Development Programme (UNDP) shows bleak figures for 2030. In that year, according to the UN programme, the death toll could reach 1.3 million if the war does not end. Moreover, by the end of 2021, they estimate that the number of dead will reach 377,000. Sixty per cent of the casualties would be the indirect result of the war, such as famine or disease, while the rest would be direct causes such as attacks or bombings. Of the casualties, children account for 25% of civilian deaths between 2018 and 2020.

REUTERS/ALI OWIDHA - Campamento de desplazados por los combates en Marib, Yemen 
REUTERS/ALI OWIDHA - Camp for people displaced by fighting in Marib, Yemen

Unfortunately, the end of the conflict seems far away. In March, Saudi Arabia offered its rivals a ceasefire that would include the reopening of the international airport in Sanaa, the country's capital, which has been under siege for the past seven years. However, the Houthis rejected the offer, focusing their efforts on taking Marib. Hans Grundberg, the UN special envoy for Yemen, recently underlined the difficulty of initiating a peace process as "the gap between the sides is widening".