Huthi attacks against shipping in the Red and Arabian seas are
continuing on a more or less consistent schedule [photo credit: Ansar
Allah]
Meanwhile, low funding for humanitarian aid (22% of a reduced appeal
as of 19 June) has contributed to the worsening economic and financial
situation for the 70% of the Yemeni population under Huthi control.
Since last December, the World Food Programme has ceased all its
distribution activities in that part of Yemen as it failed to reach
agreement with Ansar Allah on a reduced distribution mechanism.
The Huthi response was aggressive and seemingly counterproductive. Earlier this month, they arrested 13 UN staff from different institutions, as well as about 40 staff of international NGOS, accusing them of being US and Israeli spies and going so far as to release some so-called confessions.
The UN and international agencies concerned protested energetically
though, on past record, this is unlikely to impress the Huthis. What is
certain is that it will worsen the humanitarian crisis which remains
very severe even if nowhere near as horrific as the levels of starvation
in Gaza or the multiple humanitarian emergencies in Sudan.
The economic and financial war has also escalated significantly in
recent weeks. Beginning in 2016 when the Internationally Recognised
Government (IRG) transferred the Central Bank from Sana’a to Aden, the
war of the banks has since gradually worsened leaving the country with
two separate financial structures. International financial institutions
recognise the IRG’s Central Bank of Yemen (CBY) in Aden which has been
unable to stifle the Sana’a based commercial banks which are far more
active as they operate where the majority of the population and economic
activities take place. To date, the Sana’a-based commercial banks
continue to access the SWIFT mechanism essential for international
payments for imports and for remittances from Yemenis abroad to their
relatives. But should that access be lost the consequence would be
calamitous. The importance of remittances cannot be over-estimated as in
the absence of salaries and jobs they are the only source of finance
for thousands of families.
Over the years the gap between the exchange rate of the riyal between
IRG and Ansar Allah areas has become vast as in the area under their
control the Huthis forbid the use of riyals printed by the IRG Central
Bank. In June 2024 old riyals [which are physically disintegrating due
to age and use in an economy which is primarily cash based] exchanged at
YR 530 per US$ dollar, whereas the slightly different new notes issued
by the IRG in Aden exchange at YR 1800 per dollar.
The economic and financial war worsened in November 2022 when the
Huthis interrupted the IRG’s main source of income, its oil exports, by
attacking the relevant ports. They then further improved their financial
situation by imposing heavy taxes and interdicting land transport of
goods unloaded in IRG controlled ports, forcing most ships to dock at
Hodeida, with fees and customs duties paid to Huthi authorities.
Unsurprisingly by 2023 the Huthis were looking forward to further
improving their finances with the Saudi agreement that would pay for the
salaries of government staff, including military and security personnel
whose most recent official payment in June this year was for the second half of October 2018.
The 7 October Hamas attack abruptly changed the narrative. Huthi
interventions in the Red Sea in support of Palestine massively boosted
their popularity throughout Yemen but this did not compensate for the
deterioration of living standards caused by the lack of salaries and
reduced humanitarian support. Red Sea ports have now become distinctly
unattractive to shippers because of increased costs and the risks
involved due to Huthi attacks on maritime trade and the retaliations of
US/UK forces. Thus, the earlier financial and economic advantages that
the Huthis had are increasingly under stress.
In April, Ansar Allah produced some coins to replace the collapsing
YR 100 notes [equivalent to US$ 0.20]. The IRG responded immediately by ordering all banks to transfer their headquarters to Aden within 60 days.
As the deadline approached, both sides issued ‘tit for tat’ decrees
making impossible demands on the banks based in the other’s cities. As
pointed out by UN Special Envoy Hans Grundberg in his June briefing
to the UNSC, “if… banks in Sana’a are indeed cut off from international
financial transactions, it would severely impact the economy” affecting
essential imports. While Eid may have put a hold on this financial war,
its resumption will have severe consequences.
The financial element of the ongoing struggle weakens the Huthis, who
are responding with the above-mentioned arrests as well as increased
attacks on the military fronts. These are facilitated by the vast number
of new recruits who have joined them since the Gaza war started: these
young men intended to go and fight in Palestine but instead have been
sent to various Yemeni fronts after their brief training.
This series of ongoing crises bodes ill for coming months. While UN
SE Grundberg may be determined to continue working towards peace, the
world political environment is not encouraging and the country’s
factions are not helping. Meanwhile people throughout Yemen continue to
suffer economic collapse and poverty which most recently has worsened
with the return of a number of epidemics.
Members can leave comments about this newsletter on the Arab Digest website