Economic woes fuel the conflict in Yemen

Economic woes fuel the conflict in Yemen

Conflict in Yemen continues this week as Houthi rebels seek to overthrow President Hadi’s Western-aligned government, threatening an already fragile security environment. Economic woes play a major role in shaping the Houthi’s grievances, as a lack of water and access to jobs has created intense distrust against the government.

The violence that swept Yemen last week after Houthi rebels stormed the presidential palace in Sanaa underscores the intensity with which political and economic grievances plague Yemeni society. Yemen is one of the Arab world’s poorest nations, more than 54% of the population are living in poverty while some 45% of the population faces food insecurity, including a lack of access to water.

These economic woes perpetuate violence to the extent that Yemen now faces an unfortunate catch-22: as bad economic conditions fuel instability and popular unrest, the resulting security environment is inhibiting efficient oil and LNG production which is a key, revenue-generating aspect of the nation’s economy.

Instability in Yemen also has repercussions for the larger Middle East due it its strategic placement along the Bab el-Mandeb strait. Whoever assumes leadership in the coming weeks must address these economic issues to achieve long-term stability not just for Yemen, but for the Gulf.

Political grievances

Political and economic grievances are at the root of instability in Yemen. Houthi rebels blame the government for failing to uphold to a power-sharing agreement they signed with major political parties back in September. They also strongly oppose President Hadi’s current draft constitution, which calls for the division of the country into six federal states. Such a move could weaken the Houthi’s Zaidi sect’s political representation in the federal government.

In recent speeches, the leader of the Houthi rebels, Abdel Malek al-Houthi, says the group seeks to fight corruption but is not looking to overthrow the government completely: “Our movement is not going to uproot any political powers. We are here to serve the country and not target the Yemeni people… Our escalation will go slow if they start implementing the [unapproved] deal. If not, all options are open… We move in studied steps. We do not want the country to collapse.”

Despite the fact that the Houthis were able to swiftly take over the presidential palace, they lack the kind of popular support needed to govern the country. Shortly after President Hadi announced that he would resign, thousands of Yemenis took to the streets in protest against the Houthis.

Yemen has a majority of Sunni muslims, and it would be hard for the Houthis to govern a country they do not fully occupy. Moveover, the country’s weak economy relies on oil fields, which the Houthis do not have physical control over. It also relies heavily on foreign aid from the US and Saudi Arabia, both of which oppose the militia.

Nevertheless, the Houthis will continue to push for greater political power.

Deteriorating economic conditions fuel conflict

Economic troubles are a major contributor to Yemen’s current problems. The World Bank ranks Yemen as one of the poorest countries in the Arab world. Poverty has risen from 42% in 2009 to 54.5% in 2012, while its population growth rate continues to increase at an alarming rate.

Based on current consumption levels, studies show that the country could run out of water by as early as 2020. Poor farming techniques are largely to blame for rapidly diminishing natural aquifers. A report by Sanaa University reveals that 70-80% of rural conflicts in the country are related to these water shortages, as communities fight to grow food and make a living.

Qat production has also played a major role in facilitating Yemen’s water crisis. Yemenis spend, on average, between a quarter and a third of their income on qat, about $4bn a year nationally. According to one Dutch study, the qat business accounts for 16% of employment and 25% of GDP.

As a result of water shortages, thousands of farmers have headed for Sanaa in recent years looking for alternative employment, where there are few options. Corruption within Yemen’s government has largely prevented the country from making much progress to create new jobs for these people and diversify its economy. The decision to cut fuel subsidies last fall (to avoid budget deficits) sparked outrage especially among Houthi rebels who took to the streets in more protests.

Overall, the political ramifications of these shortcomings and economic troubles have led to a society that is highly distrustful of the central government. As a result, citizens are choosing to rally behind their tribal and religious identity, as opposed to embracing a national one.

Threats to domestic and international energy trade

Compared to other Gulf nations, Yemen is not a major producer of oil and natural gas, but its economy relies heavily on these resources. IMF figures show that hydrocarbons accounted for 89% of total export revenues, with 63% of government revenues coming from the hydrocarbons sector between 2010-12. About half Yemen’s oil is refined to supply heavily subsidised fuel for the domestic market.

However, the current unstable security situation threatens Yemen’s ability to fully capitalize on oil and natural gas revenues. Frequent attacks on energy infrastructure by rebel militias has offset positive developments, complicating the  the exploration, production, and transport of these resources.

Attacks on the Mareb-Ras Issa pipeline, for example, which carries up to 90,000 barrels of oil per day to export facilities on the Red Sea, forces the government to import fuel and sell it at a loss, while also losing out on valuable domestic oil revenues.

Houthi rebels have also said that they have their eyes on Yemen’s oil infrastructure located in Marib Province, to the east of the capital, where Sunni rival tribes exert control over the area. Additional attacks could further inhibit oil and gas production.

Perhaps more importantly, conflict in Yemen affects regional stability and the transportation of energy good across the Middle East, as it is situated along the Bab el-Mandab strait, a key chokepoint in international shipping. More than 3.4 million barrels of oil per day passed through Bab el-Mandab in 2013. Closure of the strait would force tankers to sail around the southern tip of Africa just to reach European, North American, and South American markets.

No end in sight

As protesters hit the streets against Houthi rebels this week and violence in the capital continues, there appears to be little hope that the chaos will subside any time soon. Al-Qaeda in the Arabian Peninsula has a solid base throughout Yemen and largely opposes Houthi advances. Clashes between the two groups could create further destruction as each group fights to fill the existing power vacuum.

The country’s economic troubles have been exacerbated by bad politics and inter-religious and tribal tensions. For Yemen to overcome such challenges, the next government must work hard to diversify the nation’s economy. Otherwise, a lack of water and sufficient sources of food could create an even worse humanitarian crisis.

About Author

Madeleine Moreau

Madeleine Moreau is the GRI Senior Commissioning Editor and a Senior Analyst currently based in Beirut, Lebanon. She specializes in investment risk and opportunity in the Middle East and has previously lived in Jordan and Morocco. Her work and insight have appeared in several leading publications, including Business Insider, TechCrunch,, The Atlantic Council, Yahoo News and OZY. She holds a Bachelor’s degree in Political Science and Arabic from Middlebury College.