The Yemeni capital, Sanaa, has been in the hands of the Houthi rebel group for more than two years now. The Houthi takeover of the capital and large areas of the country in September 2014 led not only to the launch of the Saudi-led coalition military action in Yemen by the end of March 2015, but also started one of the worst man-made humanitarian catastrophes in the country’s history and in the world with more than 3.1 million internally displaced persons, and 17 million food-insecure people of whom about 7 million people are severely food insecure and do not know where their next meal is coming from.
The internationally recognized government headed by President Abed Rabbo Mansour Hadi managed in the early months of the ongoing conflict to regain control of large areas of the south of Yemen, along with the key northern governorate of Marib. The governorate emerged from the rubble of the conflict as a new hub for economic activity that provided for the people of the city and kept the government public revenues treasury afloat. In addition to that, the internationally recognized government, with the help of the Saudi-led coalition and especially the United Arab Emirates, managed to regain control over Bab al-Mandab Strait, located at one of the most important routes of world trade and oil export from the region.
The Houthi rebel group, along with troops loyal to Yemen’s former President Ali Abdullah Saleh, is currently fighting fiercely to maintain control over the west coast of the country. The ongoing fighting does not only pose a threat to global trade, but also poses an existential threat to the Houthi rebel group. One of the reasons leading to the rebel group’s takeover of the capital was arguably its disapproval of the outlined geographic division of the future Yemeni federal state, which was proposed at the end of the National Dialogue Conference in February 2014 as a solution to Yemen’s longstanding regional problems, which deprived them from a sea gate and trapped them in mountainous areas with little resources to survive.
The value the rebel group gains from controlling one of the country’s busiest ports — the port of Hodeidah — is of existential matter for income generation, especially after the relocation of the Central Bank of Yemen (CBY) to Aden cut the Sanaa-based Central Bank’s and commercial banks’ lines of communication with international banks and financial institutions. Recent fighting along the country’s west coast and Houthi-Saleh loyalists’ attacks on different vessels and ships in the Red Sea show their strategic interest in the western regions of the country and the great strategic loss the rebel group will suffer from when losing control of them.
The relocation of the CBY and redirecting the country’s small, yet existing revenues to the Central Bank’s new headquarters in Aden and the inability of the Sanaa-based CBY to serve importers’ demand for foreign currency, which led to a decline in economic activities in Houthi-held areas, took their toll on the rebel group’s finances. The Houthi rebel group felt the tightening grip of the internationally recognized government and started looking to exploit other sources of state revenues.
In line with losing territorial advantage in their fight with the Saudi-backed, internationally recognized government, the Houthi rebel group was aware of its populous advantage. Although the Houthi-Saleh alliance does not control as many areas as the internationally recognized government, it does in fact control more populated areas. The Houthis maintained collecting taxes and customs from people in their areas. Since oil exports were suspended at the outbreak of the war, a large portion of these state revenues came from customs on imported goods and value-added tax on all sorts of goods sold in markets under their control. When the internationally recognized government wins the battle for the port of Hodeidah, the Houthi rebel group will have lost one of its greatest sources of income.
When the city of Aden was liberated from the Houthi grip in July 2015, work in its port slowly resumed. This meant that the large parts of the country would rely again on imports shipped to the port of Aden. This took some pressure off the port of Hodeidah, as more and more goods were being unloaded at the port of Aden. Therefore, the Houthi rebel group decided to impose extra tariffs on goods unloaded in southern ports and transported to northern cities to compensate for fewer decreasing collected taxes and customs from the port of Hodeidah. The group also increased customs on shipments coming from Arab countries unloading in the port of Hodeidah.
Since the Houthi rebel group controls areas more populated than those under the internationally recognized government’s control, the devastating effect of the war on food security in areas under the rebel group’s control is the most visible.
The recent government troops’ expansion along the west coast of the country was met with fierce fighting form the Houthi-Saleh alliance, because they are aware of the fact that losing the west coast of Yemen will deprive them from major sources of income: taxes and customs.
The increase in food prices combined with the liquidity crisis in Yemen — which led to leaving about a million public servants, who provide to about 7 million Yemenis, without paychecks for the last six months — worsened the already-fragile food security situation of Yemenis. The Houthi rebel group’s decision of imposing tariffs on imported commodities — with a large share of them being food items — contributed to increasing food prices. This comes at a time when the United Nations warns of a famine outbreak in the country.
Sanaa and other Houthi-held cities are witnessing a double economic siege: one imposed by the internationally recognized government and the Saudi-led coalition, with fighting along the west coast and the closure of Sanaa Airport since August 2016, which led to slowing or sometimes halting the delivery of basic commodities, and one by the Houthi rebel group with their collection of taxes, customs and tariffs from a population that mostly lost its source of income at the start of or during the war.
Although the Houthis are currently being economically besieged, which will lead to shortening the lifespan of such a militia, it is evident that the human cost of draining sources of income of the rebel group is higher than what most Yemenis can endure.
Continue reading this article by registering at no cost and get unlimited access to:
- The award-winning Middle East Lobbying - The Influence Game
- Archived articles
- Exclusive events
- The Week in Review
- Lobbying newsletter delivered weekly