GJIA: What actions are being taken to combat the current crisis in Yemen in terms of short-term and long-term relief?
CS: At the moment, we are kind of going backwards. The relief agencies have run into some difficulties with the Houthis in the North. The Houthis are economically strapped, and they do not have outside resources. Their income is based on domestic taxation, which Yemen is not used to. The Houthis have effectively taxed and controlled markets to be able to tax, for example, the fuel market. They are leaving all the social services to the international community. They depend upon the United Nations (UN) and nonprofit international relief agencies to provide medical care and food supplies. A lot of Yemenis are experiencing food shortages and hunger. The Houthis are using relief supplies to bolster their own supporters. At one point last summer, they tried to tax the relief agencies, which reacted with frustration, so the Houthi were forced to backtrack. However, they continue to redirect the aid to their supporters and punish people who do not support them by denying them relief. The relief agencies are protesting, and the United States actually pulled out their efforts in the North. The United States is only now supplying the South—to the areas that are outside of Houthi control.
What is the current situation like in regards to relief efforts?
Yemen has depended upon aid since the war began in 2015. The aid has been significant: in 2019, it reached four billion dollars. This is relative to an economy that is worth fifteen billion dollars, so it represents a large percentage of the overall GDP. But this year, in the summer, the Saudis sponsored a donor conference, where they called for 3.2 billion dollars in donations but they got only 1.3 billion dollars in commitments. COVID-19 has redirected a lot of aid to other areas. So, in terms of relief, Yemen is not looking good, and we are at a bleak point in the course of the war.
What are the causes for the crisis in Yemen?
Yemen is experiencing an economic collapse at the same time that it is experiencing war, and the two combined severely affect the humanitarian situation. Since the Republican Revolution in 1962, which is the key point in Yemeni history, the Yemeni population has grown dramatically from around four to six million to thirty million today, and it is a very young population. At the time of the Republican Revolution, Yemen was largely self-sufficient in food production. Unlike many of the Gulf states, Yemen has real, although scarce, rain-fed agriculture. This is why it has such a long ancient civilization because [Yemen] has always had agricultural resources. After the war that followed the Republican Revolution, Yemenis left and migrated to the Gulf states, mostly to Saudi Arabia. With revenue from oil, they built a new Saudi Arabia because they were the initial menial laborers in the Gulf. Those remittances sent back to Yemen from the laborers transformed the Yemeni economy; it was integrated into the global economy as an importer of consumer goods. Although agriculture was neglected, farmers were incentivized to switch out of basic food crops into higher value-added crops to raise their incomes. This was rational from the farmer’s point of view, but it meant that Yemen became an importer of its basic food staples of wheat and rice. As a result, Yemen became dependent on food imports along with all the other consumer goods. Eventually, the remittance economy petered out for a variety of reasons. However, just as it was petering out, Yemen found oil. Yemen has been an oil exporter technically since 1984, but really, it is the first decade of the 2000s that the main source of income became the oil revenue, which was funneled directly to the government. The government grew dependent upon oil revenue as it provided ninety percent of Yemen’s hard currency, and eighty percent of the government’s revenues. The lion’s share of the government’s expenditure was either subsidies to domestic fuel, government employment, or welfare payments.
The government was effectively passing oil revenue to consumers. Yemen’s oil exports peaked in 2001, and they declined ever since though revenue was buoyed by rising oil prices. But the government did not have the capability to invest in a post-hydrocarbon economy, a challenge that many Gulf States are still facing. Yemenis knew that the end of oil was coming, but they just did not have the capacity to shift because the funds were all spent on current consumption. The war just served to punctuate the end of Yemen’s dependence on oil exports. Many people think that the war has stopped the exports; the war did stop the exports, but exports were almost gone already. So the war ultimately led to an economic collapse. All of those welfare payments and the salaries of the 1.2 million employees of the state vanished for the last five years because there was no revenue anywhere to pay for these government expenditures. This is a crisis with a big economic component that people are blaming on the war. In 2014, the GDP was thirty billion dollars, and it halved over these last five years. By comparison, the US economy in the 2008 global financial crisis contracted five percent, while the Yemeni economy contracted fifty percent. That is a massive collapse that the war has exacerbated.
When the Saudis decided to attack the Houthis in March 2015, they saw the Houthis as a potential Hezbollah on their southern border—by that they mean an arm of the Iranian Revolutionary Guard that serves as a security threat to Saudi Arabia. Following that logic, they wanted to get the Houthis out of power and stop any arms transfers to the Houthis. Naturally, they created a blockade with the support of the United States and Great Britain. Relief agencies and larger commercial companies can still carry fuel, medical supplies, and food, but the whole process slowed down commerce significantly because ships must be inspected in Djibouti. There is also a tremendous amount of smuggling to the Houthi-controlled areas, which allows goods into Houthi territory. The problem is the people do not have the funds to buy them.
The war has also destroyed a lot of the infrastructure, so getting goods to market costs a lot more. In addition to the damaged infrastructure, all commercial transports pass through multiple military checkpoints from various factions, and they all have to pay multiple taxes to get through, increasing the cost of goods. Ultimately, this contributes to the potential complete collapse of the Yemeni currency. In regards to monetary policy to combat this collapse, the central bank has become a tool of war, and the Houthis are winning that war. Two years ago, the Saudis helped out the Hadi-led government by infusing a two billion deposit in hard currency in the central bank, but that has run out. After combining all these factors, you have a serious crisis.
What do you think the Houthis and Hadi should be doing to promote economic growth and decrease inflation?
Since the Houthis have no external support and live off domestic resources, they have become effective at imposing taxes—something that the Yemeni government has been unable to do efficiently since the Revolution. Problematically, the Houthis’ taxes are very burdensome, leaving the people in the Houthi-controlled areas, which is about two-thirds of the population, hungry and lacking in basic necessities. The Houthis are aware that the economy is poor, but they do not have the ability to address it during the war. On the other side of the crisis, there is the heavily divided Hadi government that actually controls nothing. The Yemeni government led by President Abdrabbuh Mansour Hadi still has many resources as both the Saudis and Emiratis are paying their military salaries, which is probably the largest proportion of that economy. Although there are Yemeni people that declare allegiance to Hadi in regions like Marib and Shabwa, they also hold him at arm’s length. For example, Marib is economically thriving because it is where the Saudi-funded war efforts in support of the Hadi government are based. Yet, they continue to hold Hadi at arm’s length and all the funds they collect stay in their region. Essentially, the Hadi, or anti-Houthi, coalition is very loose, in part because Hadi is an embarrassingly bad leader. He is still in power only because he has the mantle of international legitimacy. Everybody recognizes that Hadi’s government is corrupt; even his international backers such as Saudi Arabia understand that, but nobody wants to open the issue of a presidential transition because there is no legitimate governing body to carry out elections.
The Hadi government does get oil revenue: they managed to export around twenty thousand barrels per day in 2019. Problematically, the internal fighting and lack of coherent policy in the territory has made it difficult for them to use this revenue to fight the Houthis, making all possible solutions political in nature.