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The Yemen Review – November 2018

اقرأ المحتوى باللغة العربية
Residents in the Tha’abat area of Taiz City inspect a home in November that was damaged by shelling from Houthi forces // Photo Credit: Anas Alhajj

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Executive Summary

Representatives from Yemen’s warring parties sat at a negotiating table for the first time in more than two years at the beginning of December. The peace consultations – which took place in Sweden and were mediated by the United Nations Special Envoy for Yemen Martin Griffiths – followed international pressure for a ceasefire that began in October and intensified through November.

Rifts between Saudi Arabia and its most important ally, the United States, over the former’s intervention in the Yemen conflict appeared to deepen last month with the announced end of US in-flight refueling for Saudi-led military coalition aircraft operating over Yemen, and a vote in the US Senate to debate a bill to suspend military assistance to the coalition. Various governments in Europe also took steps toward banning arms sales to members of the coalition.

United Nations Security Council (UNSC) member states began negotiating a new draft resolution related to the Yemen conflict in November, calling for measures to de-escalate the war and address the humanitarian crisis. This was the first proposed UNSC resolution related to Yemen since April 2015. Lobbying from Saudi Arabia and the United States, however, appeared to postpone any vote on the text at least until after the negotiations in Sweden.

In Yemen, the domestic currency rebounded sharply in value against the US dollar in November after a steep collapse in the months previous. While this had the potential to help mitigate the humanitarian crisis, most of the benefits of the Yemeni rial’s recovery were absorbed before they reached consumers. Acting as a cartel to manipulate the currency market, money exchangers profited significantly from the Yemeni rial’s appreciation and most commercial retailers refused to lower prices to match the rial’s recovery. Meanwhile, international humanitarian organization Save the Children released an estimate that some 85,000 children had died of hunger in Yemen since the conflict began.

In military developments, a spike in violence around Hudaydah City at the beginning of November sparked a surge in suspected violations of humanitarian and international human rights law by the warring parties involved. Elsewhere, anti-Houthi forces made battlefield gains on multiple frontlines in both the north and south of the country.

Also in November, one of the main fissures in the anti-Houthi coalition appeared to mend somewhat. Following a visit by representatives of Yemen’s Islah party to Abu Dhabi, it appeared that the party had reconciled long-standing differences with the United Arab Emirates. Despite this, however, tensions between UAE-backed forces and Islah partisans once again erupted in Taiz governorate, including a spree of tit-for-tat assassinations.

The Sana’a Center Editorial

Yemen’s War Profiteers Are Potential Spoilers of the Peace Process

Even as economic and state collapse have propelled millions of Yemenis toward famine, the war economy that has developed over almost four years of conflict has also allowed a select cadre of individuals to become incredibly wealthy. These people – many of whom hold the highest positions of authority on either side of the frontlines, and indeed often cooperate with each other across those frontlines – have little incentive to end the war. As such, there is a high likelihood that they will act as spoilers in any peace process, such as that which the United Nations Special Envoy for Yemen, Martin Griffiths, is currently pursuing at talks between the warring parties in Sweden. A successful outcome of any peace efforts in Yemen requires that these war profiteers are taken into account. Measures must be introduced – such as sanctions – to counter these individuals’ incentive and ability to continue the war, or to try to destabilize the country in the event that a peace agreement is signed.

As a year-long Sana’a Center investigation found, perceived adversaries in Yemen’s war have often cooperated for personal profit. Over the past three and a half years, and under the cover of violence and failing diplomacy, complex and fluid networks of corruption have transcended active frontlines. Among the clearest example of this has been the flow of Saudi-led military coalition weapons to Houthi forces. At the heart of this particular money-making scheme are senior Yemeni anti-Houthi military commanders on the Saudi or Emirati payroll. After vastly inflating the number of soldiers in their ranks to receive excess salaries and armaments from their patrons, they then sell their weapons surplus across the frontlines to the same Houthi forces they are meant to be fighting.

The weapons are transported from areas nominally under the control of the government to Houthi-controlled areas through formal and informal corridors, including via desert tracks in Mahra, Hadramawt, and Shabwa governorates. This requires local, expert knowledge of the terrain, and many greased palms along the way. Ultimately though, as long as each party is paid their share – from arms dealers to those driving the trucks and individuals stationed along the road manning checkpoints – then arms sales run smoothly, no matter the destination..

These networks of corruption extend beyond Yemen’s borders. A telling example is the prevalence of fuel import deals that involve cheap, low quality Iranian fuel that is transshipped via the United Arab Emirates or Oman before arriving to Yemen, where the fuel is then sold on the local market at a hefty markup. These deals, like all other fuel shipments to Houthi-controlled ports, are effectively agreed in Sana’a and signed off on in Riyadh.

The plot thickens further still when it comes to financial flows and external money transfers. To pay fuel exporters and brokers located outside Yemen, certain Yemeni fuel importers – particularly those that have risen in clout since 2016 – have turned to informal financial networks, and specifically the services provided by money exchangers. Fuel importers desperate to get their hands on foreign currency at any price are thought to be among the biggest factors depressing the rial’s value, which is in turn the primary catalyst for the spreading famine.

The new business elite and the informal financial networks that aided their rise appeared to come under threat recently, owing to new food and fuel import regulations that the Economic Committee introduced in September 2018 under the authority of the Central Bank of Yemen (CBY) in Aden. Early indicators suggest, however, that these regulations have simply forced an adaptation to new forms of business relations and activity. Partnerships are being formed amongst importers that can meet the necessary requirements and those that cannot. The fact is that the more profitable Yemeni markets are in Houthi-controlled areas, where an estimated 70 percent of the population resides. Those seeking to profit from this war have proven themselves adept at working around new restrictions. This is how the war economy has evolved to where it is today.

In September 2018, UN Special Envoy Martin Griffiths declared his intention to place greater emphasis on addressing Yemen’s economic crisis, acknowledging the direct, catastrophic impact that Yemen’s economic decline is having on the lives and livelihoods of Yemeni people. This declaration, which occurred at a time in which the local currency was in an unprecedented free fall, is undoubtedly a step in the right direction. What is also needed, however, is a greater emphasis on identifying the key figures on all sides who are profiting from this war, the networks through which their finances flow, and the points of leverage that can be brought to bear upon them. Without reining in the influence of the war profiteers, the chances of achieving peace are grim.

UN-led Peace Talks Restart As Security Council Seeks New Yemen Resolution

Special Envoy Brings Warring Parties to Sweden

For the first time in more than two years, representatives from Yemen’s warring parties – the armed Houthi movement and the internationally recognized Yemeni government – sat together at a negotiating table in early December. The meeting – mediated by the UN Special Envoy for Yemen Martin Griffiths – took place in Rimbo, north of Stockholm, Sweden, with the stage for such having been set during the previous month.

On November 16, the United Nations Special Envoy for Yemen Martin Griffiths had briefed the UN Security Council about his intention to try and bring the parties together. Griffiths said that a window of opportunity had been created by the increased international and UN focus on Yemen and calls for a ceasefire, and the urgency of the moment, given that Yemen was slipping toward the largest famine the world has seen in generations. Following a spike in clashes in and around Houthi-held Hudaydah City in early November, the Special Envoy told the Security Council these had diminished again (see below Coalition Presses, Then Halts, Hudaydah Offensive). This followed international pressure on the Saudi-led military coalition refrain from an attack on the port.

In September this year, Griffiths had tried to stage peace consultations between the warring parties in Geneva, with these talks then being canceled at the last minute due to a logistics impasse between the warring parties related to the Houthi delegation traveling to the talks. This time, the Special Envoy told the council that the Saudi-led military coalition had agreed to his suggested logistical arrangements, and the coalition and Oman had offered to facilitate the medical evaluation of some 50 injured Houthi fighters out of Sana’a. When the Houthi delegation actually did leave Sana’a on December 4 aboard a Kuwaiti airliner, Griffiths himself was also on board as reassurance for the Houthi officials that the Saudi-led military coalition, which controls Yemeni airspace, would not intercept the flight.

In the November 16 UNSC briefing, the Special Envoy said he was pursuing confidence-building measure between the two parties, including a prisoner swap. Indeed, on the first day of the talks, December 6, the Houthis and the Yemeni government agreed to swap thousands of prisoners. Other efforts by Griffiths included the reopening of Sana’a airport, and the de-escalation of hostilities around Hudaydah port and city by turning the port over to UN administration. The port, through which more than 70 percent of Yemen’s commercial and humanitarian cargo passes, is considered crucial to addressing the humanitarian crisis.

Following his November 16 briefing, the Special Envoy traveled to Sana’a where he met with the Houthi leadership to discuss the planned consultations in Sweden. He then moved on to Hudaydah on November 23, along with Lise Grande, the UN Humanitarian Coordinator, and the Stephen Anderson, The World Food Programme country Director of Yemen. From Hudaydah, Griffiths’ office released a statement noting that the UN delegates had reached an agreement with the Houthi leadership regarding UN administration of the port. The Saudi-led military coalition continued to maintain, as of this writing, that it would only accept UN administration of the port if Houthi fighters left Hudaydah.

UN Security Council Negotiates Resolution on Yemen

For the first time since adopting Resolution 2216 in April 2015, the UNSC introduced a new draft resolution for the council to consider and negotiate. The UK, penholder of the Yemen file at the council, led the drafting of the resolution on November 1, in consultation with the US. Top US and UK officials had, days earlier, called for the warring parties in Yemen to enter a ceasefire and for a new round of UN-led peace consultations.

The UK draft text of the resolution called for a cessation of hostilities and for the implementation of the October 23 recommendations that Mark Lowcock, UN Under-Secretary-General for Humanitarian Affairs and Emergency Relief Coordinator, had made to the Security Council. (These included ending hostilities around infrastructure crucial for aid operations and commercial imports; protecting food supply chains throughout the country; rapidly injecting more foreign currency into the economy through the central bank; increasing funding for aid operations; and calling on the belligerent parties to engage with the UN Special Envoy’s peace efforts.)

On November 12, UK Foreign Secretary Jeremy Hunt travelled to Riyadh and Abu Dhabi to support the UN-led peace consultations and the UK’s efforts at the UNSC. Hunt met with, among others, Saudi King Salman Bin Abdulaziz al-Saud, his son Crown Prince Mohammed bin Salman, and the Crown Prince of Abu Dhabi Mohammed bin Zayed Al Nahyan. As CNN later reported, Hunt – after consulting with US Secretary of State Mike Pompeo and French Foreign Minister Jean-Yves Le Drian – shared a copy of the draft resolution with the Saudi Crown Prince. According to the reports, bin Salman opposed the text. Hunt also urged Saudi authorities not to try and seek military victory, referring to the intensified offensive on Hudaydah last month. A week later the UK Foreign Secretary was also in Tehran to meet with his Iranian counterpart, Javad Zarif, to discuss the Yemen peace process.

On November 19, the UK circulated an updated draft UN Security Council resolution on Yemen, with minor changes from the first draft and with updates from the UNSC briefing on Yemen held on November 16. This text called for the halting of hostilities in Hudaydah governorate; an end to all attacks on densely populated civilian areas across Yemen; and the cessation of all missile and drone attacks against neighboring countries and maritime traffic, and that all domestic and regional parties to the conflict to de-escalate tensions and engage with the UN-led peace process. The text also called for rapid increased support for the Central Bank of Yemen, for quicker access for traders to import financing, and for payment of civil servant salaries across Yemen.

While the UK held strong on trying to keep the draft resolution without major changes and push it to the table for a vote, Sana’a Center sources stated the Saudis brought intense pressure to bear on Security Council member states against the resolution. On November 27, the US mission ask the council to hold off finalizing the draft resolution until after the peace consultations in Sweden. The US position, which won quiet support from several other nations, was that a resolution before the peace talks would likely have a negative impact on those talks, angering the Saudis and possibly undermining the commitments to attend, which the warring parties had made to the UN Special Envoy.

Sana’a Center sources noted that developments on the ground through November — such as Yemeni rial’s recovery (see below ‘Yemeni Rial Appreciates’) and the scaling down of the battle for Hudaydah — had also relieved the sense of urgency for some UNSC member states regarding a new resolution.

Pressure Mounts in US, EU to End Support for Saudi-led Coalition

US to Stop Refuelling Coalition Aircraft

On November 9, the Saudi-led military coalition announced that it would no longer require the US to provide air-to-air refuelling for their fighter aircraft operating over Yemen, saying that it now had the capabilities to do so independently. Sana’a Center sources indicated, however, that this Saudi announcement was a compromise to allow Riyadh to publically save face, and that the call to end US refueling support had originated in Washington. This US support had drawn criticism domestically, given its central role in facilitating coalition airstrikes, which the UN says have been responsible for the majority of civilian deaths since 2015 in Yemen’s conflict.

In a statement, Secretary of Defense Jim Mattis officially welcomed the Saudi announcement, saying that it would continue working with the coalition to “minimize civilian casualties and expand urgent humanitarian efforts,” while reiterating Washington’s support for the UN drive for fresh peace talks. The statement alluded to the growing bipartisan pressure in Congress regarding the US role in Yemen’s war, ranging from calls for greater congressional oversight, to demands for immediate cessation of all support for the coalition. NBC News quoted a senate staffer as saying that the decision was intended to pre-empt a more wide-ranging vote in Congress on US support for the Saudi-led military coalition, an assertion echoed by US-based analysts. However, while longtime opponents of US involvement in Yemen praised the development as a “major victory,” reports published following the announcement have questioned whether the move goes far enough to quell such opposition, given that the US continues to provide intelligence support, targeting assistance and weapons to the coalition.

While many news outlets covering the development said that the US refuels 20 percent of coalition aircraft, in a September 2018 report, The Intercept said that CENTCOM does not track refuelling in a way that allows for accurate data on the Pentagon’s contribution to the coalition air campaign.

Draft Legislation Takes Aim at US Support for the Saudi-led Military Coalition

On November 15, Democrat and Republican senators introduced a bill that would suspend weapons sales to Saudi Arabia and prohibit refueling of coalition aircraft. The sponsors of ‘The Saudi Arabia Accountability and Yemen Act of 2018’ (S.3652) – which include Ranking Member of the Senate Foreign Relations Committee, Senator Bob Menendez (D-NJ) – said the legislation was introduced in response to the killing of journalist Jamal Khashoggi at the Saudi consulate in Istanbul in October, as well as Saudi Arabia’s role in Yemen’s war.

On November 28, the Senate advanced a separate resolution that would end all US support for the Saudi-led military coalition in Yemen. Senate Joint Resolution 54 passed the first committee stage vote 63 to 37 – a turnaround from March, when the same bill failed to pass by a vote of 55 to 44. The bill invokes the 1973 War Powers Resolution – which asserts that Congress has the sole constitutional privilege to declare war – and calls for the end of US involvement in the Yemen conflict within 30 days, excluding operations against al-Qaeda in the Arabian Peninsula (AQAP).

Prior to the vote, Secretary of State Mike Pompeo and Secretary of Defense James Mattis privately briefed senators on America’s role in the Yemen conflict, urging them to reject the resolution. In comments to reporters, Pompeo said the “poorly timed” move would bolster Iran and undermine UN-backed peace talks expected for December. After the vote, the White House released a statement saying the president would likely veto the resolution if it were to pass the Senate after the next two votes – the first of which is expected to take place in early December. The administration called the legislation “flawed,” saying it does not reflect the limited involvement of the US in the conflict and disputes that this support is unconstitutional. It added that the bill would harm bilateral relationships with countries in the region, with knock-on effects for US counterterrorism efforts.

These legislative moves come on the heels of the US midterm elections, in which the Democrats took control of the House of Representatives, and the Republican Party retained control of the Senate. As the majority party in the House from January 2019, Democrats will occupy key leadership positions, exerting control over the bills that the House will consider, and amendments offered by representatives. The Democrats have vowed to establish greater oversight of President Donald Trump’s foreign policy, with hearings expected regarding support for the Saudi-led military coalition in Yemen. While Republican leaders this month blocked debate on House Resolution 138 – legislation that would force a congressional vote on the US role in the Yemen – the bill is likely to be reintroduced when the Democrats are in a stronger position from January 2019 (for more on the bill, see ‘The Yemen Review – September 2018’).

Also in the US last month, on November 11, senior Obama-administration officials released a strongly worded statement urging the US government to end all support to the Saudi-led military coalition in Yemen in light of the humanitarian impact of the conflict. The officials acknowledged that this support began under Obama’s presidency, but said that this was “not intended to become a blank check,” which they claim US-backing had become under the Trump administration.

EU Moves Towards an Arms Embargo on the Saudi-led Military Coalition

On November 14, the European Parliament adopted a non-binding resolution, calling for the implementation of a EU Common Position of 2008 which had set EU standards for the licensing and delivery of arms exports. The resolution also holds that exports to members of the Saudi-led military coalition are in non-compliance with these standards, therefore reiterating its call for the imposition of an EU arms embargo on Saudi Arabia and members of the Saudi-led military coalition. Although the Common Position is described as legally-binding, article 4.2 holds that “[t]he decision to transfer or deny the transfer of any military technology or equipment shall remain at the national discretion of each Member State.”

In October, the killing of Saudi journalist Jamal Khashoggi in the Saudi consulate in Istanbul and the humanitarian impact of the Yemen war had fuelled discussions in Europe over arms exports to Saudi Arabia. Discussions continued throughout last month, with Norway, Denmark and Finland announcing they would halt arms export licenses to Saudi Arabia – and the United Arab Emirates (UAE) in regards to Finland – following a similar announcement by Germany in October. On November 19, the German government added it would also halt those arms exports to Saudi Arabia that had been approved prior to the October announcement.

MBZ Meets Macron in Paris, Protests Ensue

On November 21, the Crown Prince of Abu Dhabi, Mohammed bin Zayed Al Nahyan, visited Paris to meet with French President Emmanuel Macron, Prime Minister Édouard Philippe and foreign affairs minister Jean-Yves Le Drian.

Similar to when Saudi Crown Prince Mohammed bin Salman visited to Paris in April, bin Zayed’s trip triggered civil society activities related to the UAE’s military role in Yemen. Human Rights Watch called upon President Macron to raise concerns with the crown prince regarding war crimes in Yemen and to threaten to halt arms sales. Meanwhile, the human rights NGO International Alliance for the Defence of Rights and Freedoms (AIDL), along with six Yemeni nationals, filed a lawsuit against bin Zayed, accusing him of being complicit in torture and war crimes in Yemen as Deputy Supreme Commander of the UAE Armed Forces. AIDL also organized demonstrations in front of the UAE embassy in Paris on November 20.

Following the meeting between Macron and bin Zayed, France and the UAE issued a joint declaration in which the two announced their willingness to enhance bilateral cooperation, including in regional security issues. Regarding Yemen, they affirmed their support for the upcoming UN-led peace negotiations, as well as their general support for a political solution to the conflict and the importance of enhancing humanitarian access throughout Yemen. The declaration mentioned neither French arms sales to the UAE nor the latter’s military role in Yemen.

The Yemeni army’s First Brigade celebrates Independence Day in Aden on November 30, which commemorates South Yemen’s independence from British rule // Photo Credit: Ahmed Shihab Al-Qadi

Economic Developments

Yemeni Rial Appreciates Rapidly As Money Exchangers Cash-In

During November, the Yemeni rial (YR) hit unpredicted levels of appreciation, gaining value more rapidly, and for a longer period, than at any time since the conflict began. Between early August and end of October this year the currency had entered its steepest depreciation of the conflict, losing around 42 percent in value. November however, saw a turnaround: the rial was valued at YR750 per US$1 at the beginning of the month, but by month’s end, it was trading at YR380 per US$1 – a recovery of roughly 49 percent over this period and almost 22 percent on November 28 alone. By December 2, the rial had retreated again to YR480 per US$1. (In March 2015, when the regional intervention in the Yemeni conflict began, the rial was trading at YR215 per US$1.)

According to sources working in the exchange market who spoke with the Sana’a Center Economic Unit, the supply of rials in the parallel market has decreased lately as importers have increasingly been withdrawing liquidity from the exchangers to open letters of credit at the Aden-based Central Bank of Yemen (CBY). As an enticement to open these letters of credit and bring liquidity back into the formal financial networks, the Aden-based CBY has also been offering importers a preferential exchange rate relative to the parallel markets.

As the rial appreciated in November, there was a rush in the market to exchange stored foreign currency holdings into domestic currency to stave off losses in the value of savings. The same sources said many money exchange outlets acted as a cartel to buy foreign currency out of the market at a premium – meaning at a rate better than what the Aden-based CBY was offering importers. This was a purposeful overvaluation of the rial intended to absorb citizens foreign currency holdings. Simultaneously, these exchange outlets temporarily refused to sell, or severely limited their sale of foreign currency back into the market, anticipating that the rial would lose value again.

On December 1, the rial depreciated – from YR380 per US$1 to YR460 per US$1 – allowing the money exchangers to sell their foreign currency again for significantly more rials than they had bought it last month.

Source: Sana’a Center Economic Unit

Commercial Traders Maintain High Prices Despite YR Appreciation

In a country highly dependent on imports, the foreign exchange rate is closely correlated with basic goods prices. Prior to the conflict in 2015, Yemen imported almost 90 percent of its basic necessities from abroad, and since then the average price of the minimum food basket has increased 110 percent relative to the pre-conflict average, according to a recent World Food Programme report. Previous spikes in food commodity prices during the conflict were primarily due to the loss in domestic currency value.

In conjunction with the rial’s appreciation in value during the second half of November, commercial groups and companies announced new price lists for their products, most notably the Hayel Saeed Anam Group, which is Yemen’s largest importer of basic foodstuffs. Price reductions announced by this group ranged from roughly 10 to 23 percent for products including wheat flour, cooking oils, and soap detergents.

In attempts to regulate the price of goods following the rial’s appreciation, both the internationally recognized Yemeni government and the Houthi authorities issued detailed lists stipulating the maximum prices for various wholesale and retail commodities in their respective areas, while also implementing widespread campaigns to punish violators. On November 27, for instance, Houthi authorities closed four large shopping malls and many pharmacies in Sana’a that had been caught violating the price listings published by the Ministry of Industry and Trade. In Aden, the Bureau of Industry and Trade, under the Ministry of Industry and Trade, was tasked to monitor traders adherence to formally set-out prices. Despite such efforts, however, anecdotal reports from Sana’a and other areas indicated that many retailers did not lower their prices, while others had applied slight price cuts ranging from less than 5 to 10 percent – still far from matching rial’s recent appreciation.

A common explanation among retailers for not applying price reductions was that their inventories were restocked or purchased when rial was declining in value over September and October, and thus at higher cost, and the higher prices are needed to recoup the difference. In reality, the absence of governing authorities to supervise and regulate prices has created a conducive environment for food traders to exploit, allowing them to manipulate prices and inflate their profit margins.

For instance, even with the Aden-based CBY’s importation mechanism to offer importers of selected basic foodstuffs a privileged exchange rate – lower than the parallel market rate – Yemeni citizens are not benefiting. Instead, commodity wholesalers and retailers are the main beneficiaries. According to traders based in Sana’a, retail shops were, as of the end of November, still selling commodities based on an exchange rate of YR800 per US$1, which was the exchange rate in early October when the rial had depreciated to record lows.

The intent of the CBY’s preferential exchange rate for financing imports is that it allow foodstuffs to be available on the market at reasonable prices. However, as long as the current scenario continues, the Aden-based CBY will continue depleting its foreign currency holdings without achieving its primary goal of maintaining price stability.

Thus, the Sana’a Center Economic Unit recommends that CBY establish a joint comprehensive mechanism for regulating the commodity market. This mechanism should offer a database and information on all the CBY’s financially-supported commodity foodstuffs, the size of these commodity stocks available in the market, and how long they are estimated to last, thus allowing a determination of fair retail prices for these commodities.

Factors Supporting the YR’s Appreciating Value:

  • Accelerated Import Financing, New Domestic Debt Issuance

On November 3, the Aden-based CBY announced it was finalizing a new round of basic import financing. This amounted to the allocation of US$170 million to support the importation of six food commodities at the special exchange rate of YR585 per US$1. The amount was broken down as follows: US$98.16 million for wheat, US$33.3 million for rice, US$20.37 million for sugar, US$12.72 million for edible oil, US$3.63 million for corn, US$1.72 million for milk. The CBY also stated that it had shortened the approval period for letters of credit to less than 15 days, a process that was previously regarded by importers as excessively long.

In a circular directed to Yemeni banks, dated November 18, the Aden-based CBY informed commercial banks that it had reached an agreement with the Saudi Arabian Monetary Agency (SAMA) to facilitate the transfer of their foreign cash holdings. Since early 2015, Yemeni banks have been unable to move their cash holdings of foreign currencies to their accounts abroad. According to the agreement, the Aden-based CBY would be responsible for transferring the banks’ accumulated stocks of foreign currencies to Jeddah, Saudi Arabia. If successful, such a move could allow the CBY to utilize such stocks to fund imports and ensure Yemeni banks have the capacity to facilitate global trade and financial transactions. In attempt to encourage this transition the central bank pledged, as a service to the banking sector, to bear all costs of the mechanism until sufficient liquidity had returned to the formal financial system and the monetary cycle had been regained.

Furthermore, the Aden-based CBY, on behalf of the Ministry of Finance, had its first successful domestic debt issuance, using new rates and debt instruments the bank had announced in September this year. According to a well-placed source in the Aden banking sector who spoke with the Sana’a Center Economic Unit, the Aden-based CBY was able to sell YR100 billion in debt to a group of Yemeni commercial and Islamic banks. The move offers support for the government budget deficit from non-inflationary sources – a marked change for a government that, for most of the conflict, has been trying to cover expenses through simply printing more rials.

  • Oil Grants and Lower Demand for Foreign Currency to Import Fuels

While the Aden-based CBY and its associated Economic Committee have in recent months attempted to regulate fuels imports and curb fuel importers’ over-speculation in the exchange market, other recent oil-relevant developments last month also appear to have eased the downward pressures on the rial’s value.

On November 30, Saudi Arabia, under its Development and Reconstruction Program for Yemen, delivered the second instalment of its diesel and mazut fuel grant, worth US$60 million. This fuel is intended to allow power plants to operate and address the electricity shortages in Yemeni government held areas, potentially benefiting some 8.5 million people. This is in addition to the first Saudi fuel grant made available to the internationally recognized government at the end of this October, bringing the total fuel grants thus far to US$120 million.

In addition, there has been a recent decline in global oil prices, with the benchmark West Texas Intermediate crude declining some 19 percent, dropping from roughly US$64 per barrel on November 1 to almost US$51 as of month end.

The Sana’a Center Economic Unit last month ran a multi regression analysis on the correlation between fluctuations in global oil prices and the value of the Yemeni rial between January 2017 and October 2018. This analysis found that changes in both variables have strong positive and negative correlation. This supports the findings of a Yemeni Banking Association survey, published in October, in which bankers identified fuel importers’ demand for foreign currency as the primary factor influence the rial exchange rate.

  • New Foreign Currency Support Announced

According to Sana’a Center sources, on November 30 the Aden-based CBY reached an agreement with the International Finance Corporation (IFC) to coordinate a grant worth US$500 million from several donors to facilitate a trade funding program for Yemen. To determine if Yemeni commercial banks’ eligibility to participate in the program, starting in February next year the IFC will initiate a comprehensive review of commercial banks’ procedures. This assessment will include the banks’ governance practices in regards to their board of directors and executive management structure, and compliance requirements related to anti-money laundering and counter terrorism financing.

Furthermore, on December 1 the Aden-based CBY governor, Mohammed Zemmam, told Yemeni News Agency (Saba) that the CBY is currently awaiting promises worth US$3 billion. Zemmam also told Saba News that “there is a set of decisions to be taken by the United Nations or some countries regarding the new deposits.”

If such grants materialized, they would play a crucial role in supporting local currency stabilization and would help mitigate Yemen’s widespread humanitarian crisis. In September this Year, former CBY governor Mohamed bin Humam told the Sana’a Center that he estimated that US$4 billion was required for currency stabilization.

Commercial Banks Express Concerns Over New Import Financing Regulations

On November 12, Yemen Banks Association (YBA) sent a letter to the CBY Governor in Aden, Mohammed Zammam, outlining the difficulties commercial banks face in regards to underwriting letters of credit (LCs) for food and fuel importers using cash. As noted in the letter to the governor, the Economic Committee and Aden-based CBY are looking to enforce this measure – and are threatening fines for non-compliance – as part of the new import regulations included in Ministerial Decree 75, announced in September.

Meanwhile, on November 4, the Sana’a-based CBY issued a strongly-worded circular to commercial banks mandating that they use checks to pay for importer LCs, and warning them of the severe repercussions – including imprisonment of senior staff – should they do otherwise. A major concern of the Sana’a-based authorities is cash liquidity being drawn out of Houthi-controlled areas to Yemeni-government controlled areas.

The cash liquidity crisis in Yemen – which set in dramatically through 2016 – resulted in domestic cash being overvalued in the market relative to checks. Forcing banks to supply cash to pay for importer LCs would thus pass on this overpricing, meaning importers, when they sold their foodstuffs on the market, would do so at higher prices to recoup the difference. Thus, regular consumers would not benefit from the Aden-based CBY’s preferential exchange rate for imports.

According to Sana’a Center sources, the Aden-based CBY as well as the Economic Committee were, as of this writing, working on a new mechanism to address this concern.

Houthi-run YPC Lowers Official Fuel Prices

Per official documentation that the Sana’a Center’s Economic Unit obtained, the Houthi-run Yemen Petroleum Company (YPC) ordered the reduction of official YPC petrol and diesel prices in Houthi-controlled areas on two separate occasions in late November. The first price reduction was declared on November 21 and came into effect two days later, with the price of petrol at YR10,000 per 20 liters. The price of diesel was set at YR10,600 per 20 liters. YPC declared further price reductions a week later on November 28. The new price of petrol at YPC fuel stations was set at YR8,700 per 20 liters, while the price of diesel was set at YR9,500. The latest price reductions are scheduled to be implemented on December 1. According to the official documents, the Houthi-run YPC lowered the price of petrol and diesel in response to the appreciation of the rial.

Military and Security Developments

Coalition Presses, Then Halts, Hudaydah Offensive

Heavy fighting took place in and around Hudaydah after the launch of a new offensive by anti-Houthi forces on the west coast port city on November 2. Following advances by coalition-backed forces in the city’s eastern and southern suburbs, on November 14 the Saudi-led military coalition halted the offensive. Days later, the Houthis said they would cease missile and UAV attacks against coalition and Yemeni targets. Both sides have since accused the other of violating the ceasefire.

On November 7, there were reports that pro-government forces were within 5 km of Hudaydah port, approaching from the east, taking control of the May 22 hospital on November 10. Eyewitnesses reported street battles and coalition strikes in the southern al-Rabsa neighborhood on November 12, which – as a densely populated residential area – locals said caused considerable displacement. Medical and military sources reported at least 149 killed during 24 hours. On November 9, Mohammed al-Bukaiti of the Houthi Political Bureau called for the group’s forces to move to the west coast, echoing similar statements by Houthi leader Abdulmalik al-Houthi in a televised speech on November 7.

On November 14, the Saudi-led military coalition temporarily halted the offensive, saying the ceasefire was intended to allow civilians to flee and facilitate humanitarian interventions. Reuters quoted an unnamed source as saying the move came following western pressure – particularly from the US – for a ceasefire to ensure the Houthis attended proposed peace talks in Sweden. Houthi officials subsequently claimed that the coalition had continued to carry out airstrikes, while UAE-backed forces say that Houthi missiles targeted residential areas in the city. On November 14, the director of President Hadi’s office, Abdullah al-Alimi, said retaking of Hudaydah is inevitable, by military or political means.

Credit: Ghaidaa Alrashidy, Sana’a Center research

Pro-Government Forces Advance on Northern and Southern Fronts

Elsewhere, anti-Houthi forces made gains in Sa’ada, Hajjah, and al-Dhale governorates. In the Houthi stronghold of Sa’ada, northern Yemen, the Yemeni army reported advances in the border districts of Baqim, Razih and Dhaher. On November 3, government media quoted senior military figure Abdul Karim al-Sodai as saying that pro-government forces had moved to within 40 kilometers of Mount Marran, in Haydan district – the Houthi movement’s heartland. Heavy airstrikes and shelling were reported in areas close to the Saudi-Yemeni border, with Razih seeing particularly concentrated bombardment.

Government forces reported gains in northern Hajjah governorate, claiming on November 5 to have taken control of the Ahem junction in Haradh district – a strategic crossroads that connects Hardah city with Hudaydah governorate, to the south, and Amran governorate to the east. Efforts by coalition-backed forces to encircle Haradh district have encountered resistance from Houthi forces’ positions in the al-Nar mountains east of Haradah city, through which the road to Sa’ada runs.

In the south, the Yemeni army continued their drive toward the city of Damt, northern al-Dhale, in the small remaining area of the southern governorate that remains under Houthi control. Army media said that government forces took control of al-Hakab castle overlooking Damt on November 6, with clashes reported on the southern outskirts of the city by mid-November and claims that Houthi counterattacks on territory held by government forces have been largely repelled.

Tensions Persist Between Anti-Houthi Forces in Taiz

Ongoing tensions between anti-Houthi forces in Taiz governorate (background available here) escalated in November, centered in al-Turbah, in the south of the governorate. The area has seen a wave of attempted assassinations targeting high profile figures and disputes over control of checkpoints on the strategic road linking Taiz City and Aden. Competition between the UAE-backed Abu Abbas brigade and government military units aligned with the Islah party descended into clashes on the streets of Taiz city in August. While the subsequent withdrawal of Abu Abbas’ forces from the city put an end to the armed violence, the conflict has essentially moved southwards, where both sides continue to compete for territorial control and influence.

According to Sana’a Center sources, a meeting between high-level political and military figures in Taiz on November 4 – spurred by pressure from Riyadh – resulted in an agreement for both Abu Abbas’ and Islah-aligned forces to remove their checkpoints from al-Misrakh and al-Nashmah areas, both of which lie on minor roads leading to Taiz city. A spate of assassination attempts against high-level figures in the following weeks, however, belied cracks in the uneasy truce. The Islah-aligned 17th Infantry Brigade reported the targeting of two of its commanders, Brig. Gen. Abdulrahman al-Shamsani, on November 10, and Brig. Gen. Abdul Rahman al-Shamani, on November 17. Also on November 17, Brig. Gen. Adnan al-Hammadi, a commander of the 35th Armoured Brigade – which coordinates closely with Abu Abbas’ forces – reportedly survived an assassination attempt. Then, on November 21, gunmen reportedly fired on the convoy of Brig. Gen. Abdul Aziz al-Majidi, chief of staff of the Taiz Military Axis – the umbrella group of anti-Houthi forces fighting in the governorate.

Other Military and Security Developments In Brief:

Political Developments

Islah Leaders Visit Abu Dhabi

At the beginning of November representatives from the armed Houthi movement and Yemen’s Islah party met in the Omani capital Muscat, according to Sana’a Center sources familiar with the proceedings. These were follow-up talks to ones held earlier this year between the two parties, and were intended lay the foundation for mediation between the groups (Islah is currently a member of the pro-Yemeni government forces battling the Houthis).

However, seeking to forestall such mediation, the UAE intervened. On November 14, Abu Dhabi Crown Prince Mohamed bin Zayed Al Nahyan hosted senior Islah party leaders in the Emirati capital. These talks included Islah’s chairman, Colonel Mohammed Abdullah al-Yidoumi, and the party’s secretary-general, Abdulwahab Ahmad al-Anisi. Adnan al-Adini, a senior Islah leader, called the visit an “important and positive step” that aimed to “remove any confusion.”

The UAE regards Islah as a branch of the regional Muslim Brotherhood movement, which, along with Saudi Arabia, it designated as a terrorist organization in 2014. Islah denies any organizational ties with the political Islamist movement. Throughout the Yemen conflict, there have been regular tensions on the ground between armed groups funded by the UAE and those aligned with Islah, though there have been some indications of a thawing of relations, exemplified in a landmark meeting in December 2017 between senior Islah leaders, Crown Prince Mohammed bin Zayed al-Nahyan, and Saudi Crown Prince Mohammed bin Salman.

At the meeting last month, Sana’a Center sources reported that the Islah officials were issued a number of demands for them to comply with, which they accepted in exchange for the UAE ending its hostilities toward them. These demands included: that Islah end talks with the armed Houthi movement; that the party end its association with Yemeni Vice President Ali Mohsen; that Islah reactivate frontlines with the Houthis that have become relatively dormant, specifically in Taiz governorate and the Nihem district of Sana’a governorate; and that Islah cut its ties with Qatar.

Notably, just prior to the meeting in Abu Dhabi on November 10, al-Odini accused Qatar – which has been locked in a diplomatic spat with it’s Gulf neighbors since May 2017 – of supporting the Houthis.

Other Political Developments In Brief:

Humanitarian Developments

Almost 85,000 Yemeni Children Estimated to have Died From Hunger

On November 21, analysis by Save the Children stated that some 85,000 children are likely to have died from hunger in Yemen since the beginning of the conflict. This analysis was built on data collected by the United Nations, and calculated using conservative estimates of mortality rates for children less than five years old who suffer from untreated severe acute malnutrition. This follows the UN warning in October that Yemen was on the cusp of the worst famine the world has seen in a century.

In a press release, Bill Chamber, CEO of Save the Children, added that “the lives of an estimated 150,000 children still trapped” in the city of Hudaydah were also in imminent danger.

INGOs and Health Facilities Under Threat in Hudaydah

On November 8, 14 international nongovernmental organizations operating in Yemen issued a joint statement in which they said they were “appalled” by the escalation in violence in and around Hudaydah City. According to the World Food Programme, it has cause a “huge” number of displaced civilians. Additionally, Medecins Sans Frontieres reported that various Health facilities have been endanger, such as al-Thawrah hospital, the largest hospital in Hudaydah. On November 6, UNICEF Executive Director Henrietta Fore expressed her concerns regarding the fighting near al-Thawrah hospital. In early November, Houthis fighter took over a rooftop of a hospital in Hudaydah city, which led to three airstrikes on the building according to the Norwegian Refugee Council

November 7, Save the Children reported that its health facility was damaged by shelling into their area in Hudaydah city. The World Health Organization also reported on November 8 that the fightings now are close to the hospitals hindering the flow of medical staff and patients.

On November 11, an attack by the Saudi Coalition was close to al-Thawrah hospital and al-Salakhana hospital where constraints are being added to their operations. Notably, World Food Programme Executive director David Beasley said during a TV interview with CNN on November 14 that Houthis planted seven landmines inside their facility.

November 22, Under-Secretary-General for Humanitarian Affairs and Emergency Relief Coordinator Mark Lowcock, and UNICEF Executive Director Henrietta Fore released a joint statement urging warring parties to keep the reduction of hostilities in Hudaydah. And expressed serious concerns on the fightings near al-Thawrah hospital that has been damaged before and is now in danger. To avoid any upcoming disasters they demanded “a package of five measures” which are; “a cessation of hostilities, protection of the supply of food and essential goods, support for the economy, increased funding for the response, and engagement by the parties with the Special Envoy to end the conflict”.

Saudis, Emiratis Launch US$500 million Imdad Initiative

On November 20, the Humanitarian Aid and Relief Centre (KSRelief) and Emirates Red Crescent announced the Imdad initiative. According to the announcement, Imdad will provide US$500 million worth of support, though the UN and other organizations, to address the food security crisis in Yemen. The initiative’s founding organizations estimated it will benefit 10 million to 12 million Yemenis. .

Other Humanitarian Developments in Brief:

Human Rights and War Crimes Developments

Hudaydah Battle Sparks Surge in Atrocities Against Civilians

The intensification of the in and around Hudaydah City in early November was accompanied by a spike in suspected violations of human rights and humanitarian law. In the first week of November, the UN reported that airstrikes, shelling and landmines killed 34 civilians and injured 92 injured in Hudaydah governorate, with most of these incidents occurring in the suburbs of Hudaydah City.

On November 7, Houthis fighters took up position on the roof of al-Thawra Hospital, according to Amnesty International, putting patients and medical staff alike a risk of being targeted by coalition airstrikes. The same day, Houthi shelling killed four civilians and injured two in a residential area in al-Tahita district, southern Hudaydah governorate, according to al-Masdar Online.

Al-Masdar also reported that in early November Houthis fighters detained hundreds of workers at a silo facility at Hudaydah port. According to the report the silos contain the equivalent of 5 million bags of flour and are the largest such stockpile in northern Yemen. The Houthi fighters have prevented the workers from leaving the facility and forced them to continue working, while the fighters themselves have established sniper positions on atop the facility and dug tunnels around it.

For its part, the Saudi-led military coalition launched 200 airstrikes in Hudaydah over the first weekend of November, according to UN. On November 11, airstrikes hit close to al-Thawra Hospital, causing many inside to flee in panic, according to Amnesty International. On November 13, more airstrikes killed seven civilians and injured four while they were in a bus attempting to flee clashes in the city, according to New York Times.

Civilians Account for One-third of the Casualties of US Drone Strikes in Yemen

On November 14, the Associated Press (AP) reported that civilians account for a third of deaths from US drone strikes in Yemen, based on estimates compiled through interviews with witnesses to the strikes, families of victims, tribal leaders and local activists.

The US began its drone campaign against AQAP 16 years ago, with a marked uptick in strikes under the Trump presidency: 176 in his first two years in office, compared with 154 strikes in Obama’s whole eight-year tenure, according to AP.

UNHRC Body Reviews Riyadh’s Human Rights Record

On November 5, at the Universal Periodic Review (UPR) at the UN Human Rights Council (HRC) in Geneva, member states discussed the human rights situation in Saudi Arabia, and Saudi conduct in the Yemen conflict. Member states recommended that the Saudi-led military coalition take measures to enhance the peace process, protect civilians and particularly children in Yemen, ensure humanitarian access, immediately halt the conflict, end the blockade on Yemen and to implement the recommendations the UN Group of Eminent Experts released in August this year. Iran was the country delivering the highest number of recommendations on the Saudi role in the Yemen conflict.

In response, Saudi Arabia affirmed its full commitment to international humanitarian law and the protection of Yemeni civilians. Riyadh also emphasized the humanitarian and financial assistance that it had provided to Yemen, and said it had regularized the status of more than half a million Yemenis in Saudi Arabia, allowing them to work legally.

The Khashoggi affair also figured among recommendations, with several states calling for a credible investigation into the incident. Saudi Arabia, in turn, affirmed its commitment to investigate the case and prosecute all perpetrators.

Houthi Detainees Appear Before Special Criminal Court

On November 25 the Specialized Criminal Court held a hearing for 36 political prisoner held by Houthi security forces in Sana’a, with most having been detained for more than two years.

According to a brother of one of the detainees who spoke to the Sana’a Center, the hearing was the first at which the Houthi authorities allowed defense lawyers to present evidence. He added prosecutors had requested a copies of the evidence following the hearing, with the next hearing scheduled for December 30, 2018.

This report was prepared by Waleed Alhariri, Holly Topham, Hussam Radman, Ghaidaa Alrashidy, Anthony Biswell, Sala Khaled, Aisha al-Warraq, Ali Abdullah, Victoria K. Sauer, Hamza al-Hamadi, Taima al-Iriani and Spencer Osberg.

The Yemen Review – formerly known as Yemen at the UN – is a monthly publication produced by the Sana’a Center for Strategic Studies. Launched in June 2016, it aims to identify and assess current diplomatic, economic, political, military, security, humanitarian and human rights developments related to Yemen.

In producing The Yemen Review, Sana’a Center staff throughout Yemen and around the world gather information, conduct research, and hold private meetings with local, regional, and international stakeholders in order to analyze domestic and international developments regarding Yemen.

This monthly series is designed to provide readers with contextualized insight into the country’s most important ongoing issues.

This month’s report was developed with the support of the Kingdom of the Netherlands and the Friedrich-Ebert Yemen office.

Program/Project: The Yemen Review