The US-Israel war against Iran has changed the face of the region. After months of tension in the Gulf, a Memorandum of Understanding (MOU) was signed by the US and Iran stipulating a 60-day ceasefire and a framework for negotiations to end the war. Despite recent violations, this has finally made it possible for us to make reasonable predictions on how the chips will fall after this geopolitical earthquake.

The US-Israeli failure to achieve their military objectives is a defeat that will lead to a significant US retreat, along the lines of the “Pivot to Asia” announced by the Obama administration and broad strategic realignments among regional states. The Arab Gulf states have realized that US security guarantees are not sufficient. The “Greater Israel” designs of militant Israeli Zionists stipulate the annexation of all or part of seven different countries, including Saudi Arabia, Egypt, and Iraq. The support for these designs by the Christian Zionist voting bloc in the US has made it clear to these states that the US can no longer be trusted to defend its Arab allies and that they will have to look for security elsewhere. In response, Saudi Arabia has signed a mutual Defense Pact with Pakistan and held numerous meetings with Turkey, Egypt, and Qatar, heralding the formation of a new axis designed to protect member states against Israel’s hegemonic intentions. The UAE has doubled down on its embrace of Israel and announced strategic agreements with Pakistan’s main adversary, India, which has a history of military cooperation with Israel, suggesting an opposing axis to include Israel and, some speculate, Greece and Cyprus.

Many international experts were quick to present the outcome of the confrontation between the US, Israel, and Iran as an outright defeat for the US-Israeli side. That assessment is not accurate in my view, as the main source of Iranian deterrent power, its ability to disrupt the flow of oil and petrochemicals from the Gulf, is circumstantial and is already being mitigated by the construction of new pipelines that circumvent the Strait of Hormuz. In time, the major powers and importing states will boost their national oil reserves to weaken Iranian leverage. In the US-Iran MOU, the US gave away too much upfront, including releasing Iran’s sanctioned assets, acknowledging Iran’s control of the Strait, and promising the provision of a US$300 billion reconstruction fund to be organized by the US and its regional allies. These concessions support the argument that the Trump administration is merely seeking relief on oil to lower US gas prices ahead of the mid-term election in November. It will then negotiate more forcefully and use force to exact concessions from Iran. However, US domestic interest in breaking Iran’s will is waning, as stories begin to circulate that portray Trump as having been tricked by Israeli Prime Minister Benjamin Netanyahu into attacking Iran, leading to the spectacular humiliation of the US. Declining American reliance on Gulf oil may give the capricious US president reasons to shift his focus from Iran to other issues, such as China.

While the daily stream of contradictory statements and actions made by Trump obscures US plans for the region, Gulf states, with the exception of the UAE, have made it crystal clear – with deeds rather than words – that they intend to de-escalate with Iran and seek cooperation rather than confrontation. This was demonstrated by their willingness to foot Iran’s reconstruction bill. This new atmosphere will facilitate the resolution of the thorniest issue in Saudi-Iranian relations: the war in Yemen.

Improved Prospects for Peace in Yemen

An end to the conflict in Yemen has become the obvious choice for all parties concerned, aside from arms dealers and war profiteers. Both sides grew weary of the conflict years ago, leading to the 2022 ceasefire that continues informally to this day. Economic decline and food insecurity have hit both government and Houthi-controlled areas, and it has become abundantly clear that a military solution is all but impossible. As things currently stand, the government cannot defeat the Houthis, and the Houthis will never be allowed to take all of Yemen by force.

The only obstacle to peace has been the Houthis’ maximalist demands and refusal to negotiate with the government. Houthi intransigence is fueled by the tantalizing but naïve perception that they can repeat the 1970 settlement of the North Yemen civil war, when Saudi Arabia abandoned its royalist allies and made a deal with the victorious republicans. They apparently do not realize the massive difference between the two scenarios.

In 1970, the republican side was composed of conservative commanders and sheikhs led by a moderate president, Abdulrahman Al-Iryani, who was once described by Saleh bin Naji al-Ruwaishan, a prominent sheikh of Khawlan, as a “republican imam.” With this reputation, he succeeded in convincing the powerful sheikh Al-Ghaadir of Khawlan to defect to the republican side. The republican leadership was of the generation that looked up to the Saudi model and had appealed to the Imam to follow in Ibn Saud’s footsteps. The only real disagreement between the republicans and the Saudi leadership was over the restoration of the Hamidaddin royal family to power. The Houthis, on the other hand, are militant ideologues who still aspire to take over Mecca and Medina. They assume that regional states are unaware of the time bomb they have created through the hundreds of thousands of young boys they have radicalized, who will fan the flames of instability for a generation.

Until recently, the Houthis exercised a level of constraint and largely kept out of the third Gulf War. The few missiles they fired at Israeli targets were of more symbolic than military significance, and the few missiles and drones they fired into Saudi Arabia were accompanied by statements calling for a deal that would lift the restrictions on Yemeni ports and airports. It appeared to be an appeal to the Saudis to negotiate rather than a serious threat. This boded well for the starving people of Yemen, especially those under Houthi control.

However, in the last few days, the Houthis escalated massively and crossed several red lines, including attacks on oil installations and tankers. Even this triggered a measured Saudi response, indicating a desire to avoid escalation. While displaying restraint, the Saudis quickly demonstrated their strategic reach by forming a broad coalition to defend maritime freedom and security in the Red Sea. Regional and international statements of support for Saudi Arabia came from all quarters, including Pakistan, which expressed its resolve to deploy its naval assets to the theater.

Upon these developments, there has been a general consensus among observers that the Houthis have fully engaged in the conflict in support of Iran, just as Tehran has threatened all along. I respectfully disagree. I do not rule out the possibility, suicidal as it is, that the Houthis could throw their full weight behind Iran, and risk any possibility of a peaceful settlement of the war in Yemen, which would spare countless Yemeni lives that will otherwise be lost to war and famine. I argue, and have argued, that the Houthis will act on their understanding that any US-Iran peace agreement will inevitably be reached at their expense, unless they reach an agreement with Saudi Arabia first. The level of escalation during the past few days seems to support that expectation. While the Houthis have crossed many red lines, their level of escalation is not what one would expect if they were going for broke. The Sana’a Center has heard from credible sources that a Houthi faction has desperately tried to prevent the recent escalation, and that talks between the Houthis and the Saudis through Oman have not stopped. It is still possible for the Houthis to de-escalate before it is too late.

Saudi Arabia’s cautious stance has improved the prospects of peace in Yemen. Taking a stand against the US-Israeli attack on Iran and using its considerable leverage to push for a ceasefire, Riyadh made it clear that any disagreements with Tehran should be settled by diplomacy. The Saudi stance, along with that of Qatar and Kuwait, alerted the Iranian leadership to the folly of using subversion to destabilize their Arab neighbors. Saudi Arabia’s astute handling of the Southern Transitional Council’s rebellion and takeover of eastern Yemen also contributed to the prospects of peace. By accommodating the bulk of STC rank and file and supporting the Ministry of Defense’s efforts to establish a unified command for government forces, it has made progress in bridging the massive imbalance between government and Houthi forces. The gap remains, but it can be further narrowed through diplomacy and other non-military means.

The UAE’s January withdrawal was also a huge boost to the peace process in Yemen. The UAE has placed numerous obstacles in the path of peace, including the formation of numerous armed groups outside the control of the government and assassinating moderates on the Houthi side, including the chairman of the Supreme Political Council. The UAE has also assassinated hundreds of government soldiers and commanders, many of them members of the Islah party. It was obvious from the start that the UAE’s objective was to keep Saudi Arabia stuck in the Yemeni quagmire. Now that it has left, the prospects for peace are improving.

Iran will have a salient role in bringing peace to Yemen. Houthi intransigence cannot be overcome without Iran’s help. The involvement of a grateful Iran, using its leverage to get the Houthis to make the necessary concessions to achieve a balanced, fair, and durable peace, will be instrumental to a successful peace process. Iran will find Houthi intransigence a major obstacle to improving relations with its Arab neighbors, especially Riyadh, and so is likely to use its leverage to moderate the Houthi position on power-sharing.

With all the stars aligned for peace, there is still one possible spoiler that could turn things around: Israel. Intent on disrupting the peace negotiations between the US and Iran, and hellbent on revenge, Israel could carry out attacks on the Houthis, hoping that the conflict could balloon and disrupt the peace talks. Israel has made the necessary preparations to use bases close to Yemen, from which it could carry out a sustained campaign to weaken the Houthis. Counterintuitively, weakening the group at this point is not in the interests of peace. If the Houthis are under attack and their position compromised, they will be too insecure to engage in peace talks or make the necessary concessions.

Risks and Pitfalls

As the region calms down, peace negotiations in Yemen are expected to start in earnest, this time with direct negotiations between the Yemeni parties. The Saudis will sponsor the negotiations, having reached their own understanding with the Houthis. Their primary concern will be to put an end to the conflict, so that they can turn their attention to their development plans. The Houthis will present their own vision for peace: a power-sharing agreement that reflects the relative power of each side and the formation of a government of national unity composed of representatives of each party. The representatives will be required to go back to the capital, Sana’a, to carry out their duties. Houthis have articulated this vision repeatedly over the past few years. The government has not articulated a realistic vision for peace that reflects the current situation. Its position has been to hang on to three references: UNSC resolutions, the GCC Initiative, and the outcomes of the NDC. The Saudis will have to mediate between these two visions. Clearly, they cannot support a negotiating position that starts from the three references, so the conversation will be based on the Houthi vision and on how to modify it to the government’s satisfaction.

The mere acceptance of negotiations on the basis of the Houthi vision implies recognition of a Houthi victory and a government defeat. Whether the government accepts the Houthis’ terms or not, the debate among regional allies and the international sponsors of peace in Yemen will be on how to pressure both sides to make concessions. The Houthis will have a wide margin for concessions; they can offer up cabinet portfolios and top jobs in formal government institutions. They can make concessions on the number of security personnel that the government can position in Sana’a. They can even agree to surrender control of the Ministry of Defense to the government side. But all of this will scarcely dent their real power.

Since taking Sana’a, the Houthis have maintained their own institutions while slowly taking over the formal institutions of the Yemeni state, purging personnel and replacing them with loyalists. As we saw in 1990 and again in 2011, replacing the top leadership of state institutions makes little difference: public service personnel are not managed by the formal structures of the state, but by the shadowy patronage networks that envelop these institutions. The state structure is so centralized that those who control the capital control everything. Decentralization efforts since 1963 had been based on a vision of a centralized system devolving competencies to lower levels at its discretion. The recommendations of the National Strategy for Local Government of 2008 merely tinkered with the authority of a centralized system, and any delegation or devolution of authority could be reversed with the stroke of a pen. Even the NDC outcomes and the draft constitution came woefully short of the level of decentralization that could survive a power-sharing agreement with the Houthis.

All government negotiators can do is respond to Houthi proposals. They will eventually succumb to pressure from all sides to accept an agreement that dooms not just the internationally recognized government but the Yemeni people to decades of Houthi rule. Despite this depressing outlook, I believe that there is a solution if we are ready to think outside the box. Successful states, such as Malaysia, Singapore, and South Korea, did not follow off-the-shelf solutions; each state found a unique formula that addressed its unique circumstances and challenges. It is time for Yemen to find its own formula to avert the grim prospects ahead of us.

For the government to have a chance at an equitable settlement and durable peace, it must develop a subversion-proof, power-sharing agreement. This will require devising a state structure that is not reliant on the goodwill of central institutions and central power brokers. Its structure must be based on a web of balances between the center and the governorates on constitutional, legal, institutional, fiscal, and military powers. It will have to be protected by iron-clad regional and international guarantees, with clear and effective mechanisms to deter violators. But it will also have to include safeguards against the centrifugal force of decentralization, which could lead to the disintegration of the state. If the government does not do that, no one will, and the power-sharing agreement that Yemenis hope to end the war with will be at the discretion of the group that controls the capital, the Houthis.

This commentary is part of a series of publications produced by the Sana’a Center and funded by the Norwegian Ministry of Foreign Affairs under the Reimagining Yemen’s Peace in the Regional Landscape program. The series seeks to bolster peacebuilding efforts in Yemen by strategically examining the country’s security and economic ties with the broader Gulf and Red Sea region.