Yemen’s Houthis facing financial crisis after oil blockade

Blocked from selling Yemen’s oil, the Houthi-led government has slipped into a financial crisis after four months of conflict with a Saudi-led military coalition.

The Houthis wrested control of government in the capital Sanaa in February and sent Western-backed President Abed Rabbo Mansour Hadi into exile the following month. They have since held the levers of power, having taken over government ministries and the central bank.

Oil exports used to supply a large share of Yemeni government revenues. But a Houthi ­official says the country has not exported any since March ­because of damage to energy ­infrastructure and a blockade ­imposed by the Saudi coalition. International aid, which was ­another major funding source for the Arab world’s poorest country, has also dried up amid the ­deteriorating security situation.

The rebels control most of Yemen’s major cities, though they have suffered setbacks in the south in recent weeks. Backed by airstrikes, forces allied with the Saudi-led coalition have taken over the southern port city of Aden. Yesterday, those forces were fighting nearby for control of Yemen’s biggest air base, Al Anad.

Despite their military successes, the Houthis are finding it ­increasingly difficult to stay afloat, which raises the question of whether financial troubles could push them towards an elusive political settlement.

Tax collection has also fallen dramatically among the population of about 27 million, who are suffering from short­ages of fuel, food and medicine, according to a senior Houthi official.

Hospitals are running over ­capacity in areas hard-hit by violence, while fighting has made it difficult for aid groups to reach millions of people in need of food, according to the UN World Food Program. Diseases including dengue fever have spread in the battle-scarred south.

“There is no income at all,” said Abdullah Shaban, a member of the Houthis’ revolutionary committee — a governing body formed in March. The Houthis now face a major budget shortfall.

The Houthis have appealed for outside help. In March, the rebels sent delegations to Iran, Saudi Arabia’s rival, seeking fuel assistance and to Russia seeking larger-scale investment in energy projects. There has been no sign that any deals were reached.

Houthi officials have said they received some assistance from Iran in the past, mainly in the form of cash and intelligence. Iran is critical of the Saudi-led airstrikes, but denies it provides the Houthis with weapons.

Mr Shaban, the Houthi official, said if Iran was planning to support the Houthis, it would have done so during the continuing ­crisis, but it had not.

The Houthis also extended separate appeals to some countries including Russia to help fill their foreign-exchange coffers, according to Hasan al-Sa’adi, ­another Houthi political leader.

“There are some within the Houthi movement who are beginning to understand the consequences of continuing on the current trajectory,” said a senior Western diplomat who is tracking the situation. Efforts to broker a compromise, including a round of UN-sponsored talks in Geneva in June, have failed so far.

The Saudi-led campaign aims to restore Mr Hadi to power. Supported by the US, the coalition began airstrikes in late March and imposed a sea blockade, leaving the Houthis economically isolated and cash-strapped.

Abdulmalik al-Houthi, the movement’s top official said this week that political solutions were still possible, even as he vowed to reverse the gains of Saudi-allied forces in Aden. The Houthi losses were short-term and would be countered “despite all Saudi Arabia’s money”, he said in an address broadcast by the Houthi-run Al Masirah TV network.

The Houthis are taking steps to fix their flagging finances.

Houthi officials say Yemen’s foreign currency reserves — an important measure of a country’s ability to withstand financial shocks — have seen only a slight decline since the beginning of the year and stand at about $US4 billion ($5.4bn).

But that decrease is largely the result of the country not being able to spend reserves on imports with the blockades and the fuel shortage that makes the cost of deliveries prohibitive. Local banks are barred from giving out foreign currency.

The central bank has been selling short-term debt since airstrikes began to replace maturing debt and avoid a funding shortfall.

Last week, the rebels’ leader, Mohammed al-Houthi, said a new tax of four Yemeni rials (about 2c) per litre would be placed on sales of petroleum products. The bank received offers for about $US237 million of debt over the weekend, the Houthi-run Saba news agency reported.

Mr Sa’adi insisted the Houthis could hold out for months longer despite the financial difficulties. The central bank, finance ministry and other government departments had saved money by stamping out corruption and adopting austerity measures, he claimed.

Government spending is banned on all operations except hospitals, water and other essential utilities, he added.

“Yemenis won’t run out of ­solutions,” he said.

“We won’t die of hunger and will never let others control our destiny.”

The Australian /The Wall Street Journal