It could cripple remittances and financial transactions – and destroy an already battered economy without hurting the Houthis directly, say Yemenis.
Sanaa, Yemen — Abdu Yahia is no supporter of the Houthis. But the 37-year-old Sanaa resident has been praying for the past month that the armed Yemeni group stay off the United States’ list of designated “terrorist” outfits.
He receives aid from a humanitarian organisation in Sanaa, and fears that tag on the Houthis, who control large parts of Yemen, could stifle the flow of that assistance for a country whose economy has been devastated by a decade of war.
His prayers didn’t work.
On January 17, Washington gave the Houthis a one-month notice to stop their attacks on shipping lanes in the Red Sea, the Arabian Sea, and the Gulf of Aden or face the prospect of being put on the US “terror” list.
The Houthis rejected the ultimatum, insisting that they were not targeting civilians, that they were attacking only ships linked to Israel and that their campaign was aimed at pressuring Israel to stop its devastating war on Gaza, in which nearly 30,000 people have been killed.
So on February 16, the US relisted the Houthis as Specially Designated Global Terrorists (SDGT). The designation enables the US Treasury Department to disrupt financial flows between Yemen and any country in the international financial system, if it believes those funds could help the Houthis.
But it’s not the Houthis who will face the worst of the effects of the designation, said Yahia.
“When the Houthis are called rebels or militants, that is fine. But when they are called a ‘terrorist’ organisation, it is grave. We civilians cannot escape the consequences as long as we live in Houthi-controlled areas,” he said.
Ali studied public relations and hopes to get a job relevant to his major. But he knows his prospects, already weak, have become almost negligible with the US labelling the Houthis a “terror” group. The economy will take a further hit.
“The private sector will be more hesitant to open more investments in Houthi-controlled areas, and international humanitarian organisations may limit their operations and reduce their local staff in Yemen,” he said. “More restrictions on money transfers to Yemen will be introduced. This will hurt Yemenis who depend on financial support from friends or relatives in other countries.”
Since the start of the Yemen war in 2015, inward remittances have become an increasingly central part of the country’s economy: In 2023, they are expected to have amounted to 18 percent of Yemen’s gross domestic product (GDP), among the highest proportions in the world.
While Washington has made some exemptions to mitigate the impact of the Houthi designation as a “terror” group, the aid operations director for the United Nations Office for the Coordination of Humanitarian Affairs (OCHA), Edem Wosornu, said late last week that the Yemeni economy would not be immune from the consequences of the move. She told the UN Security Council, “We fear there may be an effect on the economy, including commercial imports of essential items on which the people of Yemen depend more than ever.”
Ali, the Sanaa resident, also worries that the restrictions could lead to a rise in prices of imported commodities. “When any military tensions intensify, or the flow of ships to Yemen is disrupted, we feel the pain the moment the price of commodities rises,” Ali said.
Aggravating economic woes
Amal Saleh, a 38-year-old schoolteacher in Al-Hudaydah province, was hopeful that the UN-led peace talks in recent months would lead to an agreement on stopping the nine-year-long war between the Iran-supported Houthis and the Saudi Arabia-backed internationally recognised government.
The two sides were close to signing a peace deal late last year. Saleh thought the agreement would also include paying public employees’ salaries, which had been cut since 2016 due to the warring parties’ dispute over resources.
In April 2022, the Yemeni rivals agreed to a six-month UN-sponsored truce for the first since 2015. Talks since then have strengthened hopes of a comprehensive peace deal. But Israel’s war on Gaza, rising regional tensions and the Red Sea escalations have yanked the focus of key players away from Yemen, complicating the negotiations, according to Grundberg.
The assumption behind the “terrorist” designation for the Houthis — that it will weaken the group — is fundamentally flawed, said Adnan Hashem, a researcher at the Yemen and Gulf Center for Studies. “Designating the Houthis as a ‘terror’ group will not directly impact the Houthi group. All that the Houthis own is inside Yemen, and they do not have cash or properties outside Yemen,” he told media.
“While the US intends to pressure the Houthi group with this move, the opposite might happen, Hashem said. “The Houthis could feel humiliated after being labelled as terrorists, and this will likely instigate them to step up their operations in the Red Sea.”
Mohammed Abdulsalam, the Houthi spokesperson, described the US designation of his group as “blatant hypocrisy”, as it aims to protect Israel and encourage the “genocide” in Gaza. The designation won’t change the Houthi approach to the Red Sea, he added. “If a number of regimes have accustomed to submitting to the American arrogant … policies, this will not be the case with Yemen.”
Yahia, the Sanaa resident, is all for the Houthi “boldness” and “solidarity” with Gaza. But those qualities do little to help him — and millions of ordinary Yemenis — he says.
“The thing we fear is the hell their unbridled courage may cause us.”
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