A former Yemeni minister said that the new UN envoy to Yemen, Hans Grodenberg, needs to take three major urgent decisions to address the most pressing problem.
In an analysis published by Foreign Policy magazine, translated by Al-Mashhad Al-Yemeni, Raafat Al-Akhali explained that the issue that emerged the most and that was seen as the most pressing problem facing Yemen was not the military aspects of the war, but rather the economy.
He pointed out that economic mediation was noticeably absent from the international approach led by the United Nations in Yemen.
He stressed the need for the envoy to reduce the economic escalation, end the division between Sanaa and Aden, and avoid double taxation.
Here is the full text of the analysis:
The most pressing problem in Yemen is not the war. It is the economy.
By Raafat Al-Akhali*
Last September 22, a high-level meeting of the United Nations hosted by Sweden, Switzerland and the European Union concluded with donors pledging an additional $600 million to the $3.85 billion United Nations Humanitarian Response Plan for Yemen. These pledges are vital, but the humanitarian crisis in Yemen is a symptom of an underlying economic conflict. This conflict has contributed significantly to the increase in food and fuel prices, and priority must be given to settling the conflict between the parties involved.
I am a Yemeni national working on development and governance issues in Yemen for nearly two decades in multiple roles: as a co-founder and advisor to a number of leading civil society organizations; As the team leading policy reforms in the Ministry of Planning and International Cooperation in 2013 and 2014; Minister of Youth and Sports in 2014 and 2015; As a senior advisor to international agencies concerned with development, peacebuilding, and the Yemeni political economy; As a researcher and practitioner on the topic of state fragility at the University of Oxford.
I recently returned from a month-long visit to Yemen. During my time there, I was able to travel to six major Yemeni cities with stops in smaller towns and villages along the way. I met leaders of local authorities, chambers of commerce, bankers, merchants, and politicians from across the Yemeni political spectrum. She has also been involved in discussions with hundreds of young leaders and civil society representatives in town halls across the country. We discussed their perspectives on the ongoing conflict and the peace process, the development priorities of the different governorates, the capacity challenges facing local authorities, and the visions of Yemeni youth for the future. But the issue that emerged the most and was seen as the most pressing problem facing Yemen was not the military aspects of the war. It was the economy.
War always has a devastating effect on the economies of countries, and Yemen is no exception. In the first year of the war alone, economic output fell by about 28%. Exacerbating matters, the economic conflict between the Houthis and the recognized Yemeni government has essentially divided Yemen into two monetary and economic regions over the past years. In Houthi-controlled areas, only banknotes printed in the pre-war period are used, while in parts of the country under sham government control, the new national currency printed since 2016. This split has become an acute economic problem; And when the Houthis banned the new banknotes in December 2019. The value of the riyal collapsed in government-controlled areas—even dropping to less than 1,100 riyals last September—while remaining relatively stable in Houthi-controlled areas. Prices of basic goods rose significantly in government-controlled areas while wages, when paid, remained stable. Meanwhile, in Houthi-controlled areas, public sector salaries have not been paid regularly for years, and fuel prices have risen amid shortages and a dispute between the Houthis and the government over imports into the Red Sea port of Hodeidah.
These issues are relatively well known among Yemen watchers. But what is less clear and still a source of growing frustration inside the country are the obscene fees amounting to 100 percent of the transfer amount on remittances between the various areas of control in Yemen, in addition to the shortage of cooking gas, and the deepening crisis of the faltering banking sector that led to the freezing of deposits And the failure of many banks to obtain that only hard-earned.
This is just a short list of the challenges faced by the minority of Yemenis who still earn a semblance of a normal income to face on a daily basis. It’s easy to forget when you’re outside of Yemen, but these economic issues are not an abstract technical issue: they affect the lives of millions of people on a daily basis, as I’ve seen on my travels.
And in Marib, a bustling Yemeni city and commercial center that has grown rapidly over the past six years but is perilously close to the main front lines of the conflict, I met a car shop mechanic who had moved to Marib from Ibb, an agricultural province in central Yemen. He moved to find a job and support his family, but he was seriously considering leaving his job because his salary was poor with the value of the riyal varying and the cost of transferring money to his family in Ibb was swallowing up half of the money he sent.
In Sanaa, which was once a two- or three-hour drive from Marib but is now a nine-hour ordeal due to frontline fighting along the way, I meet a widow outside one of Yemen’s major private banks. The only income for her family was the interest they got from a deposit in the bank after selling a plot of land. Not only has she seen the real value of her deposit and interest payments drop dramatically due to the declining purchasing power of the riyal, but she is now receiving only 50 percent of her deposit interest payments due to new regulations from the central bank in Sana’a. Fatima, like hundreds of thousands of bank customers, was prevented from withdrawing the other 50 percent of interest payments in cash. Local businessmen are starting to offer services to help depositors get their money out of the banks – but they charge about 70 percent of the value of the deposit to do so. If a person such a widow has a deposit of 1 million riyals, then she will actually receive only 300 thousand riyals in cash.
Meanwhile, in the port city of Aden that the recognized government is taking as its temporary capital, many people I interviewed have not slept for days because of the constant power cuts that prevented them from turning on air conditioning units or even simple fans. As for the mothers in Taiz, an industrial city located between Sanaa and Aden, caught in the flames of the complex internal conflict in Yemen, they are unable to buy food for their children due to the high prices in the markets due to the lack of access roads in addition to the collapsing riyal. The lack of fuel and cooking gas in Sana’a made it difficult not only to prepare meals but to ensure clean water.
Of course, all of these issues are symptoms of Yemen’s chaotic and intractable civil war that has lasted nearly seven years. A large part of any solution to these issues is to end the ongoing war and the rival groups that rule Yemen vying for control over it to reach some sort of political settlement with each other. But such a settlement seems far-fetched, and political and military détente will not automatically resolve issues such as the collapsing and dilapidated riyal.
The majority of Yemenis I spoke to strongly felt that critical economic issues needed to be addressed urgently, rather than later as part of a political settlement, regardless of the military and political trajectory of the peace process. I agree. That the military aspects of the conflict be limited to specific fronts in the country. But the economic conflict affects everyone in the country and is pushing millions of Yemenis to the brink of starvation.
However, economic mediation has been notably absent from the international approach led by the United Nations. When former special envoy Martin Griffiths was appointed in February 2018, many Yemenis urged him to take an economic leadership role and bridge the gap between competing central bank departments, one in Sanaa and the other in Aden. (The internationally recognized government moved the central bank headquarters to Aden in September 2016 while the Houthi movement rejected the move and continued central bank operations in Sanaa.)
Griffiths has long defined his mandate as “focusing on a political solution and that ending conflict brings peace.” However, his office eventually had to play the role of mediator in the burgeoning economic struggle. In December 2018, Griffiths led the negotiations that prevented a battle over the Red Sea port of Hodeidah. The agreement, called the Stockholm Agreement, contained loose language regarding joint management of port revenue to pay state employees. The two parties have met sporadically under the auspices of the United Nations since 2018 to discuss a mechanism but have been unable to find a compromise. They were able to agree on a compromise deal on fuel imports entering Hodeidah in November 2019, but that agreement unfortunately collapsed after a few months. The common theme across these efforts was that they were reactive and ad hoc, as the UN humanitarian agencies focused on responding to the consequences of the economic collapse, providing food assistance and emergency relief to the population. This is not to underestimate the critical work that humanitarian agencies are doing to save millions of Yemenis from starvation. But the economic conflict between the rival parties has exacerbated the economic collapse in Yemen, thereby deepening the humanitarian crisis and, in many cases, nullifying the impact of emergency humanitarian aid.
The new United Nations Special Envoy for Yemen, Hans Grundberg, began his new job on September 5, after two years as the European Union ambassador to Yemen. The new envoy will need to make three major decisions.
First, the United Nations — member states, the secretariat, and the envoy — must end the ambiguity around the envoy’s mandate and enable him to deal with the economic conflict. This need not be done through a statement or resolution of the United Nations Security Council although that would be a welcome step. This can be done by creating a high-level position – deputy envoy, for example – in the envoy’s office to deal primarily with his economic portfolio directly. The envoy will also need to recruit sufficient staff with the necessary technical skills and knowledge in economics, finance, and political economy to overcome complex challenges, mediate between the parties, and identify feasible technically and politically solutions.
Second, Grundberg and his office will need to organize the creation of a clear mechanism for international coordination around the economic track of the peace process. This mechanism existed before the war and was represented by the Economic Working Group of the Friends of Yemen. This group will provide an authoritative political environment, indicate the importance of this track, and address the many coordination gaps in the international community’s efforts to address the priorities of the economic track in Yemen.
Third, the envoy needs to clearly identify the issues – and most importantly they are not – part of what they can and should deal with. Issues of economic de-escalation should be high on the agenda. These are pressing economic issues that leave significant negative impacts on citizens and the economy and require negotiations and agreement between parties closely related to issues of sovereignty, authority and legitimacy. These issues include the coordination of monetary and fiscal policies, restrictions on infrastructure, major trade routes and trade, and public revenue management to ensure public sector salaries are paid and to avoid double taxation.
This will help the envoy establish an economic negotiation track now or his successor to prepare for future political negotiations when the economic dimensions of the war are on the agenda. There is great value in the parties’ agreement on how to address some of the key post-conflict economic issues early on. Postponing agreement on these key issues to a later transitional stage could jeopardize the achievements in the peace process and cause a new cycle of conflict. Examples of post-conflict economic issues that should be included in a peace agreement include: managing natural resource revenues, reunifying key institutions, integrating the civil service, and managing the post-conflict reconstruction process.
Yemenis including it have endured nearly seven years of conflict. Until the war ends, the economic suffering of the Yemeni people should not be relegated to side issues. I have been part of multiple discussions with many international actors in the past few weeks about whether or not a new special envoy should take the lead on the economic agenda, or whether that leadership should sit elsewhere in the international system. Regardless of who takes the lead in this, the moral, if not legal, responsibility rests with the international community to devote its full attention to the economic path of the peace process and to ensure effective leadership in mediating issues between the parties.
* Raafat Al-Akhali is a fellow at Blavatnik College of Government, University of Oxford, and a member of the State Fragility Council at the Center for International Growth. He previously held the position of Minister of Youth and Sports in Yemen.