Risks to Gulf states posed by Yemen's civil war: Incentives to invest in reconstruction

A recent report from the Arab Gulf States Institute in Washington, authored by senior resident scholar Karen Young, discusses the Yemen civil war and its cost for Yemen’s Gulf neighbors, urging Gulf Cooperation Council states to end their contributions to the cycle of violence in Yemen. The report notes that the future cost of the ongoing war for Gulf states may be greater than GCC states anticipate due to the reverberations that civil wars tend to have in neighboring states. The author makes policy suggestions for GCC states that seek to minimize the impact of the war in Yemen both on Yemeni society and on Yemen’s neighbors.

“A study by the World Bank, United Nations, Islamic Development Bank, and European Union estimates the economic impact of the conflict in Yemen far exceeds the promised Saudi aid. Rebuilding costs are also distinct from damage assessments. The group’s early assessment tops $15 billion….While this aid is desperately needed, it will be a fraction of the cost of the eventual reconstruction of Yemen (or two separate Yemeni states). It will also be a sliver of the cost of the conflict to the Gulf Cooperation Council states, especially those directly involved in the conflict and on Yemen’s borders. What political scientists have learned about the effects of civil wars suggests the humanitarian aid cost and even the postconflict reconstruction costs will be dwarfed by the longer-term economic effects of the war in Yemen. As the statistical evidence of civil wars reveals in their regional effects, the entire neighborhood of the GCC is likely to experience the prolonged economic shock of the war.”

Yemen’s economic structure puts it at greater risk for trouble recovering from the conflict; the country relies heavily on exporting oil and importing food products, the former of which is an increasingly unreliable source of income while the latter is compounded by the tendency to prioritize cultivation of qat over food products in the agricultural sector. The report emphasizes the need for institutional change in order to encourage recovery as well; long-term civil wars are especially devastating to a state’s economic well-being and necessitate rebuilding of state institutions. The success of the necessary economic reconstruction will hinge heavily on trust, a major factor in successful market development, the report stresses. This is particularly true in the wake of conflicts that divide states along sectarian lines, as has been the case in Yemen.

Violence is likely to continue after the current civil war comes to an end, which puts not only Yemen but also its neighbors at risk from violent groups that have taken root in the area and of prolonged, low-level insurgencies. This risk is compounded by the large number of young, unemployed Yemenis faced with a weakened economy, minimal educational or public health institutions, and easy access to weapons. However, there are other factors to examine as well. Young notes that Yemen’s neighbors are at risk of being sucked into the cycle of violence through military expenditures that could trigger an arms race in the region.  

“Countries engaged in conflict tend to increase their military spending. The spending effect is contagious to neighboring states, even if they are at peace. Civil war tends to increase military expenditure by two percentage points of GDP, according to a World Bank study by Collier. It creates regional arms races in which governments dedicate spending to military purchases and expenses that might have otherwise gone to public health, infrastructure, or education...As cross-regional World Bank studies demonstrate, one of the strongest influences on individual state military expenditure is the expenditure of neighboring states. Even for neighboring states that are not directly involved in the conflict, this research suggests that by the end of the conflict and the return to “equilibrium” (rough estimates from studies above indicate at least after five years), the neighboring countries will have increased their military expenditure on average by 0.7 percentage points.46 There is a spatial cascade effect of military spending, especially for bordering states and even in states not directly engaged in conflict. The cascade spending, and the arms race it can spur, could lead to militarized regions primed for conflict and hypersensitive to threat. The experiential learning happening inside the Yemen conflict suggests that Emirati and Saudi threat perception has only heightened, along with their willingness to commit scarcer resources to defense."

The report concludes that such an arms race should be held as a dangerous and undesirable outcome to all parties to the conflict, and is particularly relevant to members of the Saudi-led coalition. These states should take measures to prevent such an outcome; the risk that continued conflict in Yemen poses to the internal interests of its Gulf neighbors should motivate states such as Saudi Arabia and the UAE to invest in rebuilding Yemeni institutions and contributing to a lasting and meaningful peace agreement.