Chatham House: Yemen’s War Economy Prevents a Diplomatic Solution

In a Chatham House article, Yemen expert Peter Salisbury warns that the flourishing war economy that sustains militia leaders, the Hadi government, and local stakeholders poses a threat to a diplomatic solution. Militia and political leaders fund their war efforts by taxing or establishing monopolies on resources. War has empowered militia leaders on all sides, and a peace process would strip these groups of their main source of authority.


With the front lines of the Yemen war largely static for the better part of two years, and previously marginal groups now in control of swaths of territory including lucrative trade routes, the incentives for many militia leaders point to sustaining the conflict – especially since most groups operating on the ground have not been asked to participate in Yemen’s UN-led peace process.


Salisbury enumerates several business networks that provide profits for those in control. Militias manage the roads and transportation in the territory they control, and so taxing the trade that runs through their territory provides a steady source of income. Furthermore, the trade isn’t supervised, and businessmen and militias profit by creating a parallel illicit network where they smuggle in foreign weapons and sell them among warring groups indiscriminately. Groups controlling a swath of territory profit from resources within the land; Hadi allies in Aden control a monopoly on fuel supply, the local government in Hadramawt taxes goods entering the Mukalla port, and the governor in Marib sells bottled gas from an oil field under his control.


Although the prolonged conflict deprives millions of Yemenis of basic necessities, such as a stable food source or clean water, those driving the conflict have little incentive to end it. A peace process would require the government to receive all tax and oil benefits, severing the networks that enriched the Houthis and local militias. Even as famine threatens to aggravate the humanitarian catastrophe in Yemen, the combatants and their financial motivations resist the peace process.


Salisbury also describes a dimmer view of the war economy in Yemen: despite the heavy, stagnating fighting, opposing groups seem to cooperate on trade. For example, weapons and fuel are knowingly sold and transported between opposing groups. However, the Hadi government and the Saudi-led coalition already view the economy as the new battlefront, demonstrated by Hadi’s removal of the central bank to Aden and the plans to seize the port of al-Hudaydah. But even seizing al-Hudaydah won’t break the stalemate: the country would plummet into famine and the Houthis would profit from trade over the ground, and the complex set-up of the economy would continually adjust to benefit the military and political leaders in charge while millions of civilians suffer.