Three Key Challenges Founding the Division of Yemen

What can be adjusted in this catastrophic situation?
Prof. Mohammed Ali Qahtan
April 24, 2024

Three Key Challenges Founding the Division of Yemen

What can be adjusted in this catastrophic situation?
Prof. Mohammed Ali Qahtan
April 24, 2024

The economic and humanitarian conditions in Yemen are witnessing a unceasing deterioration since the first year of the conflict which broke in 2015. Every year, the conditions come more than the previous year, which brought the economic conditions to a deep collapse, which is difficult to return to what it was before the war. The humanitarian situation in Yemen has also deteriorated to its worst, as the United Nations describes it as the worst humanitarian catastrophe in the world.

Given the continuation and deepening of the current crisis, it is believed that the Yemeni state will not remain a single unified state, but rather tends to become two states; Hence, the re-dividing of Yemen will be strengthened with the persistence of bloody and permanent political and military conflicts, a deepening of the economic, living and humanitarian deterioration, and the difficulty of confrontation in both parts if the existing division continues and its administrative and organizational structure is firmly established. Therefore, it is of a dire significance to identify the factors or issues that promote the likely splitting up of the Yemeni state into two states and find appropriate solutions to oppose this threat and its presenting issues. We will explain this in details in the following:


Road Blocking

Throughout the past years of conflict since 2015, two key parties have emerged in the armed conflict; One of them took control of all the northern governorates, with the exception of some parts, and is internationally not acknowledged, and began working to establish its own ruling system, centered in the capital, Sana’a. As for the other party, it controlled the southern governorates along with some parts of the northern governorates, and it has international recognition as a representative of the legitimacy of the Yemeni state, and it was taken from Aden as a temporary capital that as an alternative to the official capital, Sanaa. However, the leaders of the legitimate government remained abroad, and have been busy with their own interests, and doing their best to enhance their being in power, indifferent to the political, economic, social and humanitarian downfall and the division of the state, as well as the issues of restoring the state and its institutions that were badly neglected. As a result, multiple military entities were formed, which are not affiliated to one leadership, rather, each of them works to root its presence and hegemony over the areas controlled by its armed forces with regional support.

All of this, over the years of conflict, has led to the split of the Yemeni state into two geographical parts within the framework of the Yemeni state, each with a political reference and regional powers that support it to expand its geographical influence. Moreover, due to the blocking of the official roads between the two sides, people and the trade exchange movement were forced to take alternative unpaved, longer routes to move from one side to another in spite of the long -distance and rugged in some of its parts at a very high transportation cost compared to the costs of movement before the war was. For example: Moving from the legitimate part of Taiz, such as the Taiz city, to another part belonging to the area controlled by the Houthi forces, like the Al-Hawban area, used to take a time ranging between 5 and 20 minutes via the official roads before the war. After the war, the same distance took a time ranging from between 5 and 10 hours at least. As for the cost, it was between 100 and 50 riyals per person before the war, while it became about 15 thousand riyals per passenger after the war. This is in addition to the effort and time required by these alternative routes due to the far distance and the obstacles created by the security checkpoints of both parties to the conflict spread throughout the roads. Accordingly, this led to a sharp decline in transport traffic between the two conflicting areas of control, as well as a reduction in trade exchange due to the high cost, as no one thinks about moving between these areas unless it's absolutely indispensable.

For that reason, the movement of people, travelers and traders, and commercial exchange began to shrink sharply between the areas affiliated with the legitimate Authority and the other allied with the Sanaa Authority. Thus, the process of geographical division of the state started to take an upward path to include other fields that will be discussed later. To prevent the geographical division of the state into two parts, it is vital to eliminate all the barriers developed on the official routes, and to restore the movement of transportation between all governorates through the reopening of the official asphalted roads without any hindrances. Such right is guaranteed by all local and international laws and acts which criminalizes those who violate this basic right of citizens as well as exerting efforts to strengthen the territorial integrity of the state and prevent its division.

It's critical that the state’s financial system must be unified, and to activate the work of the financial laws that were in force before the war so that the discrepancy in the state's financial policy does not take root, becomes a reality for two states within the state, and reinforces the geographical division of the country.

Financial Division

With the steadiness of the influence of both parties, the legitimate government and the Houthis over the areas that each of them controls by force of arms, each began searching for sufficient financial resources to cover its expenses. The Houthi authority in Sanaa has formed its own financial system, according to their approach of ruling which do not take into consideration the financial laws of the state. On the contrary, the legitimate authority announced its commitment to the financial laws of the state, as it is an internationally recognized legal body. However, its absence from ground and the multiple loyalties of its components led to the collapse of the state’s financial system, and its revenue streams were distributed among different entities, each of which controls the state’s financial resources in its hands. Accordingly, the state has two financial systems and two different monetary policies, with the state's revenue streams collapsing, corruption spreading, and public funds being plundered with each party seeking to expand the scope of its financial resources away from the official frameworks of the state's financial system channels.

  All of this, led to the emergence of two financial systems, each with features and characteristics different from the other, which reinforces the likely separation of the state into two parts. To avoid this, it is essential to unify the state’s financial system and implement the fiscal laws that were in effect before the war, so that the current discrepancy in financial policy does not take root or becomes a reality for two states within one country in addition to the promotion of the geographical division of the state.

Banking Division

With the breakout of the conflict in Yemen in 2015, the state's revenues of the Central Bank stopped in Sana'a, and the de facto authority in Sana'a continued to spend from the fiscal balances without compensation; This led to the end of the central bank's balances, and the state loses its ability to finance import and fulfill its financial and service obligations. This led to the depletion of the Central Bank’s balances, and the state lost its ability to finance import operations and fulfill its financial and service obligations. This allowed the private sector to act randomly without any interference from the state, and banks also lost their financial ability to meet depositors’ demands. When the state’s balances in the Central Bank ran out, as well as the balances of the banks that constituted its banking activity, the Central Bank therefore stopped paying employees’ salaries. Consequently, this led to the bankruptcy of the Central Bank and the freezing of bank customers’ deposit accounts. This resulted in President Abdo Rabbo announcing the relocation of the Central Bank’s functions from Sana’a to Aden, after it was declared the temporary capital of legitimate authority resisting the coup in Sana’a. However, the Central Bank in Sana’a continued to carry out its activities as a central bank. At the same time, the Central Bank of Aden was considered the central bank affiliated with the legitimate authority. 

Although the Central Bank in Aden has been recognized as the state's central bank, receives regional and international support, and maintains the international transfer code (SWIFT), it has not achieved success in controlling the banking system and the money market. Hence, the banking system was considered collapsed in both its branches, and it had two centers and two monetary policies. One of them is in effect in the areas of influence of the Sana'a Authority, and the other is in effect in the areas of influence of the Aden Authority.

Moreover, while the Central Bank in Aden issued new banknotes to meet the state’s expenses, the most important of which were salaries and wages for international staff, this was met with a ban on the circulation of these banknotes in the areas of influence of Sana’a, which continued to circulate in old, dilapidated banknotes. At the same time, the exchange rate of foreign currencies against the local currency in the money market was imposed at an almost fixed level in Sana'a and its areas, while in Aden the exchange rate of the new banknotes was liberalized in the money market, with varying exchange rates remaining outside the market. This led to a complete division of the Yemeni banking system between Sanaa and Aden, and trade exchange and cash transfers from one area to another became complicated. In fact, two currencies with different exchange rates and two banking systems attract influence over the units of the banking system, which has established the existence of two different systems and two monetary policies. Based on the above, all these factors led to the collapse of the economic cycle at the state level, and the intensification of the humanitarian suffering of citizens in all governorates of Yemen, which threatens to divide the country into two states. Therefore, I believe that the challenges of this division will not defeated unless the central bank, the national currency, and the banking system are unified as it used to be before the war.

The Key Bottom lines

In conclusion of what has been detailed above, Yemen is likely to face the risk of splitting up into two states, and therefore confronting this threat requires that all national forces who are concerned with preserving Yemeni unity, whether those on power in Sanaa, Aden, or other within the various political and military forces, to speed up the efforts to challenge this national threat through the following action points:

  • Reopening all blocked local and international routes and crossings, by land, sea and air, and removing all obstacles.
  • Uniting the state’s financial system; This can be executed through the creation of a joint financial committee whose members are carefully selected from the governments of Sana’a and Aden. The mandate of this committee is to merge the state’s financial system across all revenue agencies, in accordance with the mechanism that was in place before the conflict, and enhancing the financial regulations and laws of the Republic of Yemen. Moreover, political and military interference in the management of the state’s financial system and all of the state’s revenue channels, represented by the Joint Committee, must be prevented.
  • Establishing a joint board of directors from both banks (the Central Bank of Sana’a and the Central Bank of Aden), so that this board is in charge of unifying the state’s monetary policy and supervising the flow of state resources from its revenue bases to the branches of the central bank in all governorates, as well as paying public employees' salaries, wages, and operational costs of civil state agencies. In addition, the salaries of members of the Ministries of Defense and Interior and their military and security formations affiliated with the governments of Sana’a and Aden must be paid retroactively. Finally, no spending on other insignificant other issues may be allowed, until the war ends, peace is achieved, and the state is rebuilt.

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