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Yemen: factors behind possible economic and political collapse

Conflict management Economic development Proxy war Yemen
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Recent political unrest, in conjunction with security and social-economic challenges, presents serious concerns for Yemen’s future.


Yemen currently faces an array of challenges ranged against its future development. Political unrest continues to plague the government, along with security challenges. Yemen also faces serious economic and water challenges that are raising concerns over its ongoing stability. Since the last FDI publication on Yemen, Houthi rebels have stormed Sana’a and targeted numerous buildings. Subsequently, Prime Minister Abdul-Kader Bajammal stepped down and was replaced by Khaled Bahah. Soon after, the Houthis took control of key parts of the city of al-Hudaydah as well as the city of Ibb. An al-Qaida affiliate, AQAP, has responded with numerous attacks on Shia targets while southern separatists seeking to split from the north have given the government an ultimatum to evacuate its soldiers and civil servants by 30 November. These developments, in conjunction with other security and social-economic challenges, present serious concerns for Yemen’s future.

Key points

  • Houthi rebels continue to threaten further instability in Yemen, while Al-Qaida in the Arabian Peninsula (AQAP) is simultaneously straining government resources by contesting territory in the country’s south.
  • Yemen’s economic situation looks dire, with oil reserves running low and production estimated to cease generating income by 2017.
  • The capital, Sana’a, is estimated to run out of economically viable water supplies by 2017. Coupled with the high growth rate of Sana’a, Yemen faces a potential crisis involving internally-displaced people in the near future.
  • Iranian involvement with the Houthis should be seen as simply opportunistic and not as part of a Saudi-Iranian proxy war in Yemen.
  • The situation in Yemen is of concern to Saudi Arabia as the collapse of Yemen could result in the strengthening of AQAP and a refugee crisis for itself.
  • Saudi Arabia is unlikely to provide adequate aid in the event of a large-scale refugee crisis; the international community, including Australia, may need to contribute the required aid.
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