Yemen rivals ramp up economic war as U.N.-backed truce efforts limp

By Mohammed Alghobari and Reyam Mokhashef

ADEN (Reuters) – Yemen’s Saudi-backed government and its Houthi enemies are escalating an economic war as peace efforts stall, with tit-for-tat moves aimed at disrupting state oil revenues and fuel flows, leading to more humanitarian pain.

The Houthis, de facto authorities in north Yemen, have hampered the internationally recognised government’s ability to export oil, a vital revenue source, by launching drone attacks at terminals in the south to deter tankers from loading crude.

The internationally recognised government has hit back, with moves likely to further restrict fuel flows into Houthi-held areas. The Aden central bank issued a circular, dated Dec. 6 and obtained by Reuters, to exchange companies and houses in Yemen to freeze accounts of and halt commercial and financial dealings with 12 companies that import fuel to Houthi-held areas.

The central bank cited “terrorist list” designations and anti-money laundering laws as the basis of its instructions.

“The step came in response to the attacks that the Houthis carried out on oil exporting terminals and which have prevented the export of more than 2 million barrels of crude out of Hadhramaut and Shabwa,” an official in the Saudi-backed government, who declined to be named, said.

Another government official said other companies would be able to import fuel via Houthi-held Hodeidah port “according to rules regulating imports”, without elaborating.

The growing tensions come as U.N.-led efforts for a new truce deal have stalled for over two months since an earlier pact lapsed, though relative calm on main frontlines has held.

The expanded truce proposed includes a mechanism for payment of civil service wages, which the Houthis have criticised for not including members of the armed forces. The group has also said it is preventing “theft” of Yemen’s oil wealth.

“They begrudge our people wages and their legitimate rights and this is a big problem, we will not compromise…They begrudge our people petroleum products, received only after severe hardship,” Houthi leader Abdul Malik al-Houthi said in a speech on Wednesday.

He warned that the movement would respond to any escalation “with greater force and effectiveness”.

The seven-year-old conflict between a military coalition led by Saudi Arabia and the Iran-aligned Houthis has destroyed Yemen’s economy and left 80% of the population reliant on aid, with millions pushed into hunger.

Coalition sea and air restrictions on Houthi areas were eased under the truce that expired on Oct. 2 to allow for some fuel shipments into Hodeidah and commercial flights from Sanaa.

The government, which the Houthis ousted from the capital, Sanaa, in late 2014, was already struggling to pay public wages in the import-reliant country.

The Arab Monetary Fund last month signed a $1 billion agreement with the Aden-based authorities, in what two central bank sources told Reuters was part of wider financial assistance dispensed recently to shore up the government.

(Reporting by Mohammed Alghobari and Reyam Mokhashef; Writing by Ghaida Ghantous; Editing by Alexandra Hudson)