The conflict in Yemen has garnered international attention primarily for its regional dimensions and the humanitarian crisis it has caused. The early UN-led peace efforts, in successive rounds of shuttle diplomacy and mediation, focused almost exclusively on reaching agreements on the political and military arrangements needed to stop the conflict and start a political process. The economic dimensions, by contrast, were largely overlooked. More recent recognition that economic issues are key to resolving the conflict represents a critical shift and calls for attention and creativity if they are to be fully integrated into and supported in the wider political process.

Economic conflict

As the military battles for territorial dominance in Yemen have slowly subsided, the struggle for control over key economic resources and institutions has taken centre stage. The fight over the Central Bank of Yemen (CBY) exemplifies this. After conflict broke out in early 2015, tensions around control of the CBY simmered for 18 months. They culminated in the Saudi-backed and internationally recognised government replacing the CBY’s board and relocating its headquarters from Sana’a, controlled by the rebel Houthi movement (‘Ansar Allah’) to the temporary capital Aden in September 2016. The CBY was no longer able to pay public sector salaries regularly due to declining government revenues and the fragmentation of fiscal authorities, giving rise to the ‘salaries crisis’ that persists today.

The relocated CBY printed significant amounts of money, causing spiralling inflation and eventually leading, at the end of 2019, to the de facto authorities in Sana’a banning use of banknotes printed by the Aden-based government in the areas they controlled. This effectively established two currencies in the country and with it the ‘currency crisis’, also still ongoing. Finally, the fragmentation of the CBY has had significant ramifications on the banking sector, which became the victim of regulatory conflict between the competing CBY administrations in Sana’a and Aden.

Further contestation over access of fuel shipments to Hudaydah port, export of crude oil from government controlled areas, the re-opening of Sana’a airport, control over oil-producing governorates and oil export revenues, the telecommunications sector, the supply of cooking gas, and control over the national air carrier, Yemenia airways, demonstrates beyond doubt that control over resources is a critical driver of the conflict in Yemen.

Economic peacemaking

Yet international mediation and peacemaking efforts have fallen short of addressing the economic dimensions of the conflict adequately. The official UN-led peace process engaged with some of these issues – including the economic file as one of the confidence-building measures in the Stockholm consultations in December 2018, and brokered a temporary agreement for access of fuel shipments to Hudaydah port in early 2020 (a deal which collapsed a few months later). However, it was not until January 2022 that the new Special Envoy, Hans Grundberg, announced that the framework for the peace process would include three tracks: political, military/security, and economic.

Three out of the five points of the truce announced in April 2022 were related to the economic file (entry of fuel ships to Hudaydah port, flights out of Sana’a airport, and opening of roads in Taiz). Negotiations to extend the truce again centred primarily on economic issues; Grundberg announced in October 2022 that he had submitted a proposal to the parties to extend the truce by six months with additional elements including ‘the payment of civil servant salaries and pensions, the opening of specific roads in Taiz and other governorates, additional destinations for flights to and from Sanaa airport, unhindered entry of fuel ships into Hudaydah port’. While the truce was not formally extended, it has largely held. Meanwhile, Saudi Arabia has continued direct talks with the Houthi movement, increasingly publicly and visibly as they progressed. Within these negotiations, economic issues and especially questions surrounding the payment of public sector salaries have taken centre stage.

Priorities for future mediation

If the Saudi–Houthi talks succeed in reaching an agreement, including with the internationally recognised government, the economic track will have a prominent role in the next stages of the peace process and the UN roadmap. This will require the international community to provide political support and an authorising environment to move it forward. It will also require a significant boost in the political economy and economic negotiation resources and capacities of the Office of the UN Special Envoy to lead its mediation.