The Economic Machinery of the Houthi

Analytics - 1 month ago

Analyzing Their Financial Ecosystem

South Eye | Analysis - Exclusive

The Houthi movement in North of Yemen has sustained itself through a vast financial ecosystem, with estimated annual revenues reaching approximately $1.8 billion. This figure underscores their ability to operate as a quasi-state within Yemen, leveraging various revenue streams to finance their military campaigns and governance structures. The financial resilience of the Houthis remains a critical concern, as it enables their prolonged control over northern Yemen and sustains their insurgency against the internationally recognized Yemeni government & STC Forces.

According to a 2022 UN expert report, oil revenues constitute a significant portion of Houthi income. Between April and November 2022, 69 tankers docked at the Houthi-controlled port of Hodeidah, unloading approximately 1.81 million tons of oil. The value of these shipments was estimated at 279 billion Yemeni riyals (roughly $271 million). While this oil is ostensibly imported for civilian use, substantial portions of it are diverted to fuel the war economy, either through direct sales or taxation on local distributors. The Houthis have institutionalized these practices, creating a well-oiled mechanism for monetizing oil imports despite international scrutiny.

Moreover, the Houthis have established a robust taxation system, extracting revenue from virtually every economic sector within their territories. Their taxation policies on public services, hospitals, and banks alone generate approximately 45 billion Yemeni riyals ($180 million) annually. These taxes, often imposed under the guise of supporting public infrastructure, instead funnel into the Houthi war chest, perpetuating the conflict. Public employees in Houthi-controlled areas have also faced salary disruptions since 2016, further exacerbating the humanitarian crisis while freeing up additional funds for the group’s military activities.

Customs duties on imported goods are another significant revenue stream for the Houthis. The ports under their control serve as economic choke points, allowing them to impose additional fees on imports. Reports indicate that traders are often forced to pay exorbitant customs duties to ensure their goods reach local markets. These funds contribute to the group’s ability to maintain a grip on the local economy while ensuring a steady cash flow for their operational needs.

Beyond formal taxation, the Houthis engage in widespread extortion under the pretext of “war contributions.” Businesses, small traders, and even farmers are coerced into paying fees, ostensibly for the war effort or social projects. These practices have further strained the local economy, driving many into poverty while enriching the Houthi leadership. The group’s control over key economic sectors, including telecommunications and fuel distribution, allows them to extract additional profits from everyday transactions.

The Houthi financial network operates despite multiple layers of international sanctions and efforts to curb their revenue streams. The group’s ability to generate significant income highlights the challenges of enforcing international measures in a conflict zone. Moreover, their financial independence complicates peace negotiations, as it reduces their reliance on external support and emboldens their position in talks with the Yemeni government and the international community.

The diversion of resources to fuel the Houthi war effort has exacerbated Yemen’s humanitarian crisis. The country remains one of the world's poorest, with millions dependent on humanitarian aid. Yet, the Houthis have been accused of obstructing aid delivery, rerouting assistance for their own purposes, and using it as a bargaining chip in negotiations. The group’s financial practices not only sustain the conflict but also deepen the suffering of the Yemeni population.

Addressing the Houthi financial machinery requires a multi-faceted approach. Enhanced monitoring of oil shipments, stricter enforcement of sanctions, and support for the Yemeni government’s efforts to regain control of revenue streams are critical. International stakeholders must also work to ensure that humanitarian aid reaches those in need without interference, reducing the Houthis' ability to exploit aid for financial gain.

The international community faces a complex challenge: balancing the need to weaken the Houthis' financial capabilities with the imperative to alleviate Yemen's dire humanitarian crisis. As the group continues to leverage its financial ecosystem to sustain its war efforts, the stakes remain high for both Yemen and the broader region.