Cessation of Oil Exports Worsens Yemen's Economic Situation

Oil and gas are Yemen's main source of government revenue, yet its reserves are the main cause of regional and international conflict. Before the outbreak of the war, oil production accounted for 70% of the country's general budget resources due to its reserves, estimated at more than 11 billion barrels between the Shabwa, Marib and Sayun-Masila oil basins. The military intervention of Saudi Arabia and its allies in the war, reduced production to 55,000 barrels per day compared to 150,000-200,000 barrels per day before the conflict began in 2014. The oil companies operating in Yemen are foreign, which has made the Yemeni government dependent on them and mainly on Saudi Arabia for the past decades, and therefore having difficulty exploiting its wealth and strategic location. Tired of the "plunder of sovereign wealth" the Houthis warned oil and shipping companies to cease production. After the truce ended on 2 October 2022, the Houthis began attacks on an export terminal in the Arabian Sea in the east of the country, forcing an oil tanker to leave the site as it docked and making any hope of the UN renewing the truce impossible.

According to Yemen's permanent representative to the UN, Abdullah Al-Saadi, "the country has lost 1 billion dollars due to the cessation of oil exports to pay salaries and improve public services", which has catastrophic consequences for the population and has led the government to call for international pressure by destroying the Houthis' infrastructure and vital facilities to stop their attacks. This movement is pressuring the government with military and political measures through escalation, in order to obtain concessions in future negotiations and to stop them from exporting oil abroad, says Yemeni Prime Minister Maeen Abdulmalik. In a hard-hit economy such as Yemen's, which relies mostly on oil exports, such supply cuts hit citizens first, already affected for years by the world's biggest humanitarian crisis. The UN envoy to Yemen, Hans Grundberg, expressed concern about "the deteriorating economic situation in the country, the restrictions on movement and the impact on economic activity and people's lives".

With the disruption of oil exports for eight months, the government has had to spend around US$1 billion to repair the damage, which has been a major financial challenge for the country following the reduction in government revenues. This has been "a heavy burden for the Yemeni government due to the economic impact of the Houthi attacks on the oil sector, their continued plundering of revenues and the deepening suffering of citizens in their areas of control," said the Prime Minister. In addition, the decline of the Yemeni riyal against other foreign currencies as a result of the rise of the dollar has also led to a rise in prices that mainly impacts on Yemeni livelihoods. On the other hand, the UN has had to intervene in Yemen to "avert a potentially massive environmental and humanitarian disaster off the country's shores" according to the CEO of the shipping services company Boskalis, which reached an agreement with the United Nations Development Program (UNDP) to extract barrels of crude oil from an abandoned oil tanker in the Red Sea to avoid an environmental catastrophe.