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3. Natural Resources as Instruments of War

For decades, Yemen’s economy has served as both a catalyst and a casualty of the ongoing conflict. The country’s natural resource wealth, particularly oil, has exacerbated divisions and tensions between the north and south. While various local and foreign actors exploit these resources for their own gain, the Yemeni population endures the harsh consequences of a devastated economy.

For decades, Yemen’s economy has been a key driver of the conflicts that have ravaged the country. Plagued by widespread poverty, heavily dependent on natural resources and hindered by inefficient governance, Yemen’s economy has been exploited by various factions, deepening internal divisions and attracting external interference.

Traditionally, Yemen’s economy relied on agriculture and natural resources. Before unification in 1990, the north and south followed distinct economic models: the north was agricultural and reliant on Saudi aid, while the south was more industrialized and supported by the Soviet Union. However, with the fall of the USSR, the south lost its main financial backers, accelerating unification. This chaotic and poorly managed integration only intensified the south’s sense of marginalization, culminating in the 1994 civil war, which further strengthened northern control over the country’s strategic resources, particularly the oil fields in the south.

Natural Resources at the Core of Yemen’s Conflict

Yemen is home to modest yet strategically crucial oil reserves, particularly in the governorates of Marib, Shabwa and Hadramout. The exploitation of these resources has long been a point of contention. In the 2000s, a decline in oil production, endemic corruption and poor economic management intensified the crisis. Economist Ibrahim al-Kuhali argues that “Yemen’s economy relies on an oil rent that is poorly redistributed, deepening the inequalities between the north and the south” (Yemen's Economic Challenges, 2014).

As the conflict escalated in 2014 with the Houthi offensive, control over the country’s economic infrastructure became a key strategic objective. The Houthis' capture of Sana’a in 2015 forced the internationally recognized government to retreat to Aden, further fragmenting the already fragile economy.

A War Economy Benefiting the Belligerents

The war has exacerbated Yemen’s economic crisis, fostering a system where various factions capitalize on the chaos. The Houthis, for instance, have created a war economy by taxing consumer goods and diverting humanitarian aid. The government in Aden is heavily reliant on financial support from Saudi Arabia and the UAE, while local militias control key strategic points and exploit informal economic networks. According to a 2022 report by the International Crisis Group, “the war has transformed Yemen’s economy into a system where armed groups fund their operations by exploiting state institutions and international aid.”

Humanitarian and Social Impact

The economic collapse has had catastrophic consequences for the Yemeni population. The Yemeni rial has plummeted in value, leading to hyperinflation. According to the World Food Programme (WFP), over 17 million Yemenis are facing food insecurity. Helen Lackner argues in Yemen in Crisis (2019) that “the Yemeni economy has become a silent battleground, with the population paying the price for the greed of both local and international players.”

A Way Out of the Crisis?

While the situation remains critical, there are efforts underway to revive the economy. The United Nations and international NGOs are working to rebuild infrastructure and generate employment opportunities. However, without political stabilization and a more equitable redistribution of resources, Yemen’s economy will continue to fuel internal divisions and sustain the conflict.

As economist Rafat al-Akhali notes, “Reconstructing Yemen's economy requires a complete overhaul of the political system or the same causes will continue to produce the same effects” (Chatham House Report, 2021). Yemen’s economic future thus depends on overcoming its internal fractures and resisting external interference that exploits its structural weaknesses.