Unrest is nothing new for Yemen. The country's rugged and mountainous geography led to the development of numerous tribes that constantly compete for limited resources. Modern Yemen has been unified only since 1990, and it seems unlikely that it will stay that way for much longer. Before the al-Houthi rebels took control of Sanaa, a federated state split into six different regions was proposed, but recent developments suggest that a split into two separate nations is more likely. Even then, the unrest in Yemen will continue, and we expect to see the humanitarian crisis worsen as a result, especially in the north.
Growing Water Scarcity
Yemen's water problems are well documented. Its climate and rapidly growing population, along with a lack of regulation, have resulted in extreme overuse of existing resources, especially groundwater. Subsidized diesel has made pumping water more affordable and thus has led to rampant over-pumping of groundwater resources. This, along with the cultivation of the water-intensive and addictive qat, an herbal stimulant, has brought the country to the brink of disaster. The capital, Sanaa, will run out of a useable water supply somewhere between 2017 and 2025, according to estimates.
The cash-strapped government does not have access to the amount of money necessary to address the problem. Nor does the water crisis have priority in government spending; the budget for the National Water Resource Authority was cut 70 percent recently. Moreover, there is currently no enforcement of existing water-use regulations.
Energy Revenue and Economic Decline
Prior to the 1980s, Yemen depended on remittances from workers abroad to sustain the economy. After the discovery and exploitation of oil reserves, Yemen's economy became extremely reliant on the hydrocarbon sector (which provided 25 percent of gross domestic product and 63 percent of government revenue), but production peaked at roughly 440,000 barrels per day in 2001 and declined to around 133,000 barrels per day by 2013. Coupled with the recent fall in oil prices, the drop in production has significantly reduced revenue derived from energy exports. In 2008, Yemen exported some $5.9 billion worth of crude oil, and by 2013, before the precipitous drop in oil prices, crude oil exports had fallen to $3.25 billion. A report issued by the Central Bank of Yemen showed that revenues from oil exports fell by almost a billion dollars in 2014, indicating that exports had plummeted even further. Without significant investment to recover or even maintain production, these numbers will continue to fall.
Although liquefied natural gas exports could provide another source of revenue, security issues will threaten the viability of the pipeline for exports. Moreover, even the potential $300 million a year that could be generated by LNG exports is not enough to make up for the diminished oil revenue. Domestically, severe problems with the electricity grid and generation capacity are worsened by the frequent sabotage of power lines. A large food import bill — Yemen depends on imports for 90 percent of basic foodstuffs — further compounds the economic turmoil.
Yemen's foreign currency reserves are also declining; they slipped to $4.6 billion in November 2014 from $5.1 billion in September 2014 in part because of the need to import petroleum products. This amount is enough to import food and fuel for only a few months. The reduction in aid after the al-Houthi takeover of Sanaa has compounded the shortage and has left Yemen in a precarious economic situation. Anecdotes indicate citizens are removing money from banks, making the collapse of the riyal a real possibility — a development that would leave the already struggling government unable to pay salaries.
The Role of Foreign Aid
Yemen relies greatly on foreign aid, requiring upward of $1.6 billion per year to just avoid a balance of payments crisis. In 2012, net official development assistance disbursed to Yemen from its top 15 donors (excluding contributions from Saudi Arabia) was roughly $445 million. Germany, the United States and the United Kingdom are the largest Western backers, while the United Arab Emirates is the largest regional backer, according to the Organization for Economic Cooperation and Development's records. That said, Saudi Arabia is hands down the largest backer overall, providing roughly $1 billion to 2 billion per year to its southern neighbor, in part as an effort to keep the security situation there from spilling over its own southern border. Patronage to specific tribes allows the Saudis to exert influence on the Yemeni government.
Should Yemen adopt a two-nation arrangement, Saudi Arabia, Iran and other regional powers will likely continue with the patronage strategy. Iran will focus its support on the al-Houthis in the north. The Gulf Cooperation Council states and Saudi Arabia will support a Hadi-led southern government, but Saudi tribal patronage will necessarily span both North and South Yemen if Riyadh hopes to maintain a security buffer.
The security situation in Yemen has contributed to the number of displaced people in the country. Approximately 335,000 internally displaced people and 245,000 refugees live within Yemen's borders from years of conflict inside Yemen and across the sea in the Horn of Africa. The northern part of the country has borne the brunt of these migrations; more than 100,000 internally displaced people are located in Saada province and more than 81,000 are in Hajja province.
Many of the displaced people from southern Yemen have returned home since the end of the 2011 unrest. However, in the northern part of the country, where people have been displaced since the 2009-2010 conflict, displaced people have not yet returned home. The country will struggle to support the nearly 450,000 Yemenis who have returned through various entry points since January 2013.
The Future of Yemen
All of these crises are likely to remain the same or worsen, especially in northern Yemen. Assuming that the country splits in two along a north-south divide, which appears to be what Riyadh and others are supporting, the division of oil revenues would be important initially. However, those revenues will continue to decline rapidly, and outside investment will be unlikely given the poor security situation over the next five to 10 years. LNG revenues are comparatively low and are not likely to rise significantly. The distribution of international aid will be key to the relative success of each of the two new Yemens.
Even after the split, a strong, central government is not likely to emerge in the north. Even though the Zaidis ruled what was once North Yemen for centuries, the al-Houthis do not necessarily want to govern the entirety of what would be North Yemen. Moreover, there could still be unrest in Marib and resistance from the al-Amar tribal faction and the Hashid federation, although at this point the al-Houthis have dampened most resistance in their traditional territory. Without a strong central government willing to begin infrastructure projects and enforce water regulations (and end diesel subsidies), the water crisis will come to a head in the next five years. Without access to the country's desalination capacity (which likely will fall to South Yemen), urban populations will continue to lose what few water resources they have over the next five to 10 years, and an increase in displaced people will be likely.
Even if the conflict is settled by a split into two states, Yemen — already reliant on international aid simply to function — will require even more support. International humanitarian aid organizations can operate in hostile environments (such as Somalia and Syria) and help individuals there, but Yemen's needs are already underfunded. As the need for humanitarian aid grows, less and less of that need is likely to be met. More individuals will become displaced because of the water crisis, and the growing poverty will exacerbate the security situation as competition increases for limited resources. The Saudis are likely to make more investments in border security (in addition to their current multi-billion-dollar efforts) as Yemenis seek refuge across the border. Riyadh will also likely give some sort of financial support to North Yemen, even if it sides with South Yemen, since it will be in the Saudis' interest to secure that border and to minimize Iran's increasing influence as best they can.