The threat for the GCC from a failed Yemen

As Yemen edges closer to potential civil war, the GCC is desperate to ensure the problems do not spill over. Published in MEED, 1 April 2011

President Ali Abdullah Saleh of Yemen says he is ready to leave office, but after more than 32 years in power he does not seem to be in much of a hurry. While he has promised to go, he wants to do it on his terms.

“We in the leadership do not want power and do not need it,” he told his supporters at a rally in Sanaa on 25 March. “We are willing to hand over power to safe hands, not to frivolous, sick, hateful and corrupt hands.”

What Saleh’s neighbours in the GCC want is to ensure that Yemen avoids economic collapse and civil war that would threaten the stability of their own countries, especially Saudi Arabia.

Saleh’s tactics are, at best, only delaying the inevitable. Senior generals, influential local businessmen and ambassadors in key foreign capitals have all deserted his regime in recent weeks. Although he managed to attract large crowds of supporters to the streets on 25 March, his opponents have been both more numerous and vociferous. Right now the political momentum lies with them.

Political tide turns in Yemen

“The political tide has turned decisively against Saleh,” says April Longley Alley, senior analyst for the Arabian peninsula at the Brussels-headquartered International Crisis Group. “We know he’s going to go. The question is how and when.

“The quicker an agreement can be reached and the quicker Saleh can announce how he is leaving and how he will transfer power to a civilian government, the better it will be for Yemen and everyone involved. In this situation, there’s so much room for miscalculation and bloody conflict.”

The timing and nature of Saleh’s departure are important questions for Yemen’s neighbours too. For GCC states concerned that instability in Yemen could rock their own countries, the situation is at a critical juncture.

Yemen’s many political problems include the Al-Houthi rebel movement in the north and secessionists in the south, as well as the presence of Al-Qaeda in the Arabian Peninsula (AQAP). Economically, the country is facing dwindling oil reserves and has few other sources of income. Its gross domestic product per person is among the lowest in the whole Middle East.

These problems have already been seeping across its borders, particularly into Saudi Arabia. In August 2009, AQAP tried, but failed to kill Saudi Arabia’s Prince Mohammed bin Nayef, the deputy interior minister in charge of counter-terrorism. Riyadh also fought skirmishes with Houthi rebels along its southern border in late 2009 and early 2010. The days ahead will decide whether such problems will increase or fade.

“The GCC states are deeply concerned,” says Mustafa Alani, director of the security & defence research Programme at the Dubai-based Gulf Research Centre. “They understand that Saleh has to go. The major concern is the vacuum of power. They don’t want Saleh to go without a smooth transfer of power because Yemen is a very dangerous place. You have a whole cocktail of threats.”

The US has been the main international player trying to resolve Yemen’s political impasse. While it has refused to take sides publically, its ambassador Gerald Feierstein was present at meetings on 24 and 25 March between vice-president Abdu Rabo Mansour Hadi and opposition leaders, including Major General Ali Mohsen and members of the Joint Meeting Parties.

Behind the scenes, GCC states have also been getting involved, particularly Saudi Arabia. “The security of Saudi Arabia starts in Yemen,” says Alani. “There is a lot of diplomatic pressure and effort from Saudi Arabia, and from other GCC countries as well, to make sure things will not collapse. The contact is not only with Saleh, it is with the military institutions, the security institutions and the political opposition.

“The Saudis have influence in the country. There is a very active effort to secure some sort of smooth transfer of power. They have no favourite [to replace Saleh]. They want a fair and transparent election, whether it is in three months or six months.”

Such transitional periods can make for unstable times and, in the absence of any clear alternative leader to Saleh, no one can predict with confidence what sort of government will emerge. The greatest short-term risk is of civil war breaking out between security forces loyal to Saleh and those opposed to him. The country itself could also fracture, if southern secessionists achieve their aim.

The degree to which the US, the GCC or anyone else can influence the events in Yemen and prevent is limited. One lesson from revolutions in the region is that the most important actors are usually domestic ones unless, as in Libya, other countries are willing to use military force.

What can be predicted with certainty, however, is that any new leader will face the same daunting economic challenges which Saleh proved unequal to. The start of liquefied natural gas production in late 2009 provided a welcome boost to the economy, but it does not completely make up for the gradual decline in oil output. The fiscal deficit in 2010 was still around $1.6bn, an estimated 43 per cent of the population live below the poverty line and unemployment is at least 35 per cent.

Unless these problems are tackled, they could fuel further instability in the country. This is where the GCC could play a more central role. In particular, the Gulf countries will, along with Yemen’s other allies, need to step in with greater financial assistance.

“Whatever government takes over is going to face an almost immediate economic crisis,” says Alley. “The GCC is going to be a critical player in addressing these financial and economic challenges. Saudi Arabia has much more financial leverage in the country and much more historical weight than the US will ever have in Yemen.”

Aid and soft loans have been forthcoming in recent years and more will almost certainly be extended to any new government. In July 2010, the Washington-headquartered IMF approved a three-year loan worth $369.8m, $53m of which was available immediately. That was followed in December by a $200m loan from the Abu Dhabi-headquartered Arab Monetary Fund.

Far more substantial has been the more than $2bn in aid which GCC states have pledged since 2006. However, it has not always been easy to convert these pledges into concrete action. Many projects that should have received funding have been hit by delays, partly because the security situation has meant contractors have been unwilling to work on the infrastructure schemes such aid has been focused on.

Speaking in London on 10 November 2010, Abdel Aziz Aluwaisheg, director general for international economic relations at the GCC Secretariat, acknowledged some of the shortcomings. “The speed with which disbursement has gone has not been satisfactory for us or for Yemen,” he said. “Less than 50 per cent has actually been disbursed.

“One of the projects that the GCC is funding is the building of a power station in Marib, [but] no qualified contractors submitted tenders to this power station. Yemen contacted some specific companies and they declined because of the security situation.”

Additional aid for Yemen

Yemen has said it needs another $6bn and donors will need to find new ways to ensure aid does get through despite the lack of security. The GCC at least seems to recognise the urgency. “While some donors would like to see long-term reform of the civil service before they advance funds to various projects, other donors think that we cannot afford to wait that long – that includes the GCC,” said Aluwaisheg.

Along with the recent downturn in the global economy, the security concerns have also contributed to falling trade levels. Most of Yemen’s trade with the GCC is carried out with the UAE, Saudi Arabia and Kuwait. In 2009 alone, imports and exports with the GCC were both down 32 per cent to $2.2bn and $591m respectively, according to the IMF. This put trade levels back to 2006 levels.

One way to boost trade would be to invite Yemen into the GCC, but while talks about Yemen becoming the seventh member of the bloc have taken place in the past, its economic weakness and fractious political scene has meant the idea has gone nowhere.

The current political crisis means that membership is as far away as ever, but closer integration without full membership may be possible. In the meantime, more financial aid in tandem with diplomatic support could help to stabilise any new regime, which emerges once Saleh finally leaves office.

The hope in Gulf capitals will be that the domestic challenge to Saleh’s leadership does not translate into an even bigger challenge to them from whatever follows.