26 Jan 2012 (104 Pages)
Includes 3 FREE Quarterly Updates.
Although it is yet to be seen what effect (if any) the killing of Libyan leader Muammar Gaddafi by antigovernment
militants will have on President Ali Abdullah Saleh, it is likely to add urgency to his strategy
in some shape or form. It appears increasingly likely that Saleh and his cohorts genuinely believe
Yemen’s political structure can survive fates seen in Tunisia, Egypt and Libya by a combination of
compromise, perseverance and relevance to the US’s foreign policy.
Yemen remains in a state of political limbo, months after Saleh was forced to seek medical treatment in
Saudi Arabia following an attack on his residence in June 2011. Although Saleh sustained severe burns,
raising doubts about his ability to resume his duties, he continues to refuse opposition demands that he
resign the presidency. Vice-President Abdrabu Sayed Hadi Mansour has been acting as president in
Saleh's absence but he lacks the authority to maintain order. Meanwhile, the power vacuum led to clashes
between government and opposition forces, Islamist militants, and tribal groups. Although the Gulf Cooperation
Council (GCC) and the US had for some months been seeking to negotiate a power transition
from Saleh to the opposition, he has proved much harder to dislodge than the Tunisian and Egyptian
presidents earlier in 2011. Government forces are unable to quash the opposition, but the opposition is not
strong enough to force out the regime.
Indeed, measures such as a ceasefire between the government, rebels and defected army personnel signed
in October 2011 are likely to prove meaningless. With law and order breaking down, there is a golden
opportunity for Islamist militants and other groups to make parts of Yemen their own fiefdoms. The
deteriorating security situation is of great concern to neighbouring Saudi Arabia, which fears an influx of
refugees or militants to its own territory. It is also a risk to international shipping, given that the Asia to
Europe route passes through the Gulf of Aden and the Red Sea, both of which are adjacent to Yemen. The
approach to the Gulf of Aden is already precarious, due to instability in Somalia.
Meanwhile, many months of political protests and rising instability will undoubtedly take their toll on
Yemen's economy, which BMI forecasts to contract by around 13.1% in 2011. The IMF's representative
in Yemen expects inflation to surge to 30% in 2011, and the fiscal deficit to jump to around 10.0%, with
the latter negatively affected by damage to a key pipeline caused by armed groups in March 2011 (Yemen
relies on oil for 60% of revenues). The Yemeni rial, which is nominally pegged to the US dollar, will
likely depreciate further, raising the cost of imports.
Overall, we see no quick solutions to Yemen's woes. Even once Saleh is formally removed, there will not
be a restoration of stability. In fact, the opposite might occur, as various interest groups seek to maximise
their share of the political pie. BMI sees various scenarios playing out, including continuation of oneparty
rule, a democratic transition, an Islamisation of the state, civil war, or a peaceful secession of the
south. These are not mutually exclusive scenarios, and could occur in varying degrees together.