Houthis under sanctions.. How does the private sector in Yemen hold out?

The Yemeni economy is entering a new and most dangerous turning point in the last decade, after the Houthi militia caused massive destruction in various economic sectors, as all Houthi practices were reflected in the damage to public interests in Yemen, including economic and commercial interests.

The US State Department announced on Tuesday, March 4, the entry into force of the decision to reclassify the Houthi militia in Yemen as a terrorist organization, as this step is likely to have many consequences on the economic and humanitarian conditions in Yemen.

It also puts all economic and commercial interests linked to the Houthi militia at risk, as the US Treasury's decision aims to freeze all assets and properties belonging to the Houthis and stop financial and commercial transactions.

The US State Department's statement stated that it will not tolerate any country dealing with the Houthis under the pretext of doing business.

The possibility of the Yemeni economy and humanitarian conditions being affected is increasing with the difficulty of the current situation and the militia’s insistence on gambling with the country’s future and present, especially the economic file, which has been a direct target of the Houthi militia for the past ten years, as the public sector has been subjected to systematic erosion and substitution and acquisition that has affected the private sector.

The sanctions will freeze any foreign financial assets linked to the Houthis or their companies, which could prompt them to impose double taxes.

The US decision to designate the Houthi militia in Yemen as a foreign terrorist organization, issued by President Donald Trump and effective in March 2025, is expected to have a direct impact on the Houthi militia’s economy, and the economic and living conditions in the areas controlled by the militia by force.

The closest description of the effects of this decision on the existing economy linked to the group’s interests in the areas under their control is to impose international economic isolation on the Houthis, by freezing their assets, banning financial and commercial transactions, and imposing severe penalties on any party that violates these measures.

Under the Foreign Terrorist Organizations designation legislation, any form of support, whether financial, technical, or even direct contact with the group or its members, is strictly prohibited without exception.

These sanctions will directly affect the local economy in the Houthi-controlled areas, especially public and private revenues that form the backbone of their influence. The group relies heavily on illegal fees collected from seaports, exorbitant taxes on banks and commercial companies, and external financial transfers from international organizations. With this decision, these sources are expected to gradually close to the Houthis, threatening their financial stability.

restriction of international trade

In the context of the Yemeni economy, which relies heavily on foreign trade and imports to meet its basic needs for food and consumer goods, these sanctions will cause severe shocks in the areas controlled by the Houthis, especially in the capital, Sanaa, and neighboring governorates, as foreign trade is currently the main artery of the Yemeni economy, and is likely to face major challenges as a result of the restrictions imposed on the ports run by the group, such as the port of Hodeidah.

Sanctions will send the Houthis back to square one economically, stripping them of the financial gains they have made over years of building a parallel economy.

The US Treasury's classification imposes economic sanctions that include freezing the financial assets of the group and its leaders, and banning commercial dealings with it. This may push international companies to reduce or stop their commercial dealings with areas controlled by the Houthis, such as the ports of Hodeidah, for fear of US sanctions.

In light of this, the cost of the impacts will double in terms of the rise in prices of basic commodities such as food, medicine and fuel in these areas, as Yemen relies heavily on imports, which greatly affects the domestic supply situation and exacerbates the deterioration of living conditions.

The difficulty of the Houthi militia in accessing financial resources, with the decision in effect, which may lead to the freezing of any external financial assets linked to the Houthis or their companies, and limiting their ability to finance their economic operations, which may push them to impose additional taxes on merchants and citizens in their areas, which would burden the local economy.

Financial transactions affected

The risks of economic isolation and the cessation of financial transactions with the economic sector linked to the Houthi militia also emerge, which will have direct effects on the ability of local financial institutions to access the international financial system, especially the banking sector, which is still under the direct influence of the Houthi militia, which weakens commercial companies and importers from accessing global markets to purchase goods, food and merchandise, in addition to the decline and decline of the credit capacity of banks in providing financial services and loans to individuals and public and private institutions.

With banks in these areas having difficulty accessing the international financial system, and shipping companies hesitant to deal with these ports for fear of sanctions, the economic crisis will worsen, as Yemen relies mainly on foreign markets to secure its needs, in addition to foreign exchange transfers from humanitarian aid and expatriates, resources that will be negatively affected by this classification. These measures will also weaken the Houthis’ ability to exploit their resources, and will weaken their attempts to legitimize their control over state institutions, including the banking sector, most of which is concentrated in Sana’a.

The most significant impact on the private sector is that any dealings with the Houthi militia may expose them to US sanctions, such as asset freezes or economic embargoes.

Ultimately, these sanctions will send the Houthis back to square one economically, stripping them of the financial gains they have made over years of building a parallel economy. The group, which has exploited the central bank branch in Sanaa to target the national currency in liberated areas and pressure commercial banks, will find itself facing an unprecedented challenge. With the ban on dealing with this branch, banks in Sanaa will have only one option to avoid international isolation: coordination with the internationally recognized central bank in Aden and compliance with counterterrorism laws and the global financial system.

Overall, the decision has the effect of restricting the Houthis’ financial and economic capabilities, which weakens their influence in the long term. However, the private sector and the business community, especially those linked to the Houthi militia, will also be exposed to risks if the common interests between the two parties continue. Therefore, the closest way to stay away from the circle of international sanctions and preserve its interests is to end any dealings with the Houthi militia, on both the financial and commercial sides.

Resilience options for the private sector

This situation imposes great challenges on the private sector in Yemen, including the banking sector, to distance itself from the repercussions and effects of the US sanctions and economic isolation. This may push it towards finding alternative policies to preserve its interests, starting with stopping any facilities or transactions related to the commercial and financial interests of the Houthi militia.

The most prominent aspects of the impact of the US classification of the Houthis on the international terrorism lists on the Yemeni private sector and the business community are summarized in restricting financial transactions, as any transactions by individuals, establishments and institutions with the Houthi militia may expose them to US sanctions, such as freezing assets or an economic embargo. This includes banks and companies in the areas they control, which complicates access to the global financial system.

The private sector has options to preserve its interests and productive activities, including coordination with the legitimate government, or moving to the liberated governorates to deal with the outside world.

Companies that rely on importing or exporting goods through ports such as Hodeidah, which are under Houthi control, may face legal and logistical risks, including the refusal of international banks to settle payments, which exacerbates the economic situation in Houthi-controlled areas.

Under these circumstances, the Yemeni private sector has other options to preserve its interests and productive activities, including full coordination with the legitimate government, and moving to the liberated governorates to deal with the outside world, in addition to benefiting from the ports in government areas such as the ports of Aden and Mukalla, as a suitable and safer alternative to facilitate the import mechanism and the continuation of foreign trade.

On the other hand, strengthening relations with foreign companies and institutions that support the legitimate government or are familiar with the Yemeni reality is considered an important strategic step. These relations should focus on highlighting the commitment of Yemeni companies to international standards and laws, which enhances their credibility and opens the doors to economic cooperation.

To preserve its commercial interests with the outside world, it is important for the private sector in Yemen to take proactive steps that include severing any potential connection with the Houthi militia, strengthening partnerships in areas under the control of the legitimate government, and strictly adhering to international legislation. Despite the huge challenges, close cooperation with the legitimate government and the international community can mitigate the impact of the classification and ensure the sustainability of foreign trade relations.