US Institute: Houthis are floundering and ignoring the impact of their designation as terrorists

President Donald Trump’s decision to redesignate Yemen’s Houthi movement as a foreign terrorist organization represents a full-fledged moment in Washington’s vacillating approach to the Iranian-backed militia, which former President Joseph Biden Jr.’s team quickly reversed because of its potential impact on the delivery of humanitarian aid to Yemen.

But this time, the designation comes amid a very different regional landscape due to the Houthis’ bold activities against Israel and disruption of maritime security in the Red Sea.

The UN-recognized Yemeni government, led by President Rashad al-Alimi, wasted no time in enacting the designation. The Yemeni government has long called for the United States to designate the Houthis as terrorists, and sees the redesignation as a diplomatic victory. For years, the Houthis have exploited and helped engineer Yemen’s humanitarian crisis through systematic aid obstruction and economic exploitation.

The new measures by the central bank, backed by US Treasury regulations, represent the first serious attempt to disrupt Houthi financing since a July 2024 UN agreement that lifted economic restrictions imposed by the Yemeni central bank on Houthi-controlled areas.

This agreement, which effectively drained the central bank’s momentum while offering the Houthis a financial lifeline, shows the limits of half-measures.

The challenges to implementing the new banking restrictions on the Houthis are many. While the central bank finally has the tools to squeeze Houthi coffers, history suggests the group is more likely to respond with military escalation than compliance.

In addition, Alimi’s government faces a complex mixed task: keeping the Houthis under pressure while maintaining humanitarian aid, stabilizing the economy while implementing sanctions against the Houthis, and continuing peace talks while dealing with a newly designated terrorist group.

The Yemen Crisis Management Committee, a group within the Yemeni government established to coordinate and manage the response to the country’s ongoing humanitarian crisis, has been tasked with managing this process.

Regional interactions

Iran is unlikely to scale back its support for the Houthis as its Lebanese proxy suffers catastrophic setbacks. The reaction to the designation from Saudi Arabia and the UAE has been measured. Saudi Arabia, which has weathered years of Houthi attacks, has refrained from wholeheartedly endorsing the designation, despite welcoming it in 2021.

Riyadh’s cautious stance reflects both its continued diplomatic engagement with Tehran and a calculated caution about U.S. security guarantees, which stems in part from the lack of an adequate U.S. response to the September 2019 attacks on oil facilities at Abqaiq and Khurais.

The Saudi strategic hedging underscores a broader regional awareness that escalation carries its own risks. The UAE, which once made a case for a foreign terrorist organization designation in the past, has also not commented on the designation as it appears to be carefully calibrating its public stance toward the Houthis.

The Houthis’ messaging reflects this complex regional dynamic. In his first speech after the designation, Houthi leader Abdulmalik al-Houthi avoided direct confrontation with Saudi Arabia and the UAE, a departure from previous rhetoric.

Instead, he offered only indirect warnings to “America’s allies,” focusing primarily on the United States and Israel, indicating that the Houthis recognize their interest in preserving space for future regional settlement even as they escalate against international targets.

In public, the Houthis have been dismissive of the designation. Abdulmalik al-Houthi has not addressed the issue directly, preferring to flex his muscles by making unsubstantiated claims that the group has shot down 14 U.S. surveillance aircraft in the Red Sea and forced a U.S. aircraft carrier (on a scheduled mission) to withdraw. This public boasting stands in sharp contrast to the Houthis’ extensive efforts behind the scenes to mitigate the impact of the designation.

The Houthis have launched an aggressive lobbying campaign targeting international NGOs and UN agencies, mirroring their successful efforts in 2021 to pressure the Biden administration to lift the designation. This dual approach—public bragging—suggests an acute awareness of the potential impact of this designation.

Meanwhile, Houthi media has already begun promoting this designation as a collective punishment of the Yemeni people, a narrative that requires careful countering by Yemeni and international actors.

The Houthis’ messaging strategy—which oscillates between threats against maritime security and demands to protect civilian interests—underscores the challenge of implementing a designation without inadvertently reinforcing the Houthi narrative.

The Houthis may escalate their campaign in the Red Sea, testing international resolve and complicating maritime security arrangements. Abdulmalik al-Houthi’s recent rhetoric reflects the group’s continued pattern of using international tensions to justify its seizure of local power, and attempting to frame its Red Sea disruptions as a lever for territorial expansion within Yemen. Meanwhile, civilians in Yemen, particularly in Houthi-controlled areas, face the prospect of greater isolation and deprivation.

The UN’s position on this designation reveals a fundamental challenge in international mediation. The Houthis’ record of forced recruitment and child recruitment, obstruction of aid delivery, and abduction of UN staff clearly demonstrates a pattern of coercion.

The UN’s ability to act as an objective mediator, despite being subject to such pressures, has been systematically undermined. In addition to the impact of coercion, the situation reveals a broader question about the effectiveness of traditional diplomatic frameworks when dealing with actors who exploit humanitarian missions for leverage and hijack the humanitarian narrative for their own illegitimate purposes.

Activate classification

On the positive side of the agenda, the UN challenges leave an opportunity for the Gulf states to play a greater role in calming the situation in Yemen. However, the cautious stance of Yemen’s traditional Gulf allies creates an additional challenge for Alimi’s government.

While the government sees the designation as a diplomatic tool to pressure the Houthis, it must carefully calibrate its response to avoid overriding its regional partners’ appetite for escalation. The Gulf states’ strategic recalibration with Iran effectively puts a ceiling on how aggressively Yemen can implement the designation.

The broader international dimension poses even more complex challenges. While this designation gives the Yemeni government additional leverage, it complicates the already difficult process of negotiating peace.

Humanitarian organizations, paralyzed by the bureaucratic paralysis that followed the 2021 designation, are concerned about their ability to operate in Houthi-controlled territory. Yet the Houthis are unconcerned about such concerns, exacerbating these challenges by creating a hostile environment for humanitarian organizations.

The Houthis have kidnapped more than 20 aid workers, on false charges of espionage, making the cost of service existential for Yemeni aid workers. By asserting control over aid deliveries, the Houthis have transformed humanitarian access from a basic right into a powerful weapon of control and a bargaining chip in their broader campaign for regional influence.

However, the real power of this is in its ability to create specific legal and financial consequences that constrain Houthi operations. By targeting Houthi financing networks and criminalizing support for their maritime aggression, the designation provides concrete mechanisms for international action.

Financial institutions must now actively block Houthi assets while shipping companies and insurers face new legal obligations in their operations in the Red Sea. For the Yemeni government, these concrete restrictions provide a practical tool to reassert sovereignty and build international consensus against Houthi destabilization.

The effectiveness of this designation will ultimately depend on the Yemeni government’s ability to skillfully navigate multiple constraints: the appetite for confrontation among regional allies, humanitarian imperatives, and the complex task of implementation.

The outcome, as in Yemen, will be determined by the finer details of implementation that follow the broad outlines of the designation and sanctions policy. Success will require navigating a careful path between pressure and diplomacy, maintaining broader regional and international support, mitigating humanitarian risks, and ensuring that the focus remains on the Houthi obstruction and manipulation that is causing them.

Source: Arab Gulf States Institute in Washington