“As of August 2023, more than 50% of households in IRG-controlled areas are unable to meet their basic food requirements.”

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Abdullah Al-Shadli (South24)

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It is exactly a year since the Iranian-backed Houthi militia encircled the oil ports in South Yemen. They launched four attacks on the oil ports in Hadramout and Shabwa in October and November 2022. 

The attacks, which caused severe damage to the Port of Al-Dabba, in Hadramout, led to the cessation of oil exports, which continues till today. The Houthi attack coincided with the official expiration of the UN-brokered truce on October 2, 2022 without renewing it. This was the beginning of activating a de-facto truce in Yemen or the so-called “de-escalation stage”.

As a result of the Houthi escalation, the Yemeni Presidential Leadership Council (PLC) and the internationally-recognized government (IRG) in Yemen were put to the test. The Houthi attacks on the oil infrastructure led to the worsening of the economic and humanitarian crisis in the IRG-controlled areas, especially in South Yemen. In the first half of 2023, the economic impact of the Houthi action began to unfold, as the local currency lost about 28% of its value over the past 12 months.

Humanitarian website ‘ReliefWeb’ said: “As of August 2023, more than 50% of households in IRG-controlled areas are unable to meet their basic food requirements.”

On December 19, 2022, PLC Chairman Rashad Al-Alimi, in a televised interview, warned that his government may not be able to pay the employees’ salaries following the cessation of oil exports.

Prior to the Houthi attacks, Yemen’s government would export around two million barrels of crude oil every two months via Al-Dabba terminal and another 600,000 barrels via oil terminals in Shabwa province.

The size of losses

While there is a lack of accurate government statistics regarding the size of losses since the cessation of oil exports in October 2022, a report issued in August 2023 by ’Famine Early Warning Systems Network‘ said that according to its calculations “the total loss of oil export revenue for the past 10 months has cost the IRG over one billion USD”.

The report, referring to the Houthis, said that the “Sana’a-based authorities (SBA) continue to enforce measures to prevent the importation of goods from IRG-controlled areas via land borders in an effort to redirect imports through the SBA-controlled Red Sea ports. This has reduced the IRG’s revenue from customs and taxes. … These measures are estimated to be costing the IRG nearly 50 billion Yemeni rials per month in customs and taxes.” Besieging the oil ports and blocking exports is akin to waging an economic war. 

On August 3, 2023, Deputy Permanent Representative to the United Nations for Yemen Marwan Ali Noman, addressing a UNSC session on famine and food insecurity caused by conflicts, said: “Yemen lost about 1.5 billion dollars since August last year due to the war and the continuous Houthi threat of targeting oil facilities. This lost fund was allocated to improve public services and pay salaries across the country”.

‘South24 Center’ contacted the Yemeni Oil and Minerals Minister, Dr. Saeed Al-Shamasi, to disclose the extent of losses caused by the cessation of oil exports, but we haven’t received any response as yet.

‘South24 Center’ asked Hadramout Governor, Mabkhout bin Madi, about the losses and he replied: “I don’t have accurate statistics about this. However, this has led to massive losses and impacted different aspects of life. The IRG is the only one that can calculate the losses as it is the party that would sell the oil and receive its revenues.”

In regard to Hadramout, bin Madi said that the ending of oil exports “has delivered a fatal blow to Hadramout as all project and development plans have stopped. This has also hurt the subsidies delivered to several sectors, including education, charities and others”.

The fact that the total revenue from oil exports in 2021 reached $1.4 billion illustrates that the Yemeni government has incurred massive losses.

In this regard, Yemeni oil expert Dr. Abdulghani Gaghman said: “In 2022, oil revenues were predicted to reach $1.7 billion. However, the government only earned about $900 million following the cessation of production in October.”

He added: “When we talk about the losses emanating from the stoppage of oil production, they should exceed one billion dollars. Some tests were carried out in April and May to pump oil from the Jannah Hunt Pipeline in Shabwa which connects it to the Ayad oil fields.”

“After the pumping operation, the production rate was raised by about 20,000 barrels per day. The tests increased the daily oil production to 85-90 thousand barrels. Given the average oil price (70-80 USD per barrel), we find that the revenues are very big. Therefore, the IRG’s losses exceed one billion dollars.”

The damaged floating pump

The Houthi attack on the Port of Al-Dabba in Hadramout on November 21 last year caused extensive damage to the oil export pump. Sources provided ‘South24 Center’ with exclusive photos that showed the massive destruction caused by the attack. 

In an interview with ‘Al Arabiya’, PLC Chairman said that the cost of the oil pump maintenance would exceed $50 million over at least six months. 

However, bin Madi told ‘South24 Center’ that the cost would be higher and cited foreign experts as estimating that it could go up to USD100 million.

According to websites specializing in the field of oil floating pumps, the average maintenance costs range between $15-20 million excluding installation. However, this is related to the quantum of damage and the location. 

“So far, we haven't seen any real drastic maintenance of the damaged oil pump in the Port of Al-Dabba,” according to Mabkhout bin Madi. He said that "this requires importing specialised equipment and a lot of money, both of which aren’t currently available to us and ‘PetroMasila’*.”

He explained: "We have attempted to salvage as much as possible in order not to damage the pipelines and undersea tanks. We will delay the actual maintenance of the oil pump until the situation stabilizes.“ 

Elaborating on the maintenance required, bin Madi said “this depends on the availability of money and equipment. The latter won’t be available regionally and has to be imported from other countries such as Norway. The platform was built in a way that enables it to sustain fierce waves in the open Arabian Sea.” 

The Governor of Hadramout believes that the main obstacle to not getting the needed equipment isn't necessarily the lack of money. He explained that "Companies sometimes avoid engaging in such risky deals.”

 

South24 Center reporter Abdullah Al-Shadli with Governor of Hadramout Mabkhout bin Madi, Mukalla, October 22, 2023 (South24 Center) 

Expert Gaghman voiced doubts about the government's estimates regarding the pump’s maintenance costs. He believes that the costs will be higher due to the “commissions” paid that constitute a large part of the total amount submitted to the government. This stirs serious suspicions of corruption, according to him. 

He added: "The Ministry and PetroMasila that owns oil fields and pipelines from Al-Masila to Al-Dabba as well as the oil pump should supply the government and media with clear information about the prices, on who will be awarded the tender and the party that will execute it.”

He stressed that ‘PetroMasila’ is the company which is responsible for maintenance of the oil pump although its tenders are mired in much ambiguity. He expects a maintenance period of three-four months at most. He noted that the actual time for installation doesn't exceed one or two months. However, the government sets a six months’ period, from the time it signs the contract to the phases, including supply, installation and delivery. 

Securing oil exports

On May 24, 2023 the Yemeni government called on the international community to take firm measures against the Houthi militia and make efforts to resume oil exports which had been idle for several months.

On January 11, during his meeting with the UK Ambassador to Yemen Richard Oppenheim, Major General Aidrous Al-Zubaidi, the President of the Southern Transitional Council and PLC Member, called on Britain to play a bigger role for mobilizing economic support for Yemen and protecting the economic facilities in a way that would enable the PLC and the government to resume the production and exportation of oil.

Such continuous pleas reflect that PLC and the Yemeni government need foreign assistance to resume oil exports in light of the lack of a strategic military deterrence to thwart the Houthi missiles and drones. 

‘South24 Center’ contacted the Commander of the 2nd Military District, Major General Fayez Al-Tamimi, to answer questions on whether his forces will be able to resist the Houthi aerial attacks if the government resumes oil exports from the Port of Al-Dabba without signing an agreement with the Houthis. However, we haven't received any response yet. 

On the stance of the local authorities regarding the resumption of oil exports, Governor bin Madi said: “We can’t risk it again unless we have adequate defenses to protect the oil port and the cities from any possible attack.”

He added: “We don’t count on any agreement. However, we won’t allow this unless we have a defense system capable of confronting any attack.”

In the opinion of Military expert Colonel Waddah Al-Oubali, the ability of the Yemeni government to unilaterally resume oil exports can be divided into military and political levels.

At the military level, Al-Oubali said: “PLC and the (Saudi-led) Coalition can provide meticulous technical protection for the oil ports, whether through jamming and electronic war devices which have proven effective on some fronts, or through imposing a new equation on the Houthis (port for a port).”

He told ‘South24 Center’: “This can be attained through threatening to target the oil port of Ras Issa in Al-Salif in Hodeidah and warning oil tanks against entering the port. This threat is similar to the tools used by the Houthis (drones).”

He believes that all defensive measures which may be used by the two parties against each other won’t be enough to reassure ships to enter the ports. Thus, a compromise has to be arrived at to stop threatening the ports controlled by the two parties.

At the political level, the expert said: “I think that the international actor wants to keep this issue as a political and economic pressure card against the PLC to make it accept controversial settlements. Thus, through some political concessions, the IRG can resume oil exports.”

Political consequences

The consequences of the cessation of oil exports go beyond the economic aspects. This weakens the political and negotiation position of the PLC and the Yemeni government, according to political analyst Salman Al-Maqrami.

He told ‘South24 Center’: “The Houthi attacks on the oil exportation ports in Shabwa and Hadramout along with (Houthi leader Mahdi) Al-Mashat’s threat in August to target a gas export ship in Aden have exposed the weakness of PLC with all its factions. This also shows that Saudi Arabia and the Arab Coalition don’t oppose the Houthi demand to continue the truce.”

Al-Maqrami explained that “the PLC’s silence toward the cessation of oil exports and its failure to escalate this issue have led to its complete marginalization in the negotiations. Moreover, this has enhanced the Houthis’ demands that include sharing oil and gas revenues. If they achieve this precondition, the Houthis will have gained all what they wanted through negotiations though they failed to do so by war.”

Since the Houthi attacks on the oil ports, direct negotiations have been conducted between the Saudis and the Houthis with Omani mediation. This was being held in parallel with other UN and international efforts to reach a new political agreement in Yemen. While the Houthis insist on some demands and preconditions including paying the salaries of fighters and employees in the areas under their control, based on their military capabilities, the PLC is mired in economic and internal political crisis.

Meanwhile, the price of a US dollar in Aden has exceeded 1,500 riyals. This is the lowest level of the local currency since the formation of PLC in April 2022.

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*PetroMasila is a Yemeni company which works in the exploration and production of oil