PESSIMISTIC OBSERVERS FEAR TROUBLE AHEAD FOR YEMEN

S E C R E T SANAA 000571
SIPDIS
FOR NEA/ARP:AMACDONALD AND INR
E.O. 12958: DECL: 03/31/2019
TAGS: PGOV ECON YM
SUBJECT: PESSIMISTIC OBSERVERS FEAR TROUBLE AHEAD FOR YEMEN
REF: A. SANAA 430

B. SANAA 560

C. SANAA 529
Classified By: Ambassador Stephen A. Seche for reasons 1.4 (b) and (d)
Summary
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1. (C) A trusted contact predicted to POL/E Chief serious
trouble on the horizon for the ROYG stemming from its
budgetary problems. Others are less pessimistic, but there
are many who feel that the current Yemeni regime is in a
precarious place both economically and politically. The ROYG
needs to get serious about reform to keep simmering
unhappiness from boiling over into unrest. End Summary.
Economic Problems Looming
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2. (C) On March 28, political observer Abdulghani al-Eryani
told POL/E Chief that he foresees the collapse of the ROYG
within the next 12 months. He predicted the political crisis
would spring from the current financial crisis once the ROYG
is unable to pay its bills. While Eryani is, by far, the
most pessimistic of post’s contacts, his underlying belief
that the ROYG is on a collision course with serious financial
problems is not unique. Ali al-Wafi, Deputy Head of the
Economic Department of the opposition Islah party, told POL/E
Chief on March 30 that, while the ROYG can easily weather the
crisis with some basic fiscal reforms, in the absence of
those reforms the country will face a financial "disaster" in
the next two to three years. A German diplomat told POL/E
Chief on March 31 that in a recent conversation Deputy
Finance Minster Jalal Yacoub told him that he "had no idea"
how the ROYG would pay civil service salaries this fiscal
year.

3. (C) World Bank Senior Economist Ali Abdulrazzaq was much
more optimistic. While he acknowledged that the downturn in
the price of oil put the ROYG in a precarious fiscal
position, he opined that the recent firming of oil prices in
combination with ROYG austerity measures would allow the
government to muddle through until the global financial
crisis resolves itself and oil prices (and therefore ROYG
revenues) trend back up. He added that if it were to become
apparent that the ROYG was unable to support its currency the
World Bank would step in to prevent its devaluation.
Underlying Political Problems
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4. (C) While Eryani saw the trigger for the crisis as
economic, the underlying problems he outlined in Yemen were
political. POL/E Chief pointed out that Yemeni observers
have been predicting dire crises for at least a decade and
the ROYG has continued to function, and asked how the current
situation is different. Eryani asserted four differences:
1) the country is more polarized now than ever before between
the ruling party and the opposition and between the wealthy
and the poor; 2) within the ROYG, Saleh has concentrated
more authority in his own hands than ever before; 3) Saleh
is seen to have a diminished capacity to implement programs
he favors; and 4) the central government’s influence in
outlying regions is less than ever before.

5. (S) Other embassy contacts echo Eryani’s concerns about
Saleh. On March 30, ruling General People’s Congress (GPC)
Central Committee member Mohammed Abulahoum told POL/E Chief
that he believed Saleh is as weak as he has ever been and has
lost his ability to manage crises. GPC MP Mohammed Naji
al-Shaif, who is also the son of the paramount Sheikh of
Yemen’s largest tribal confederation, told the Ambassador on
March 30 that he was not certain whether Saleh was "keeping
quiet (about Yemen’s problems) or just failing" to deal with
them. Both Abulahoum and Shaif used the same term to
describe Yemen’s situation: "dark."
Tribal Engagement Urged
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6. (S) Abulahoum and another embassy contact, GPC MP Nabil
Basha, have recently appeared to be positioning themselves
for a possible post-Saleh era. Both men approached POL/E
Chief separately with the same message: if the US wants to
continue to have influence in Yemen, forming relationships
with Yemen’s tribes is more important than with the ROYG
(septel). The subtext of both men’s intervention was that in
the near future the influence of the central government will
wane while the influence of the tribes will wax. Both men
are also positioning themselves to be the brokers of
increased embassy/tribal cooperation. Basha offered to
arrange a meeting between the officer leading post’s tribal
engagement efforts and Shaif. Abulahoum recently traveled to
Washington, where he met with officials of the State
Department and Pentagon to urge that the USG interact more
directly with tribal leaders.
Comment
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7. (C) For thirty years Saleh has ruled Yemen. Observers
have been predicting disaster here for almost as long.
Tensions now, however, are running unusually high. With
secessionists active in southern Yemen (ref A),al-Qaeda
operating throughout the country, and a sixth al-Houthi
uprising looming in Saada (ref B),Saleh has his hands full
and is poorly positioned to make hard but necessary choices
like lifting fuel subsidies. The ROYG dodged one possible
flashpoint for widespread unrest when it avoided holding
elections without the opposition (ref C). It will have to be
just as crafty (or lucky) to keep its economic problems from
igniting the volatile situation in Yemen. End Comment.
SECHE