When war between the Yemeni government and Houthi tribesmen again broke out in the northern Saada province in August, there was little information to be had about the extent of the conflict. Journalists were barred from entering the province and, with the government disinclined to provide details, local observers could only tell hostilities had intensified by the frequency of fighter jets roaring overhead on their way north.

But the failure of the Yemeni government’s efforts to crush the uprising, which started in 2004 and has flared up intermittently since, has prompted fears in neighbouring Gulf states that instability could spill over the border into Saudi Arabia.

In November, in a move to contain the problem, Saudi armed forces crossed into Yemen – the first time they had entered another state’s sovereign territory since the Arab-Israeli conflict in 1967 – and attacked Houthi positions. The rebels claim Riyadh has been bombing targets up to 30 kilometres inside the country. The conflict was expected to top the agenda of the GCC summit, which began in Kuwait on 14 December.

Stability threat

The rebellion in the north is just one of Yemen’s problems. The government of President Ali Abdullah Saleh also faces a resurgent secessionist movement in the south and the growing presence of the terrorist group Al-Qaeda in the east. Combined, these issues pose a serious threat to the stability of the Arab world’s poorest state.

Some military observers have tried to characterise the conflict in the north as a proxy war between Iran, which is aligned with the Shia Houthis, and Saudi Arabia, which sides with the Sunni-dominated government. But the truth is more complex. “If only it were that simple,” says one Western government adviser based in Yemen’s capital, Sanaa.

Houthi leaders have repeatedly said that their uprising is a reaction to the economic and political disenfranchisement by the predominantly Sunni central government. The Houthis are Zaydis, a branch of Shia Islam peculiar to Yemen and some parts of Saudi Arabia.

Yemen could be a great success story if you want it to be, or it can be a great disaster. So far, we are 60:40 in the direction of disaster.

The Zaydis ruled northern Yemen for almost 1,000 years before they were overthrown in the 1962 revolution, led by army officers including the current Yemeni president. Saleh’s government says the Houthis now want to return to power and install a Shia imamate to rule with support from the Shiite theocracy in Iran.

The government’s position is gaining popularity in the country. “The view [people have] of the Houthis has become very negative,” says Nasser Arribiye, a local journalist and political analyst. “People really believe that they want to take control of the entire country.”

Neighbouring Saudi Arabia is also wary of a Shia uprising in Yemen supported by Iran, says Nigel Inkster, director of transnational threats and political risk at UK think-tank the Institute for International Security Studies and a former deputy head of UK intelligence agency MI6.

Riyadh has its own Shia minority, largely in the east and south of the country. “The Saudis have decided to engage forcefully on this,” says Inkster. “It is probably due to nervousness about the volatility of their own Shia population and about the propensity of Iran to try to exploit a situation like this.”

The problem of the secessionist movement in the south of Yemen is less acute, but remains a strain on the overstretched government, says Inkster. Until unification with the north in 1990, the southern People’s Democratic Republic of Yemen was a Marxist enclave. In 1994, citing a lack of economic and political equality with the north, then vice-president Ali Salim al-Beidh attempted to secede, leading to a bloody but short-lived civil war.

Southerners claim that since the war, their lot has not improved and they see little of the oil and gas revenues generated in their territory. An amnesty in 2004 for the leaders of the failed secession attempt was seen as an effort at rapprochement, but five years on, the problems are again coming to the fore. In November, secessionist groups blockaded highways in the south, stopping cars with Sanaa number plates, and in one case shooting dead two Yemeni soldiers.

The problems are leading to disillusion with the government, according to one tribal leader, who had fled Yemen in 1994 but returned a decade later.

“When I came back in 2004, I had so many ideas for reform but nothing got done,” he says. “Yemen could be a great success story if you want it to be, or it can be a great disaster. So far, we are 60:40 in the direction of disaster. A lot of work has to be done. Poverty here is among the highest in the world.”

According to the World Bank, 40 per cent of the country’s population live in poverty and the average Yemeni income ranks 161st out of the 210 countries it monitors. The tribal leader says that while the conflicts in the north and south of the country are the most visible threats to Saleh, increasing poverty and disenchantment with government is also driving the growth of extremist groups.

“There is no excuse,” he says. “We need to improve the standard of living of people. If we do not improve these things, you will have an increase in radicalism and a loss of control by the government.

“Groups such as Al-Qaeda can only live in empty areas where there are no government services, where there is no government control. That is the magnet that attracts them. Unless you try to fill that area, Yemen will not be far behind Pakistan and Afghanistan.”

This view is shared by Richard Barrett, programme co-ordinator for the UN’s Taliban and Al-Qaeda sanctions group. Saudi and Yemeni arms of Al-Qaeda merged in January 2009, creating Al-Qaeda in the Arabian Peninsula (Aqap), which is among the greatest terrorist threats in the world, he says. Since it was set up, it has moved into largely lawless areas in eastern Yemen, such as Hadramout province.

“Aqap has an area of Yemen it can hole up in and the Yemeni government already had enough on its hands with the movement in the south, the uprising in the north and wider social issues,” says Barrett. “There is a lot of opportunity in Yemen for Aqap to set up bases, and for recruitment.”

More worrying are the potential links between Aqap and the leadership of the Afghan and Pakistani branches of Al-Qaeda.

“For these people, Yemen would be a pretty good place to start building a new organisation,” says Barrett. “If they get squeezed more in Afghanistan and Pakistan, we might see some of the leadership moving into Yemen.”

In the past, Saleh’s government has managed to play off competing tribal, religious and political factions in the country through a patronage system underpinned by oil and gas revenues. But these revenues are drying up.

According to the Central Bank of Yemen, the government’s oil export earnings were $1.23bn in the first nine months of 2009, down 66 per cent from $3.9bn in the same period of 2008.

Sources close to Yemen’s Finance Ministry say the Saada conflict is costing the government up to YR2bn ($9.9m) a day. If it were to last a year, this would amount to $3.6bn – more than a third of the government’s entire revenue in 2008. With outstanding debts of $6.7bn and foreign currency reserves close to a four-year low of $8bn, the country is in a precarious financial position.

Displaced people

To make matters worse, the government must cope with more than 330,000 people who have fled nearby Somalia or the war in the north of the country. The UN Commission on Human Rights will need $100m to provide for 175,000 internally displaced people fleeing the Saada conflict in 2009, according to Claire Bourgeois, head of its Yemen programme.

“The humanitarian situation is getting worse,” she says. “We fear there is an increase in the number of people who are not getting access to basic health services, accommodation, food and shelter. There is still an increase in the number of people being displaced.

“This is the sixth war since 2004 in Saada. Some people are losing hope. After the fifth war [in 2008], about 50 per cent of the displaced persons returned and 50 per cent stayed behind. They didn’t see the point in returning if there was going to be another conflict.”

The situation threatens to create animosity between local people and those living in refugee camps, such as the 10,000-capacity Marzak camp in northwest Yemen.

“To set up a camp is costly,” says Bourgeois. “You have to build it, keep it operating and supply food and manpower. You have to be careful that the people in the camps are not receiving more support than the local population or you will raise tensions.”

With Yemenis ever more disenchanted with a government they see as corrupt and inefficient, and whose greatest asset, its armed forces, appear incapable of putting down the northern uprising, many analysts fear that Saleh’s central government may be forced out of power.

Both Inkster and Barrett say that other governments, and Saudi Arabia in particular, will offer as much help as possible to stop the country descending into the kind of civil disorder seen in Somalia.

“A lot of people will move to prevent things from getting to the Somalia stage,” says Inkster. “Clearly it is a preoccupation for Saudi Arabia and it is getting more attention in Washington. But while Yemen has been seen as a vulnerable state, it has never been seen as enough of a threat to give rise to serious activity by states that could help. That could change now.”

However, it is not clear that any help provided will be sufficient to overcome all the problems Yemen faces.