While not without risks, President Donald J. Trump’s decision to re-designate Yemen’s Houthi rebels as a foreign terrorist organization is a powerful diplomatic tool for Yemen’s Internationally Recognized Government (IRG), according to an analysis published be The Arab Gulf States Institute in Washington (AGSIW)
The designation has given the IRG and Yemen’s central bank something they have long sought: legitimate authority to implement comprehensive banking restrictions on Houthi networks, in coordination with international partners on enforcing sanctions – a departure from previous attempts at financial pressure, which collapsed due to a lack of international support.
The central bank‘s new measures, backed by U.S. Treasury regulations, would represent the first serious attempt to disrupt Houthi funding since the July 2024 U.N. deal, which lifted the Central Bank of Yemen’s economic restrictions on Houthi-controlled areas. That deal, which effectively drained the central bank’s momentum while providing the Houthis with a financial lifeline, demonstrates the limitations of half measures.
The implementation challenges for the new banking restrictions on the Houthis are multiple. While the central bank finally has the tools to squeeze Houthi coffers, history suggests the group will likely respond with military escalation rather than compliance.
Iran and its “axis of resistance” members swiftly condemned the designation. Tehran called it an “illegal” move that would escalate regional tensions, while Hezbollah in Lebanon and armed groups in Iraq echoed similar sentiments, framing it as U.S. aggression.
Iran, seeing its investment in the Houthis paying continued dividends, at a time when its Lebanese proxy has suffered catastrophic setbacks, is unlikely to reduce its support.
Publicly, the Houthis maintain a dismissive attitude toward the designation, the Houthi media has already begun spinning the designation as collective punishment of the Yemeni people, a narrative that will require careful countering from both Yemeni and international actors.
The Houthis’ messaging strategy – oscillating between threats against maritime security and claims of protecting civilian interests – underscores the challenge of implementing the designation without inadvertently reinforcing the Houthi narrative.
The U.N.‘s position on the designation reveals a fundamental challenge in international mediation. The Houthis’ track record of forced conscription and recruiting child soldiers, obstructing aid deliveries, and kidnapping U.N. personnel clearly demonstrates a pattern of coercion.
The U.N.’s capacity to serve as an objective mediator, while subjected to such pressures, has been systematically undermined.
In addition to the coercion having its impact, the situation exposes a broader question about the effectiveness of traditional diplomatic frameworks when dealing with actors who exploit humanitarian missions for leverage and hijack the narrative of humanitarian mission for its own illicit purposes.
The designation’s effectiveness will ultimately hinge on how deftly Yemen’s government can navigate multiple constraints: regional allies’ appetite for confrontation, humanitarian imperatives, and the complex task of implementation.
The outcome, like much in Yemen, will be determined by the granular details of implementation that follow on the broad strokes of designations and sanctions policy. Success will require navigating a careful path between pressure and diplomacy, maintaining regional and broader international support, while alleviating humanitarian pitfalls and ensuring the focus remains on Houthi obstruction and manipulation that are causing them.