Prepared by: The Yemen and Gulf Studies Center Expert Team

The decision by US President Donald Trump to designate the Houthis as a top-tier global terrorist organisation marks a significant shift in the US stance toward the Yemeni group. This move reflects the new US administration's approach toward the Houthis, which is heavily characterised by the concept of "maximum pressure." The timing of this decision, coinciding with the Gaza ceasefire agreement, underscores its importance and potential to carry far-reaching implications across security, military, political, humanitarian, and economic dimensions. In this context, the Yemen & Gulf Center for Studies seeks to provide a detailed analysis of the decision’s implications, focusing on its political, security, economic, and humanitarian consequences. Additionally, the centre’s experts aim to explore the Houthis’ potential responses to this decision and its broader impact on the group.

I. Political Implications of Designating the Houthis as a Terrorist Organization

Dr. Ali Yahya Abdullah

Professor of Political Science at Sanaa University and Expert at the Yemen & Gulf Center for Studies

The Trump administration’s decision to reclassify the Houthi group as a Foreign Terrorist Organization (FTO) represents a notable shift in US policy toward the group. This move signals a more hardline approach compared to the Biden administration, which had previously revoked this designation. The decision carries both symbolic and practical dimensions, aiming to intensify pressure on the group through stringent sanctions targeting its leadership, financial resources, and support networks. It also reflects a clear intent to curb the Houthis’ ability to sustain hostile activities, particularly attacks threatening international maritime security and global trade in the Red Sea and Bab al-Mandeb.(1)

The reclassification of the Houthis as a terrorist organisation carries complex political and security implications at both the Yemeni and regional levels. Politically, the decision poses a challenge to UN-led efforts to revive the political process, as it may push the Houthis to reject any political dialogue, viewing the designation as a hostile act by the United States. This escalation could deepen Yemen’s political stalemate, especially given the group’s continued ties to Iran and its military escalation, further complicating prospects for a comprehensive peace settlement and exacerbating the existing humanitarian and economic crises.

Sanaa has taken a firm stance against the decision, framing it as an extension of what it describes as U.S.-Israeli aggression in the region. Through statements from the Supreme Political Council, the Houthi leadership has asserted that the decision will fail to achieve its objectives and will instead be met with reciprocal measures, including military escalation and restrictions on international maritime navigation. Sanaa has warned of the decision’s repercussions on US interests and its regional partners, signalling its readiness to impose counter-sanctions and target regional and international interests in response to any escalatory steps.(2)

The Houthis’ initial response demonstrates a clear understanding of the implications of their terrorist designation. They have taken steps aimed at relative de-escalation, such as reducing attacks in the Red Sea and releasing prisoners from the opposing side as part of a humanitarian initiative that included elderly and sick individuals. Additionally, the release of the 25-member crew of the Galaxy Leader vessel, representing various nationalities, (3) just one day after the US designation, appears aimed at easing international pressure and mitigating potential backlash. These measures suggest an attempt by the Houthis to avoid further escalation that could lead to harsher sanctions or expanded military operations against them. However, the effectiveness of these steps remains contingent on developments on the ground and the ability of international actors to formulate a unified response to the threats posed by the group.

At the domestic level, the designation deepens divisions among Yemeni factions. The internationally recognised government and the Saudi-led Arab coalition may view the decision as international support bolstering their positions, potentially encouraging them to adopt more hardline stances toward the Houthis. In this context, Ahmed Awad bin Mubarak, Prime Minister of Yemen, has emphasised that the government values this move, seeing it as a clear message to the Houthis that the international community, particularly the United States, possesses significant leverage to pressure the group. He added that communications between the Yemeni government and the US administration are ongoing, noting that this decision reflects a shift in Washington’s approach toward a comprehensive strategy addressing the Yemeni crisis, encompassing political, security, military, and economic dimensions while emphasising that the Houthis’ presence exacerbates humanitarian conditions more than any potential fallout from the decision.(4)

Conversely, the terrorist designation may escalate the Houthis’ political and military intransigence, deepening divisions among warring factions and hindering peace efforts. In its response, the Houthi group has dismissed the US decision as "detrimental to regional stability and peace efforts," framing it as a continuation of a hostile stance due to their support for the Palestinian cause.(5) This escalation complicates prospects for a comprehensive political settlement and further undermines UN mediation efforts.

At the regional level, the designation strengthens the position of the Saudi-led Arab coalition, which has long sought to undermine the Houthis’ influence and end the Yemeni crisis. Simultaneously, the decision sends a clear message of US support for its regional partners, potentially encouraging intensified military and diplomatic efforts to curb the Houthis’ influence. On the other hand, Iran, the Houthis’ primary ally, views this designation as an escalatory move by the United States and its allies, which may prompt Tehran to increase its political and military support for the group. This regional polarisation further complicates prospects for a peaceful resolution as rivalries deepen and disagreements intensify, threatening to prolong the Yemeni crisis and its political and humanitarian repercussions.

Internationally, the decision places the United Nations and other international organisations in a difficult position. The UN, which relies on inclusivity to ensure the success of any negotiations, may face significant challenges in engaging with a group designated as a terrorist organisation by the United States. This situation could limit the UN’s ability to persuade the Houthis to participate in peace talks, eroding international confidence in the effectiveness of the UN’s role in resolving the Yemeni crisis.

Nevertheless, the decision to designate the Houthis as a terrorist organisation is expected to alter the dynamics of the Yemeni conflict significantly. It may push the group to engage more seriously in peace efforts, particularly if the designation is accompanied by practical measures to halt weapons supplies and financial support. Enhanced regional cooperation between the United States and its allies could also create a more stringent environment for the Houthis, potentially restoring regional balance.

However, this decision may reinforce dynamics centred on force rather than dialogue, opening the door to further militarisation of the conflict and escalating political and military confrontations. In the absence of parallel political mechanisms to de-escalate tensions, the designation could push Yemen into a more complex phase, marked by intensified military clashes and diminished prospects for political solutions.

II. Security Implications of Designating the Houthis as a Terrorist Organization

Mohamed Fawzi

Regional Security Expert

On Wednesday, January 22, 2025, President Donald Trump signed an executive order reclassifying the Houthi group as a Foreign Terrorist Organization (FTO). The order directs the US Secretary of State to consult with relevant parties and recommend the reclassification within 30 days. This decision is notably stricter than the Biden administration’s previous designation of the Houthis as a "specially designated global terrorist organisation." The decision carries significant security and military implications, which can be examined as follows:

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• Following the multi-phase ceasefire in Gaza between Israel and Hamas, the Houthis announced a reduction in their attacks in the Red Sea. They also released the crew of the Galaxy Leader vessel through Omani mediation. In response to the US decision, the Houthis have classified the US and the UK as terrorist entities. These developments suggest two possibilities: first, the US decision may prompt the Houthis to resume escalation in the Red Sea; second, the group may move to block British and American ships from passing through the Red Sea and Bab al-Mandeb.

• One possible security scenario involves Israel expanding its targeted strikes against the Houthis in Yemen. This is based on several factors: The Gaza ceasefire agreement lacks regional dimensions; the US decision provides Israel with political cover for future strikes; Israeli security circles believe previous strikes have not significantly weakened the Houthis; and recent regional escalation has convinced Israel that the Houthis pose a threat comparable to other Iranian proxies near its borders.

• In the current strategic landscape, Israel faces significant logistical challenges in targeting the Houthis. First, Yemen lies over 2,000 kilometres from Israel, requiring several hours of flight time for Israeli warplanes to reach their objectives—an operation entailing substantial economic costs. Second, Israeli security assessments indicate a relative intelligence gap in Yemen compared to other conflict zones where Israel maintains deeper operational insights. Third, in response to Israel’s precision strikes against Hamas and Hezbollah leaders in the previous war, Houthi leadership has bolstered its security measures, making targeted operations more difficult. However, Israel is likely to counter these constraints by expanding its intelligence footprint in Yemen and leveraging advanced technologies, including long-range combat drones, satellite reconnaissance, and intelligence-sharing partnerships with the United States and Britain.

• The recent US decision will exert considerable economic pressure on the Houthis, yet it is unlikely to degrade their military capabilities significantly. The group primarily relies on smuggled Iranian-made weapons for armament while sustaining its operations through local taxation and levies in territories under its control. Additionally, the Houthis maintain extensive ties with various armed organisations and militias, further bolstering their access to weaponry. Their financial and technical resources also enable the production of domestically manufactured arms. On the operational level, US strikes targeting Houthi military infrastructure face inherent limitations. The group employs rudimentary yet highly mobile missile launch platforms, mitigating the impact of precision strikes. Furthermore, the Houthis have adopted a network of tunnels to safeguard their leadership and military assets while strategically placing weapons depots in densely populated areas, effectively using civilians as human shields—calculating that Western nations will refrain from targeting such locations.

III. Economic Implications: International Isolation and Financial Losses

Wafiq Saleh

Economic Expert at the Yemen & Gulf Center for Studies

The decision by U.S. President Donald Trump to reclassify the Houthi group as a terrorist organisation represents a decisive turning point in the trajectory of the Yemeni crisis, particularly in its economic and financial dimensions, which are the most closely linked and significantly impacted by such measures.

In this concise paper, we will simplify the various aspects and implications of this decision on the economic and financial landscape of the country as a whole. The U.S. decision, set to take effect thirty days after its issuance on January 22, 2025, will impose international economic isolation on the Houthi group. This will be achieved by freezing its assets, prohibiting financial and commercial transactions, and imposing stringent sanctions on other parties that violate these restrictions. The classification of foreign terrorist organisations criminalises all forms of financial or personal dealings, including providing technical expertise, training, or assistance. This may even extend to contacting the Houthis or any group members without any exceptions.

Of course, such severe sanctions will significantly impact local economic records, including public and private revenues, which form a fundamental financial pillar of the group’s strategy for building and consolidating its influence and authority. These revenues are likely to be cut off from the Houthi group, particularly those derived from seaports, the exorbitant fees it often imposes illegally on banks and commercial companies, taxes on large taxpayers, and foreign financial transfers to international organisations, as well as commercial transactions involving banks.

Given Yemen’s broader economic landscape, the latest US sanctions are poised to trigger profound financial and logistical shocks for the Houthi regime, which maintains its grip over the capital, Sanaa, and several northern governorates. Foreign trade remains the backbone of Yemen’s fragile economy, heavily dependent on imports to secure essential commodities, food supplies, and consumer goods.

One of the most immediate and severe repercussions of the sanctions will be on foreign trade, mainly through Houthi-controlled ports. The restrictions are expected to exacerbate economic isolation, making it increasingly difficult for financial institutions in Houthi-held areas to access the global financial system. Moreover, major shipping firms are likely to shy away from Al-Hodeidah and other Houthi-run ports, fearing exposure to international penalties for engaging with an entity now officially designated by the US as a foreign terrorist organisation.

The impact of international sanctions on the Houthi group, particularly in the economic sphere, stems from Yemen’s heavy reliance on foreign trade and global markets to secure essential goods, including food supplies. Additionally, the exchange market depends on foreign currency inflows from humanitarian aid allocated to international organisations and remittances sent by Yemeni expatriates abroad.

These sanctions will severely undercut the Houthis’ economic manoeuvrability, constraining their capacity to exploit public and private financial resources. The group has long sought to entrench its control by effectively hijacking state institutions in areas under its rule while tightening its repressive grip over the private sector—particularly within the banking industry, which remains concentrated in Sanaa.

Under the White House’s directive, banks still operating within Houthi-controlled regions face mounting barriers to integrating with the global financial system. This, in turn, will severely disrupt the ability of commercial enterprises and importers to access international markets to procure essential goods and commodities. Furthermore, the credit capacity of financial institutions—already constrained—will deteriorate further, impeding their ability to issue loans and provide essential financial services to individuals and businesses alike.

These developments mark a decisive setback for the Houthis at a broader economic level, threatening to dismantle the substantial financial gains they have accumulated over the years. The group has meticulously worked to carve out an autonomous economic structure, distinct from Yemen’s national economy, with the Central Bank’s Sanaa branch serving as its primary financial instrument. Through this mechanism, the Houthis have actively undermined the national currency in government-held areas and imposed stringent restrictions on commercial and Islamic banks, pushing them to the brink of insolvency.

The most critical vulnerability for the Houthis lies in the banking sector, a pillar of their financial survival. Once the sanctions take full effect, banks and financial institutions headquartered in Sanaa will increasingly be unable to transact through the Central Bank’s local branch without exposing themselves to severe penalties. Any continued engagement with the Houthi-controlled financial system could lead to asset freezes and restrictions on international transactions, forcing the entire banking sector to reassess its operational alignment. Ultimately, banks will have little choice but to fully coordinate with the internationally recognised Central Bank of Yemen in Aden to maintain access to global financial networks, comply with anti-money laundering and counter-terrorism financing regulations, and avoid international isolation.

From a macroeconomic perspective, Washington’s measures not only curtail the Houthis’ financial influence but also bolster the standing of the Central Bank of Yemen in Aden. With an expanded role in overseeing monetary policy and regulatory oversight, the Aden-based central bank is positioned to reassert control over financial institutions that had previously operated under Houthi influence. The imperative for banks to mitigate sanction risks and maintain financial viability will drive them toward swift alignment with Aden’s regulatory framework, strengthening its authority over banking operations, international financial transactions, and commercial banking correspondence.

Ultimately, whether the Yemeni government can capitalise on these developments to consolidate its influence on the ground remains contingent on its ability to implement effective reforms. Sustained governmental action is required to leverage these sanctions to recalibrate economic governance, address structural inefficiencies, and reinforce state institutions' legitimacy.

Fourth: The Implications of Reclassifying the Houthis as a Terrorist Organization on Humanitarian Work in Yemen

Walid Al-Abara - Head of the Yemen & Gulf Center for Studies

The US decision to reclassify the Houthis as a terrorist organisation has significant implications for humanitarian operations in Yemen. The decision aims to undermine the Houthis’ control over aid distribution, halt financial flows benefiting the group, and pressure international organisations to limit their direct engagement with the Houthis. However, this may also disrupt the delivery of aid to millions of Yemenis in Houthi-controlled areas, exacerbating the humanitarian crisis.

Objectives of the Decision and Its Potential Impacts

The reclassification aims to achieve multiple objectives, primarily curbing the Houthis' grip on humanitarian operations, severing financial channels that sustain them, and pressuring international organisations to reduce direct engagement with the group. These shifts could significantly reshape the dynamics of aid distribution in Yemen.

Undermining Houthi Control Over Humanitarian Work

Since the signing of the Stockholm Agreement in December 2018 and the subsequent cessation of hostilities in Hodeidah, the Houthis have entrenched their control over humanitarian operations. By dictating the issuance of permits, overseeing the entry of aid through the port of Hodeidah, and manipulating distribution mechanisms, they have bolstered their legitimacy as a de facto authority before the international community. In contrast, the internationally recognised Yemeni government has remained primarily relegated to administrative functions such as visa issuance for humanitarian workers and customs exemptions without exerting control over aid distribution.

The terrorist designation could curb the Houthis' ability to channel humanitarian operations for political or military leverage, reinforcing the Yemeni government's efforts to reassert its sovereign oversight. The government has persistently called for relocating the headquarters of international organisations from Sanaa to Aden while urging traders and importers to utilise ports under its jurisdiction.

2. Halting the Flow of Aid Through Banks in Sanaa

Between 2015 and 2024, UN-led humanitarian response plans allocated approximately $38 billion to Yemen, with the World Bank estimating the aid-driven economy at $2 to $3 billion annually. While these funds have provided a lifeline for millions, they have also inadvertently prolonged the conflict by fortifying the Houthis' financial base.

The reclassification will prevent aid-related transactions from being processed through banks under Houthi control, leading to:

• A diminished ability for the group to exploit humanitarian aid as a financial resource.
• Heightened liquidity shortages and foreign currency scarcity in Houthi-held areas, exacerbating economic pressures.
• The potential dismissal of thousands of humanitarian workers due to funding constraints.
• An anticipated surge in the prices of essential commodities following the contraction of foreign currency inflows.

3. Pressuring Organizations to Shift Operations to Aden

The Houthis’ inclusion on the terrorist lists will likely compel many humanitarian agencies to reassess their operational strategies in Yemen. A precedent was set following the Biden administration’s January 2024 designation of the group, which prompted some organisations to relocate to the interim capital, Aden. With the latest decision, this shift is expected to gain momentum.

While this move could mitigate Houthi access to aid funds, it also introduces significant risks, including:

• Increased obstacles in delivering aid to populations in Houthi-controlled areas.
• Potential retaliatory measures by the Houthis against humanitarian organisations, as previously witnessed through arrests and coercive tactics to maintain a presence in Sanaa.

4. Curtailing Humanitarian Cooperation with the Houthis:

Throughout the years of conflict, some countries and organisations have provided humanitarian aid through Houthi-affiliated government institutions, such as ministries and official funds in Sana’a. However, with the group’s designation as a terrorist organisation, direct cooperation is likely to decline, affecting the ability of these institutions to manage humanitarian projects.

In response, the Houthis are expected to escalate their actions, either by imposing further restrictions on humanitarian organisations operating in their territory or even barring them altogether. This could worsen the humanitarian crisis and challenge the international community significantly.

Humanitarian Implications: Open to All Possibilities

While the US decision aims to weaken the Houthis’ influence and prevent them from exploiting aid, its impact on the civilian population could be complex. On one hand, restricting aid from passing through the Houthis may improve oversight and ensure it reaches those in need. However, it could also trigger economic and humanitarian instability in Houthi-controlled areas, potentially leading to:

• The Houthis intensifying internal repression to suppress protests over worsening living conditions.
• Increased pressure on the United Nations and the U.S. administration if the humanitarian crisis escalates, which could prompt a reassessment of restrictions.

Conclusion
Reclassifying the Houthis as a terrorist organisation constitutes a defining moment in Yemen’s protracted conflict, carrying multidimensional implications across political, security, economic, and humanitarian spheres. While the move could restrict the Houthis' ability to manipulate humanitarian aid, it also poses serious challenges for relief organisations and risks exacerbating the humanitarian crisis in Houthi-controlled areas. The critical question remains: Can this policy be executed in a manner that fulfils its strategic objectives without inflicting further harm on millions of Yemenis in dire need of assistance?

[1] White House. "FACT SHEET: President Donald J. Trump Re-designates the Houthis as a Foreign Terrorist Organization." January 22, 2025. https://www.whitehouse.gov/fact-sheets/2025/01/fact-sheet-president-donald-j-trump-re-designates-the-houthis-as-a-foreign-terrorist-organization/.

[2] صحيفة المسيرة. "صنعاء تضع ميزان الرد على مفاعيل قرار التصنيف الأمريكي: التصعيد بالتصعيد." العدد 2071، 26 يناير 2025، ص. 3.

[3] صحيفة الثورة. "صنعاء تفرج عن «153» من أسرى الطرف الآخر من جانب واحد في مبادرة إنسانية هي الثانية في أقل من عام وشملت حالات مرضية وجرحى وكبار سن." 26 يناير 2025. https://althawrah.ye/archives/949182.

[4] وزارة الخارجية الأمريكية. "الإفراج عن أفراد طاقم سفينة 'غالاكسي ليدر". بيان صحفي، مكتب المتحدث باسم وزارة الخارجية، 23 كانون الثاني/يناير 2025. https://www.state.gov/release-of-galaxy-leader-crew-members.

[5] اليمن، "رئيس وزراء اليمن يرد على أسئلة الانفصال والتطبيع ومساعي إنهاء الحوثي"، الحرة / خاص - واشنطن، 24 يناير 2025. https://tinyurl.com/289jjs9w

[6] بلقيس. "الحوثيون: إدراجنا ضمن المنظمات الإرهابية لا يخدم استقرار المنطقة." 23 يناير 2025. https://tinyurl.com/2dqzlk4m.