Arab Center Washington DC - On January 17, the United States designated the Houthis in Yemen, also known as Ansar Allah, as a Specially Designated Global Terrorist (SDGT) in response to the armed group’s missile and drone attacks on American and international commercial vessels traveling off Yemen’s Red Sea coastline. The designation took effect on February 16. In a show of solidarity with the Palestinian people, the Houthis vowed to retaliate against Israel until it ends its war on Gaza by attacking and hijacking ships that the group claims are connected to Israel, although many of the targeted vessels have no Israeli ties and some are even carrying humanitarian aid for Yemen. Along with the terrorist designation, since December the United States has led an international military operation entitled Operation Prosperity Guardian and has conducted airstrikes on Houthi military targets in Yemen. In February, the European Union followed suit and initiated a naval force operation, named Aspides, to protect Red Sea commercial vessels from Houthi attacks.
The United States asserts that the designation’s main aim is to obstruct terrorist funding for the Houthis and to restrict their access to financial markets without harming the people of Yemen, as Washington has provided allowances in the designation for humanitarian organizations to deliver essential aid. Despite this assurance, however, the US move has raised concerns about negative repercussions on Yemen’s humanitarian and economic situation. “We fear there may be an effect on the economy, including commercial imports of essential items on which the people of Yemen depend on more than ever,” warned the United Nations Office for the Coordination of Humanitarian Affairs.
The designation aims to exert pressure on the Houthis, but it appears incongruent with the group’s operational structure—they have very limited financial connections to the United States—and thus is unlikely to impede its activities. Indeed, the Houthis operate with localized and unconventional funding sources, do not rely on the global market, and remain isolated from their neighbors and the international community, except for Iran. Thus, the decision to label the Houthis as a terrorist group is unlikely to achieve its intended objectives—and may have a severe negative impact on the Yemeni population, especially by restricting the import of essential commercial items.
Reasons Behind the Houthi Designation
Concern about such ramifications were the main reason why the Biden administration, just weeks after taking office, reversed the Trump administration’s January 2021 designation of the Houthis as a “Foreign Terrorist Organization” (FTO) and as a SDGT. The Trump administration had stated that its move aimed “to hold Ansar Allah accountable for its terrorist acts, including cross-border attacks threatening civilian populations, infrastructure, and commercial shipping.” The designation came during a period of close US ties with Saudi Arabia and the United Arab Emirates (UAE), who had pushed Washington to designate the Houthis. After the Houthis escalated their attacks on Saudi Arabia and the UAE, Trump sought to please his Gulf allies. The Trump administration announced the designation following its “maximum pressure” campaign against Houthi-backer Iran that resulted in almost weekly sanctions against the Islamic Republic.
Significant developments followed Biden’s February 2021 delisting, including resumed diplomatic relations between Iran and Saudi Arabia in March 2023 and a notable reduction of hostilities between the Houthis and Saudi Arabia and the UAE. Most recently, the Houthis became involved in the war on Gaza as part of the Axis of Resistance, which also includes Lebanon’s Hezbollah and Iraq’s pro-Iran militias. While the Houthi group sees direct confrontation with the United States—and Israel—as a religious duty, the United States wants to punish it for attacking US military forces and international commercial vessels in the Red Sea. Since November, the Houthis have attacked at least 45 ships, leading to a surge of approximately 250 percent in shipping costs and pushing 70 percent of cargo ships to avoid the area.
The Biden administration justifies its designation as an effort “to impede terrorist funding to the Houthis, further restrict their access to financial markets, and hold them accountable for their actions.” But the move’s efficacy is questionable. The Houthis derive income not from international sources but from exploiting the Yemeni population by imposing unjust taxes on companies and individuals in the areas they control without providing public services and by seizing private property—including land, real estate, and funds—without compensation. Houthis also rely on smuggled advanced weapons from Iran. Since 2015, the Houthi forces have received Iranian-made anti-ship missiles and other advanced weaponry, significantly enhancing their maritime threat in the Red Sea.
The Biden administration’s assertion that it will “immediately reevaluate” the terrorist designation if the Houthis cease their Red Sea shipping attacks suggests an acknowledgment that its approach may not be sustainable because it may not effectively address the complex challenges posed by the Houthis.
How the Designation Works
The designation is typically carried out by the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) under various executive orders and laws. When an individual or group is designated as an SDGT, it translates to a freeze on their assets within US jurisdiction, accompanied by a general prohibition on US citizens engaging in transactions with it. Beyond the financial ramifications, the designation serves as a public condemnation of those implicated in acts of terrorism and as a crucial component of a broader strategy aimed at disrupting networks involved in terrorist financing.
The SDGT designation will have an impact on aid organizations, the private sector, and the peacebuilding process in areas under Houthi control. The designation could prevent numerous nonprofit groups, humanitarian aid organizations, private companies, and individuals located in Houthi-controlled regions who have dealings with the Houthi authorities from implementing their programs. In a February 5 statement, a coalition of international humanitarian organizations providing much-needed aid to Yemeni civilians expressed concern that major import suppliers and financial institutions will not be able to continue their work in Yemen, cautioning that the designation “will likely already contribute to the complex operating environment” in the country.
In addition, the designation is expected to exacerbate the already significant challenges posed by the interference of warring parties in the distribution of humanitarian aid in Yemen. Furthermore, local media reports say that the money transfer company Western Union has suspended its operation in Yemen as a result of the designation. Finally, the designation could create significant challenges for external mediators participating in peace negotiations with the Houthis. This is because the designation criminalizes the provision of any property or service, including expert advice or assistance, to designated organizations, thus hindering the ability of mediators to contribute effectively to the peace process.
Despite the designation and the Operation Prosperity Guardian attacks, the Houthis are persisting in their activities undeterred. US officials, in outlining plans to curtail Houthi capabilities and secure the Red Sea, have asserted that US strikes have damaged or destroyed nearly one-third of the Houthis’ offensive capacities. Despite this, the Armed Conflict Location and Event Data Project (ACLED) reports that the Houthis launched 21 attacks on international shipping last month.
The Houthis are leveraging the western military operations against them to bolster their popularity among pro-Palestinian Arab publics. They seek to present themselves as the legitimate rulers of Yemen, despite their ascension to power in Sanaa through military means, plundering of Yemeni state institutions, and history of repression and human rights violations. In response to the designation, the Houthis expelled all US and UK nationals working for the United Nations and aid organizations in Yemen. Taking further advantage of the current situation, the Houthi-controlled parliament in Sanaa ratified a law classifying countries, entities, and individuals deemed hostile to Yemen. This law is seen as part of the Houthis’ ongoing effort to seize properties and as a potential tool to suppress local dissent.
Shift in Approach Needed
The decision to designate the Houthis is troubling due to its potential negative impact on the Yemeni population. The United States must reassess the designation’s efficacy in achieving its intended objectives. If the goal is to influence Houthi behavior or constrain the group’s operations, a more comprehensive and strategic approach is required.
There is an urgent need for Washington to acknowledge the link between the Houthi attacks in the Red Sea and the war on Gaza. The US focus should shift toward multilateral engagement with regional and international partners, especially the Palestinians, to foster dialogue and to find diplomatic solutions to end the war on Gaza. There is a clear Arab and international interest in protecting Red Sea shipping lanes and in achieving a comprehensive resolution that starts with a ceasefire in Gaza. Additionally, to counter Houthis’ increasing military capabilities, the United States should support a politically and militarily unified Yemeni government and ensure a unified front against the group. The United States must address political fragmentation in Yemen to strengthen the Yemeni state and to empower it to counter Houthi influence both inside the country and in the Red Sea.
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*This policy analysis paper was written first for and published on the Arab Center Washington DC.
