Bargaining With Nothing to Lose

Yemen's public finances and economy are broadly divided into two areas. The Houthis govern the northwest around Sana'a; the internationally recognized government and several regional forces share control of the south around Aden. The north relies on its collection system; the south on outside support replacing blocked exports.

In Houthi-governed areas, taxes and customs are supplemented by levies and war donations. In July, the Mokha Center for Strategic Studies estimated roughly USD 2.5 billion a year. But that includes USD 700 million in indirect business costs such as transport and services. The total cannot all be counted as Houthi revenue. The US Treasury's estimate of more than USD 2 billion a year from illicit oil sales is a separate tally.

The southern government lost crude exports, a key revenue source, after export terminals were attacked in late 2022. The World Bank's May review this year also documents halted exports, fiscal distress and the role of Saudi support. This does not establish that the south benefits more from war than peace. Resuming exports is, instead, an important condition for recovery.

Negotiations must also address livelihoods after the war. The roadmap outlined by the UN special envoy in December 2023 included public-sector salaries and resumption of crude exports. A ceasefire alone does not decide who supplies the money or how it is paid. The task is to restore livelihoods while changing the collection structures formed during the war (Office of the UN Special Envoy).

Meanwhile, residents' burdens have grown. The UN estimated 22.3 million people need assistance and protection this year. Reports on 9/22 tallied 674 deaths and about 3,000 injuries since 8/6, and more than 158 thousand people displaced in September. This is why the interests of those earning wartime revenue cannot be equated with residents' interests.

To assess Houthi bargaining power, what matters is how long they can impose costs on the other side. Countering relatively cheap attacks with expensive interceptors burdens defenders. But unit-cost differences alone do not tell us which side can endure. We must also consider defensive systems, stocks and the value of ships and lives protected.

Threats were carried out differently against different targets. Our 8/10 research ledger recorded implementation of 5 out of 5 Houthi threats against Saudi Arabia, versus 1 out of 3 against Israel and international shipping. The sample is small and sensitive to selection. It cannot establish that the Houthis always keep promises or that the poorer party is more credible.

Port revenue and payments for strait passage must also be distinguished. Customs on cargo entering a port differ from payments imposed on ships passing through a strait. Estimates of informal payments for the latter lack sufficient independent verification. Selective attacks to maximize passage fees therefore remain a possible hypothesis.

Freightos' 9/15 report said some container lines had increased their return to the Red Sea despite the Houthi offensive. Maersk also published route-specific operating updates on 9/9. This differs from a complete shipping halt. But container ships' return does not establish the safety of Saudi crude tankers or a Houthi permission system.

Easing tensions also requires workable payment channels. The US designated the Houthis a Foreign Terrorist Organization (FTO) in March 2025. At the same time, OFAC rules permit some noncommercial personal remittances and humanitarian transactions. It is not possible to conclude that all salary transfers are legally impossible. Any specific salary agreement requires separate checks of the payer, recipient, funding route and applicable law (OFAC explanation).

Saudi crude's main export routes run through Gulf ports or Yanbu on the Red Sea. The Gulf route requires crossing Hormuz. Crude moved to Yanbu through the East–West Pipeline then takes different routes by destination. The direct southern route to Asia passes through Bab el-Mandeb.

Europe-bound shipments can go north via the Suez Canal or SUMED Pipeline. Asia-bound cargo can also go north and take a long detour, but that increases transit time and transshipment costs. Houthi threats against Saudi-linked vessels are thus better understood as making the southern route from Yanbu difficult, rather than blocking all exports at once.

The 9/22 report marks the first stage of recovery. Citing sources, Reuters reported a low-flow restart of the East–West Pipeline, with forecasts of 40% capacity within days and full restoration in 6–8 weeks. It also reported preparations to load a China-bound cargo at Yanbu. We have not secured official operator confirmation or daily flow figures.

This China-bound cargo is a case to follow through loading, departure, passage and arrival. A Chinese destination alone does not exempt a vessel from Houthi attacks. Ownership, operators and cargo links also differ. Only after verifying its actual route and arrival can we assess how much of Saudi Arabia's export route has recovered.

Oil prices contain both expectations and current constraints. November Brent settled at USD 99.25 on 9/22, while Opinet's Dubai crude was USD 111.20. The difference is USD 11.95, but crude grades and trading/assessment bases differ; it cannot all be counted as a strait-risk premium. Separate reports that expected supply recovery depressed futures from evidence of actual volume recovery.

Iran seeks to link the strait to broader negotiations to end the war. Terms reported 9/22 included lifting the naval blockade, returning frozen assets and ending the war on all fronts. Reports of Iranian demands do not establish US agreement. It is too early to read them as an agreement or confirmed implementation.

The same day, Trump said the US and Iran had held three hours of talks. US envoy Witkoff described mediation shuttling between the sides. We therefore do not conclude that US envoys and Iran's foreign minister held direct talks around the same table (Axios 9/22, updated report).

Broader negotiations make implementation harder to guarantee. If Iran seeks to include the Yemen front, the Houthis must also have reason to comply. Iranian support does not mean control over every Houthi decision. Coastal expansion can be read as an attempt to secure their share in negotiations, but this alone does not establish the offensive's cause (our interpretation).

Saudi Arabia is seeking outside support. On 9/22, the UK Ministry of Defence officially announced agreement to provide tanker-aircraft support for Saudi defensive operations. The decision, actual deployment and defensive effect must be verified in sequence (UK Ministry of Defence).

Saudi Arabia needs both fewer Houthi attacks and continued outside security support. An agreement with Iran might ease those burdens, but we cannot assume Iran is the fastest guarantor of a Houthi halt. Who participates in the agreement, and what can be done about noncompliance matter as much as the wording.

Bargaining power changes over time. In his 9/22 UN speech, Trump said he expected an agreement after the November midterms. That is his forecast, not a deadline agreed by both sides (ABC).

Iran's proposal to open Hormuz within 7 days is conditional on reduced US military pressure and an end to the port blockade. Do not count a week from the report date. Saudi Arabia's 6–8-week pipeline-recovery forecast also needs verification through actual flow (The National 9/22).

There is no guarantee the Houthis will retain their current bargaining power. If Hormuz restrictions ease, Saudi Arabia may have less reason to rely on the southern route from Yanbu. Conversely, Houthi pressure may persist if an agreement excludes the Yemen front. This report's hypothesis is that the Houthis seek to convert their military advantage into territory, political participation and economic concessions.

China has interests and connections that give it a role in mediation. It is a major buyer of Gulf and Iranian crude. Reuters reported on 9/17 that China asked Iran to restrain the Houthis following a Saudi request. Sources did not identify the channel or say whether the request was conveyed at the 9/16 foreign-ministers' meeting (Reuters republication).

China's foreign ministry officially announced Xi Jinping's US state visit for 9/23–25. The schedule is confirmed; it does not mean China guaranteed Houthi behavior or that the US and China agreed on the strait (Ministry of Foreign Affairs of China).

Success in mediation could affect other negotiations. If China reduces tensions through its relationship with Iran, its position in US–China talks may change. But we have no evidence of an agreed exchange for tariffs, semiconductors or rare earths. Before calling it a guarantor, establish what behavior it promised and what burden it accepts for noncompliance (our interpretation).

Coastal expansion brings both advantages and burdens for the Houthis. A 9/15 Al Jazeera Centre for Studies analysis estimated September gains at about 5,400km², with a roughly 300km supply route from Hodeidah through Mocha to Mayun. Fighting on the move in mountains differs from holding exposed coastal bases.

Reports on 9/22 described Houthi fighting over the Kahbub mountains overlooking the strait and Mayun. This shows the burden of defending the rear even after gaining coast. The same article's more than 157 Saudi airstrikes on 9/21 were Houthi claims, not an independently verified strike count.

This interpretation can be tested in two directions. If the Houthis reduce their offensive, include salaries, port access and sanctions terms in an agreement, and implement it, the bargaining hypothesis strengthens. If they press into the highlands and south while broadening targets, holding territory and expanding war become stronger explanations. Documents and actions must be checked together.

These three branches are conditional interpretations, not return forecasts. Can wartime interests be changed so that peace reaches residents as income? This is the final question in bargaining over narrow sea routes.

We examine seven items separately. The body records what was known at publication; the gauges below load current observations. Event-based items show the date of human verification. We do not create a composite score.