(Bloomberg) -- Saudi Arabia is increasingly anxious over the situation in neighboring Yemen, where Iran-backed Houthi militants have stepped up hostilities with Israel and threatened to attack the oil-rich kingdom over claims it’s waging economic warfare against them.
Riyadh fears being drawn into a new direct conflict with the Houthis, according to several people familiar with the Saudi government’s strategy, who asked not to be identified due to the sensitivity of the matter. Saudi Arabia previously fought the militant group for seven years from 2015 in a conflict that devastated Yemen, leaving an estimated 370,000 people dead from fighting and famine.
Tensions have risen in recent days after a long-distance Houthi drone killed a man in Tel Aviv on July 19, which Israel countered with airstrikes on the Houthi-controlled port of Hodeida the following day.
Around the same time, Houthi leader Abdul Malik Al-Houthi claimed Saudi Arabia is colluding with Israel and the US to curb the group’s attacks on Red Sea shipping, which it began late last year in solidarity with Hamas and Palestinian civilians impacted by the war in Gaza. He threatened to inflict “horrific losses” on the kingdom and derail Vision 2030, Crown Prince Mohammed bin Salman’s multi-trillion-dollar economic and social transformation plan.
The Houthis regularly attacked Saudi Arabia during their war — including its oil installations — before a fragile truce in 2022. Any resumption of those assaults would likely push up crude prices. Having initially backed Saudi Arabia’s campaign, the US put immense pressure on the kingdom and the United Arab Emirates to end the conflict and commence peace talks as the humanitarian crisis worsened.
The Saudi Defense Ministry has denied any involvement in Israel’s strikes on Hodeida, while the Foreign Ministry called on “all parties to exercise maximum restraint.”
The stance reflects a major shift in the crown prince’s foreign policy in recent years. Having initially taken an aggressive position against Iran and its regional proxies, he last year forged a detente with Tehran and signed a deal with the Houthis as he prioritized economic development and attracting foreign investors and tourists.
The long-term viability of that strategy is doubtful, said Nadwa Al-Dawsari, a Washington DC-based Yemen expert and advisor to several Western governments, as the Houthis increasingly view themselves as a regional force that wants to eclipse Saudi Arabia and step up resistance to Israel and the US.
“Ideology is driving the Houthis, who have been underestimated by a lot of people,” she said.
Saudi officials have tried to defuse the situation by urging Yemen’s internationally recognized government and central bank governor to reconsider financial actions designed to weaken the Houthis, according to five people with direct knowledge of these discussions. Riyadh said it may reduce economic and military support for the Yemeni administration if the moves against the Houthis were implemented and that it would be on its own to face a new likely conflict, the people said.
The Saudis in turn assured the Houthis they were doing everything they could to stop implementation of the measures, according to two people familiar with the matter.
The United Nations said this week that Yemeni parties had reached an agreement that would result in the cancellation of financial restrictions against Houthi-controlled areas, which are home to nearly 20 million people dependent on international humanitarian aid and remittances from abroad. The UN “recognized the significant role of the Kingdom of Saudi Arabia in bringing this agreement about,” it said in a statement.
A Saudi Foreign Ministry official didn’t respond to requests for comment.
Saudi Arabia and the US had previously backed the central bank measures to pressure the Houthis, believing they would help end maritime hostilities and kick-start UN-led peace talks to resolve the conflict in Yemen, Bloomberg News reported in early June. Months of airstrikes by the US and UK against Houthi targets since January had failed to end the Red Sea attacks.
Yet in recent weeks, the Houthis have been ratcheting up their maritime campaign to levels not seen since December. They released footage of sites they planned to target in Saudi Arabia and then launched the attack on Tel Aviv.
Its unclear what role the US played in reversing the plans. The State Department declined to comment while the Treasury Department did not respond to a request for comment.
Fatima Abo Alasrar, a scholar at the Middle East Institute think tank, said Saudi Arabia faces tough choices given the “significant leap” in Houthi capabilities since 2015 — as evidenced by sending a drone almost 2,000 kilometers (1,242 miles) from Yemen into the heart of Tel Aviv. Continuing to make concessions risks emboldening them, she said.
The Saudis are wary of fresh confrontation with the Houthis and Iran, said Bernard Haykel, professor of Near East studies at Princeton University.
“The Saudis have internalized a lesson, a realization that the Americans could be here today and gone tomorrow but Iran and the Houthis are here today and will not be gone tomorrow,” he said.
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