Yemen relief groups concerned UN experts report may hurt aid work

Local grassroots charities in Yemen are disconcerted by revelations in the 2021 United Nations Security Council Panel of Experts report that threaten humanitarian workflow in the war-ravaged nation.

The Trump administration’s decision a month before the report was released to impose the Foreign Terrorist Organization (FTO) designation on the Iran-aligned Houthis did not help either. But this was swiftly reversed when US President Joe Biden assumed power.

Key accusations in the UN report include: Yemeni multinational Hayel Saeed Anam (HSA) Group made a profit of about $194m between mid-2018 and August 2020 from the letter of credit mechanism alone (an instrument used in international trade guaranteeing security to both buyers and sellers); the Central Bank of Yemen (CBY) misused Saudi deposits worth nearly $2bn and engaged in money laundering and foreign currency rate manipulation.

Both the HSA Group and the CBY denied the allegations.

Muna Luqman, the founder of Taiz-based grassroots charity Food4Humanity, spoke of concerns about how the accusations hinder private sector donors’ ability to support charities such as hers.

“This [UN report] could be far more damaging than the impact of the US State Department’s FTO designation on Houthis where humanitarian aid is concerned,” she warned.

Cumulatively, the aftermath of the UN’s allegations has already disrupted international money wire transfers. The accusations have also inflicted commercial damage to the reputation of banks that deal with Yemen’s private sector, making it much harder to import food.

“Everybody is halting supply until this is cleared and clarified,” Luqman told Al Jazeera.

Anything that affects the remaining structures of the state and the economy will increase the prices, Luqman said, adding, “This week, in two days, the prices went up.”

The timing could not be worse as the World Food Programme (WFP) estimates 20.1 million face hunger without food assistance. Last week, the UN raised a disappointing $1.7bn at a virtual donor pledging event – less than half of what it was expecting.

UN Secretary-General Antonio Guterres called it a “death sentence” on the Yemeni people when 400,000 children risk dying of malnutrition.

‘It’s complicated’

Images of babies and children, listless, emaciated, with ribs exposed while anguished mothers look on, have become poster campaigns on social media and underground tube stations in most Western countries to solicit donations for Yemen.

But Luqman said even the money raised at the conference cannot be transferred to those in need. Western Union, for example, has blocked transfers and set a limit of up to $1,000. “It has become complicated,” said Luqman.

Since the start of the Saudi Arabia-led bombing campaign in Yemen six years ago this week, local and international aid organisations have faced a litany of obstacles in ensuring aid reaches its intended recipients.

The Houthis, who control northern Yemen and swept into the capital Sanaa in 2014, have been repeatedly accused of obstructing, stealing, and selling aid on the black market. The Saudis, too, have weaponised hunger.

Luqman has been delivering aid to remote areas in Taiz, which the Houthis have besieged for nearly six years. Taiz is hilly countryside and challenging terrain, rife with Houthi snipers, all of which severely restrict access for international organisations.

Luqman’s concerns about rising food insecurity are well-founded. A WFP report, titled Food markets in the Time of Conflict and Cholera, shows as the war dragged on, Yemen’s wheat market evolved into an oligopoly – a sign of how the food sector adapts to a wartime economy. Only two companies trade 70-80 percent of the wheat grain market, of which one is HSA.

The HSA Group also supplies to organisations such as the WFP, said Luqman.

Founded in 1938, the HSA Group’s origins can be traced to a village in Qaradh in southwestern Taiz. When the coronavirus pandemic swept through Yemen in April, the global company led a COVID-19 initiative to support communities, front-line healthcare workers, along with the UN.

The UN panellists wrote “just nine companies captured 48 percent of the $1.89bn Saudi deposit; all nine belong to a single holding corporation – the HSA Group”. However, the methodology behind the UN experts calculation does not illustrate the market share of the HSA Group, said Amal Nasser, an economist at Sanaa Centre for Strategic Studies.

Rafat al-Akhali, founder of a youth foundation called Resonate Yemen, accused the UN panel of ignoring the company’s past and not contextualising the numbers. The report fails to show the HSA Group has been the largest food importer in Yemen even prior to the conflict, al-Akhali said.

HSA possibly made a profit of $194m solely from this scheme. More alarming, Nasser highlighted the central bank lost $423m because of the decision to offer preferential rates that are significantly lower than market exchange rates.

Central bank – last front line in Yemen’s war

The CBY, which can be likened to the human nervous system and has been deemed “the last front line in Yemen’s war”, is a shambles.

Since the bank’s relocation to Aden in September 2016, President Abd-Rabbu Mansour Hadi failed to recruit qualified banking staff. Hadi accused the Houthis of squandering $4bn in reserves on the war effort, which they denied. In Houthi controlled Sanaa, the central bank exists, but only in name.

A former Yemeni diplomat, Mustapha Noman, told Al Jazeera the bank’s board members, including the governor and the deputy governor, have zero banking experience.

“They were chosen based on their political affiliations,” said Noman, who also served under late Yemeni President Ali Abdullah Saleh as an ambassador and deputy foreign minister.

He accused the bank’s governors of demanding higher salaries similar to European counterparts despite diminished reserves, and as public sector employees went unpaid and millions of Yemenis starved to death.

A letter circulating on social media – sent by former CBY Governor Munasar al-Quaiti to President Hadi in August 2017 – requests approval for monthly salaries of $40,000 and $50,000 for his deputy and himself, respectively.

“The breed of corruption is within the CBY. They know it, everyone knows it,” Noman said.

In response to the UN panel’s request, the CBY provided additional documents but failed to explain why it adopted such a destructive strategy, according to the report.

The HSA Group informed the panel, although it, along with other traders, received preferential exchange rates from the Saudi deposit, the discount was passed on to consumers with no financial gain to the group. The panel requested more documents, but the report was published before the documents were supplied.

“How did they calculate such profit? Simply by doing a back-of-the-envelope calculation based on the spread between the panel’s reported market exchange rate and the CBY exchange rate offered through the Saudi deposit,” al-Akhali said.

Fernando R Carvajal served as Armed Groups and Regional Expert on the UNSC Panel of Experts on Yemen from April 2017 to March 2019. He said the UN panel should not have reached out to a private company such as HSA.

“The only entities that have a right to reply are the governments or member states. Before we start on the report, we write a letter to the government explaining our investigation.”

But Dakshinie Gunaratne, coordinator of the UNSC Yemen Panel of Experts, said it provides an opportunity to respond in situations where it is deemed necessary.

The UN Panel of Experts first originated in 1995 to monitor and document the Rwanda genocide. Over the years, their mandates have evolved and expanded from solely monitoring to include detailed analysis and recommendations for resolving regional conflicts.

The panels face several challenges: sources are confidential and reaching a consensus is difficult in some instances. While these specific challenges do not necessarily interfere with the accuracy of the reporting, Carvajal pointed out it inherently limits the scope of a probe by individual experts.

Government investigation is crucial

Everyone has the right to defend themselves, but in this case, economist Nasser said it is crucial for the government to investigate the issue and be transparent with its outcome.

“CBY and its leadership emphasise that they acted within their mandate as stipulated in the Central Bank Law of 2000. But this does not rule out the possibility of mismanagement of funds or abuse of power in setting a spread between preferential and market rates as high as 29 percent,” she said.

Carvajal said more questions exist as to why Yemen’s government did not respond to questions about the HSA Group in time.

While the UN report allegations might hurt humanitarian work, Noman said other business entities can compensate if HSA wanted to withdraw. “I doubt they are willing to relinquish their monopoly.”

Al-Akhali said the report has been a serious violation of the UN’s “Do No Harm” principle – an unwritten rule in UN diplomacy that requires humanitarian actors to refrain from causing further damage and suffering as a result of their actions.

In January, the HSA Group announced it commissioned an independent audit into the allegations to provide a full review and account of the facts.

“The investigation exercise is under way and further details will be provided in due course,” the group said in a statement last week.

The Biden administration has made ending the six-year war in Yemen a top foreign policy priority. The US president recently reinstated $73m in assistance, which the Trump team had slashed last year.

But a dysfunctional central bank coupled with the absence of a concrete strategy prompts the following query: will the funds reach the intended recipients or abet the Houthi war efforts?

Meanwhile, the UN allegations don’t help.