Yemen’s rival powers battle over banknotes

The Iran-allied Houthis, who say people should only use the old bills, have defended the ban as a move against inflation and what they call rampant money-printing by the government. (File/AFP)
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Updated 18 January 2020

Yemen’s rival powers battle over banknotes

  • The Houthis outlawed the use and possession of crisp new Yemeni riyal bills
  • The riyal stood at about 560 to the dollar across Yemen before the ban was announced in mid-December

SANAA/ADEN: Yemen’s warring sides opened a new front in their five-year conflict on Saturday - a battle over old and new banknotes that threatens to create two economies in the same state.

As of midnight, the Houthi movement which controls the capital Sanaa outlawed the use and possession of crisp new Yemeni riyal bills issued by its rivals in the internationally recognised government based in the southern port town of Aden.

The Iran-allied Houthis, who say people should only use the old bills, have defended the ban as a move against inflation and what they call rampant money-printing by the government.

The government has branded the ban an act of economic vandalism. And the population, as ever, have been left stuck in the crossfire.

Yemenis from both sides told Reuters the ban had effectively created two currencies with diverging values, adding to the turmoil in a state already governed by two powers and brought to its knees by the war.

In the one-month build up to the ban, people in Houthi-controlled areas have been queuing to try to exchange their new riyal notes for old, turning the grubby and torn bills into a prized and relatively scarce commodity.

The riyal stood at about 560 to the dollar across Yemen before the ban was announced in mid-December. The rate has since slipped a little in Houthi-controlled areas to around 582, but slumped much further to 642 in the south, an area now awash with new bills.

That relative strength might look like a boon for northerners, if only they could get hold of enough of the old notes in time to keep afloat in the largely cash-based economy.

“We go for the exchange and they won’t take [the new notes] from us. Or say they need three, four or five days,” craftsman Abdullah Saleh al-Dahmasi told Reuters on a Sanaa street a week before the ban came into force.

“The new one isn’t accepted and the old one is worn out, they have to find a solution,” the 27-year-old said.

A few days before the ban came in, around 20 angry men and women were turned away from one exchange which said it had filled its quota for the day. Many had been coming there for three days in the hope of swapping their cash.

North-south trade has become far more expensive as traders have to buy and sell two types of riyal - told apart by the state of the paper and the different sizes and designs.

TWO CENTRAL BANKS

Many people in Sanaa told Reuters they felt the ban was needed to constrain inflation. But they were facing difficulties in the short-term.

“When people saw that new currency come into circulation, they held onto it as it was new and shiny. But now it’s a problem that they have it,” said 28-year-old Abdallah Bashiri, a private sector worker in Sanaa.

In that city, legal exchanges will swap 100,000 Yemeni riyals (around $172) in new notes for electronic currency that can be spent on things like phone credit or electricity bills, for a small fee of around $1.50.

But things get more challenging when it comes to actual paper that can be spent in food markets. Sanaa residents said unofficial exchanges are offering to change 100,000 riyals of new notes into 90-96,000 riyals of the scarcer old.

After the Houthis stormed the capital Sanaa in 2014 and ousted the government of President Abd Rabbu Mansour Hadi, Yemen’s central bank split into two branches - one in Sanaa, under Houthi control, and one internationally recognised branch in Aden, which has access to money printers.

The Aden authorities have defended their decision to step up the printing of new money from 2017, saying it was an attempt to deal with a building cash crunch and pay public sector salaries.

“The Houthis ... did not consider the economic cost to society,” Yousef Saeed Ahmad, adviser to the governor of Aden’s central bank, told Reuters there this week.

“We hope the measures taken are short-term. They cannot be kept up because the economy is one, it is interrelated and commodities flow from Sanaa to Aden and vice versa. This measure will aggregate the living conditions of all Yemenis,” he said.

The Houthis have defended their ban as a way of defending the value of the currency.

“The Sanaa central bank had to take measures to stem the dangerous practices the Aden central bank was carrying out through their monetary policy,” said Sami Al-Siyaghi, in charge of foreign banking operations at the Sanaa central bank.

“The imposition of [Aden’s] monetary stance on us led to the collapse of the national currency against foreign currency ... With each new issuance you notice a commensurate collapse in the riyal against foreign currency,” Siyashi told Reuters. 


US announces new sanctions on Iran defense ministry, atomic energy agency

Updated 13 min 43 sec ago

US announces new sanctions on Iran defense ministry, atomic energy agency

  • US adds five Iranian scientists to sanctions list
  • Washington stands ready to respond to future Iranian aggression

WASHINGTON: The United States slapped additional sanctions on Iran on Monday after the Trump administration’s unilateral weekend declaration that all United Nations penalties that were eased under the 2015 nuclear deal had been restored.
The announcement comes in defiance of the world community, which has rejected U..S. legal standing to impose the international sanctions and sets the stage for an ugly showdown at the annual UN General Assembly this week.

“The United States has now restored UN sanctions on Iran,” President Donald Trump said in a statement issued shortly after he signed an executive order spelling out how the US will enforce the “snapback” of the sanctions. “My actions today send a clear message to the Iranian regime and those in the international community who refuse to stand up to Iran.”

Trump’s administration named 27 people or entities that it said would be subject to UN sanctions, but the world body itself says that the decision is not up to Washington.
Speaking to reporters with fellow Cabinet secretaries at the State Department, Secretary of State Mike Pompeo then announced the administration was hitting more than two dozen Iranian individuals and institutions with penalties. Nearly all of them, however, including the Iranian defense ministry and its atomic energy agency, were already subject to US sanctions that the administration had re-imposed after Trump withdrew from the nuclear deal in 2018.

Trump’s executive order mainly affects Iranian and foreign entities involved in conventional weapons and ballistic missile activity. A UN arms embargo on Iran is to expire in October under the terms of the nuclear deal, but Pompeo and others insist the snapback has rescinded its termination.
The Trump administration argues that it is enforcing the UN arms embargo that Iran has violated, including through an attack on Saudi oil facilities.
Accompanied by Treasury Secretary Stephen Mnuchin, Defense Secretary Mark Esper, Commerce Secretary Wilbur Ross, Ambassador to the United Nations Kelly Craft and national security adviser Robert O’Brien, Pompeo said the US was acting because the rest of the world is refusing to confront the Iranian threat.

“We have made it very clear that every member state in the United Nations has a responsibility to enforce the sanctions,” US Secretary of State Mike Pompeo told reporters when asked about European opposition.
“That certainly includes the United Kingdom, France and Germany. We will have every expectation that those nations enforce these sanctions,” he said.
“No matter where you are in the world, you will risk sanctions,” he said, warning foreign companies and officials not to do business with targeted Iranian entities.

Craft said, “As we have in the past, we will stand alone to protect peace and security.”
The administration declared on Saturday that all UN sanctions against Iran had been restored because Tehran is violating parts of the nuclear deal in which it agreed to curb its nuclear program in exchange for billions of dollars in sanctions relief.
But few UN member states believe the US has the legal standing to restore the sanctions because Trump withdrew from the nuclear deal in 2018. The US argues it retains the right to do so as an original participant in the deal and a member of the council.
The remaining world powers in the deal — France, Germany, Britain, China and Russia — have been struggling to offset the sanctions that the US re-imposed on Iran after the Trump administration left the pact, which the president said was one-sided in favor of Tehran.

Ali Akbar Salehi, the head of Iran’s nuclear agency, said Monday that there is still a broad agreement among the international community that the nuclear pact should be preserved.
At a conference of the International Atomic Energy Agency in Vienna, Salehi said the Joint Comprehensive Plan of Action, or JCPOA, has been “caught in a quasi-stalemate situation” since Trump pulled out in 2015.


While insisting it is not pursuing a nuclear weapon, Iran has been steadily breaking restrictions outlined in the deal on the amount of uranium it can enrich, the purity it can enrich it to, and other limitations. At the same time, Iran has far less enriched uranium and lower-purity uranium than it had before signing the deal, and it has continued to allow international inspectors into its nuclear facilities.

The United States has separately been seeking to oust Venezuelan President Nicolas Maduro, who has increasingly sought cooperation with Iran on the oil sector.
The State Department said it was again imposing sanctions on Maduro under the executive order from Trump that is based on the UN resolution, pointing to defense transactions between Iran and the leftist Venezuelan leader.

“For nearly two years, corrupt officials in Tehran have worked with the illegitimate regime in Venezuela to flout the UN arms embargo,” Pompeo said.
“Our actions today are a warning that should be heard worldwide.”

Furthermore, Elliott Abrams, Washington’s envoy on Iran, said on Monday that the US is concerned about Iran’s cooperation with North Korea and will do whatever it can to prevent it, .
Abrams was responding to a reporter’s question on whether the United States had seen evidence that Tehran and Pyongyang had resumed cooperation on long-range missile development.
He spoke shortly after the Trump administration slapped the new sanctions on Iran.
(With Reuters, AFP and AP)