The powerful bomb blast that last week tore a jagged hole in the hull of the U.S. naval destroyer, the USS Cole, may also have ripped apart the Yemeni government’s plans for the city of Aden, in whose harbor the ship was being refueled. Yemen is a country that craves foreign investment and has focused its development plans around Aden, which it strives to transform into the region’s premier service and distribution hub.
The foreign currency that potentially could be raised in Aden was considered vital to the national economy. Yemen’s foreign debt totaled $7.7 billion in 1999 and has been rising at an annual rate of approximately $1 billion. But the income that may be lost as a result of the blast is not only an economic concern to the Yemeni government. Poverty is rife, and is a source of potential political instability, encouraging terrorism and a further weakening of the central government. Per capita income in the country averages only $275, with 48 percent of the population lives in dire poverty — the highest level of region.
Following the blast, which initial reports suggested was the result of a suicide bombing, the Yemeni government was indignant that terrorism was not involved. Yemen’s foreign ministry vehemently rejected US claims that the explosion was a terrorist attack, stating that, “it does not accept the presence of terrorists on its territories.”
But intelligence organizations believe that at least eight important terrorist groups are known to operate in Yemen, including both local bodies and international bodies with links elsewhere in the Arab world. Later on, Yemeni officials reluctantly admitted that terrorism was a likely cause of the blast. Local security agencies rounded up dozens of people for questioning.
The immediate fear of the Yemeni authorities is that the Port of Aden will lose its comparative advantage over other regional harbors, and foreign investment in the country’s energy sector will decrease. The government had been aggressively promoting Aden Port as a stopover for ships traveling between the Indian Ocean and Europe.
Aden’s goal has been to eventually challenge the Jebel Ali Port in Dubai for supremacy in the Gulf region. Jebel Ali currently controls roughly one-third of the estimated 7 million twenty-foot equivalent units (TEU) regional trade, but Aden's geographical advantage over Jebel Ali enables ships plying the main east-west route to reduce journey times by up to three days.
Since May of this year, the U.S. Navy has used Aden as a place to refuel and restock supplies before sailing to the Gulf or up the Red Sea. Like the USS Cole, many of those ships were being employed to enforce the naval blockade on Iraq. In the wake of the bombing, the Pentagon is likely to reconsider Aden’s security status.
The indirect fallout from the bombing may involve the scaring off of Western business interests, who otherwise might have considered investing in the Yemeni economy. In the energy sector, Yemen had been stepping up exploration and production-sharing agreements with foreign firms with the aim of raising oil output to 700,000 barrels per day (BPD) from the current level of less than 500,000 PD. Since the signing of a border demarcation treaty with Saudi Arabia in July, the country had been courting foreign firms to explore for oil and gas in the newly acquired areas.
In the absence of Western investors, Yemen may be forced to depend on its northern neighbor Saudi Arabia as a source of investment. Since July, a number of Saudi businesses have announced plans to launch $400 million worth of new investment projects in Yemen. These include the Al-Madina International Technology Company, which has a signed a contract to develop several residential and tourism projects in major Yemeni cities, and the Roaya Company has concluded an $82 million contract to build a radar system at the Sana’a International Airport in the Yemeni capital. — (Albawaba-MEBG)
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