Negotiations and discussions are taking place on the basis and mechanisms for the distribution of sovereign resources between the governments of Sana'a and Aden, while disregarding the status of sovereign wealth and its significance for present and future generations. Here, it is worth clarifying the difference between sovereign wealth and sovereign resources. The former refers to the total value of the assets in the country at a specific time, and it includes establishments, real estate, factories, infrastructure facilities (roads, electricity, ports, airports, communications, etc.), and natural resources (oil, gas, minerals, agricultural lands, fishing areas, etc.) as well as the invisible assets such as human resources, technological progress, cultural heritage and geographical location, which may contribute to the generation of new assets in the future. As for the sovereign resources, it means the revenues of activity from utilizing the assets of sovereign wealth, and these revenues are supplied to the public treasury of the state to cover public expenditures - current and investment. It includes revenues from mineral and natural resources (oil, gas, fish...), tax revenues, customs, zakat, etc., and the government’s share of the profits of public and mixed establishments and companies (telecommunications, electricity, cement...), and service resources in addition to the other revenues from, (Air Navigation, airports, sea ports,...) Moreover, it also includes cash issuance to finance government expenditures from inflationary sources, and credit resources (domestic and foreign loans, subsidies and Aids).

It is clear that the national, regional and international disposition is currently with the discontinuation of the war, and that hopes aspire to a permanent armistice and then to achieving lasting peace and stability. One of the Indisputable facts, in light of the armistice scenario, is that; the management of sovereign resources requires unified sovereign institutions capable of the management of fiscal and monetary policies.

The question arises: How were the sovereign resources managed by the governments of Sana'a and Aden during the war time? And what is the perception of managing those resources in light of the current state scenario – the armistice? Or a scenario of harmony and peace?

Managing sovereign resources during wartime

The war has led to the division of the country into two parts under the control of two governments, in Sana'a and Aden, which are similar in many characteristics with regard to the management of sovereign resources during the seven years of conflict, and differ in other aspects, and this may continue during the armistice period.

Similarities

• Both governments manage the accessible sovereign resources without a public budget approved by Parliament or application of the budget law, and this is contrary to the constitution and the laws in force.

• Each of them manages public money away from transparency and accountability. There is no comprehensive or detailed data available on public revenue items or public expenditure items, and there are no final accounts showing revenues and expenditures, which raises serious questions about the rationality of governance in the management of public money.

• Documented and undocumented press reports and social media are full of news about suspicions of corruption in the various levels of both governments, to varying degrees.

• Each of them evaded the responsibility to pay the salaries of state employees, and also exempted themselves from the responsibility of subsidizing oil derivatives and electricity and from providing social security allowances to the poor enrolled in the register of the Social Welfare Fund.

The Variances

• The government of Aden finances its expenditures from several sources: it has pursued a reckless financial policy based on financing government expenditures from inflationary sources through note issuance, which significantly contributed to the insane rise in the prices of goods and services, the deterioration of the purchasing power of the riyal and the continuous collapse of the value of the riyal against foreign currencies. In addition, the government relies on revenues from the sale of crude oil and domestic gas from Marib, Hadramout and Shabwa, and each governorate controls a large part of those resources, as well as tax, customs and other levies, and a large part of it is subject to armed groups or to the governorates. It also receives financial support provided by the coalition countries, but it has the lower hand and does not have the decision-making power to manage it, in addition to external financing, specifically from the International Monetary Fund to meet the challenges of the Corona crisis, and from the Arab Monetary Fund to support economic reforms.

• On the other hand, the government of Sana’a, during the war, oil and gas revenues remained out of its reach, but it pursued a restrictive and unfair financial policy by increasing the volume of taxes, customs, zakat and other fees and royalties. In fact, Taxes and zakat amounted to more than ten times what they were amounted before the war. And all of this was borne by the poor and broke citizens in the end, and this explains the continued rise in commodity prices despite the stability of the exchange rate, in which the Sana’a government succeeded to maintain during the last four years.

Managing sovereign resources within the scenario of the persistence of the armistice

It is clear that the national, regional and international mood is against the continuation of the war, and that hopes aspire to a permanent armistice and then to achieving permanent peace and stability. It is a matter of fact, in light of the armistice scenario, that the management of sovereign resources requires unified capable sovereign institutions to be charged with the management of financial and monetary policies, specifically the Ministry of Finance and the Central Bank, and this may be a far-fetched alternative in light of the complexities existing between the two parties to the conflict as that depends on the degree of confidence building between the two parties, and on their desire to move from the truce to the stage of peace and stability. Rather, it is possible in principle to agree on unifying the central bank to carry out the functions of the “state treasury”, and this requires agreement on technical and institutional arrangements to link the main center with the branches, and also agree on supplying all the sovereign resources of the state to the treasury of the central bank at the main headquarters and to its branches in all governorates. Moreover, it includes revenues from oil and gas sales, taxes, customs and other sovereign fees, as well as international financing. On the other hand, the Central Bank should be responsible for facilitating the disbursement of public budget expenditure items, which include: salaries of state employees in all regions of Sana’a and Aden, operational costs of the government facilities and institutions in all governorates of the Republic, and investment spending on developmental projects in all governorates.

Not to forfeit sovereign wealth - gas, for example

In light of the armistice situation, the issue is not limited to the distribution of sovereign resources, rather, the current concern must be the preservation of the sovereign wealth, and we take for example the sovereign revenues from the gas wealth. In fact, there are many reports and findings that confirm that the gas wealth was surrendered in the concession contract deal solely for Total Company and its partners, during the period 2009-2013, the value of gas exports amounted to about $14.5 billion (at the price of one million BTUs equaling $11.7). 

The government revenues amounted at about $787 million, which equals only 5% of the total value of gas exports, while Total and its partners obtained 95% of those revenues. This huge variance between the two shares is due to some unfair articles in the contract agreements between the Yemeni government and the operating partner. (Total and its partners), including the equation for determining the price of one million thermal units, the formula for determining the government’s share of profits, and the monopoly of Total to be the producer, exporter and seller of gas without partnership or involvement of the government or any other company.

Therefore, the two governments in Sana’a and Aden have a historical responsibility, before talking about gas revenues, which, as we mentioned above, are just crumbs in exchange for what Total and its partners get. Thus, positions must be unified on Yemen's sovereign rights to gas wealth and it is critical to demand a review of the contract agreements with the operating partner "Total" to ensure the sale of gas is in accordance with international prices, so that the government obtains its fair share of the profits, and to prevent the operator from seizing the state's reserves. In addition, fair compensation shall be considered to the government for losses resulting from exporting gas at the expense of oil in the reservoirs, and the fees for upstream facilities, which should be owned by the government and not by an illegal foreign company.

Scenario ending the war and achieving peace

The parties to the conflict have great obligations that require everyone to surrender to peace and work first to remove Yemen from Chapter VII of the United Nations Charter, to start rebuilding the state on sound foundations, and to agree on the principles and mechanisms for managing resources and sovereign wealth, and this includes:

First: Agreeing on the nature and principles of building the state, including the number of regions it shall consist of, the nature of the relationship between the regional governments and the central government, and the methodology of distributing sovereign resources between them, as history has its eye on everyone.

Second: Agreeing on the constitution document and the rights, duties and responsibilities it contains at all levels of government, central and local, and the fundamentals and rules for electing the senior officials in the executive authority and legislative council elections, in addition to the rules and controls for the work frame of the judicial authority.

Third: Agreeing on the management of sovereign resources and wealth and maximizing their utilization given that the sovereign or national wealth index is considered one of the important criteria in measuring the development and progress of the state and society. Consequently, countries compete to preserve and expand these assets constantly, so that they can maximize the sovereign resources resulting from them, and therefore the strategic entitlements forthcoming, including the following:

• Expanding explorations in the fields of oil, gas and other minerals. The oil map of Yemen includes 105 sectors and oil is currently produced from only 12 sectors. This means that the rest of the sectors are open and need to be promoted to attract international companies to invest in oil exploration.

• Protecting Yemen's sovereign rights from gas export revenues, and the need to review contract agreements with the operating partner in terms of pricing, profit shares, volume of gas sold to the operator according to contracts, upstream facility fees, and others.

• Protecting Yemen's exclusive territorial waters and maritime economic zones, which are vast areas extending to the continental shelf in the depths of the Indian Ocean, and require the proper exploitation of fish or mineral resources therein, and the protection of islands, specifically Socotra Island, as one of the pillars of sovereign wealth.

• Expansion of infrastructure projects (power, roads, ports, airports, communications...) as an essential and prior condition for attracting and encouraging national and foreign investments, in the industrial, agricultural or service fields.

• Developing human resources through the development of public, technical and university education institutions to qualify human cadre to enter the local, regional or international labor market. Here, we must not forget that the returns of the wealth of human resources abroad (remittances of expatriates) still have an effective positive impact on the stability of the exchange market in light of the interruption of the most important sources of supply for foreign exchange, such as revenues from oil and gas, loans, etc., and it can be said that the toil of expatriates maintains stability and value of the Yemeni riyal.

• Exploiting the distinguished geographical location of Yemen, its location on the international shipping lane linking Asia, Africa and Europe, developing seaports, joining the Belt and Road initiative adopted by the State of China and benefiting from the advantages of investment opportunities promoted by the initiative.

• Strengthening cooperation ties with the international community and international and regional agencies to ensure obtaining financial resources to fund economic and social development projects, and promoting Yemen heritage to attract regional and international tourism (antiquities and historical cities, beaches and coral reefs, mountains and plateaus, the vast desert).

• To conclude; it is undeniable that the profits of peace and stability are much greater than the requirements of war. Will the parties to the conflict understand this challenge, and tend to dialogue and end the cycle of war and spread security and peace? This is what the coming days will tell us.

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