President Donald J.Trump’s decision to re-designate Yemen’s Houthi movement a foreign terrorist organization marks a full-circle moment in Washington’s oscillating approach to the Iran-backed militia. The January 22 announcement effectively resurrects Trump’s eleventh-hour 2021 designation, which former President Joseph R. Biden Jr.‘s team swiftly reversed because of its potential impact on the delivery of humanitarian assistance to Yemen. But this time, the designation arrives amid a dramatically different regional landscape caused by the Houthis’ emboldened activities against Israel and disruption of Red Sea maritime security.
Yemen’s United Nations-recognized government, led by President Rashad al-Alimi, has wasted no time operationalizing the designation. The Yemeni government has long advocated for the Houthis to be designated terrorists by the United States, and it views the redesignation as a diplomatic victory. For years, the Houthis have exploited Yemen’s humanitarian crisis, one they helped engineer through systematic aid obstruction and economic exploitation.
The designation has given Alimi and Yemen’s central bank something they have long sought: legitimate authority to implement comprehensive banking restrictions on Houthi networks. Alimi directed the central bank to coordinate with international partners on enforcing sanctions – a departure from previous attempts at financial pressure, which collapsed due to a lack of international support. The central bank‘s new measures, backed by U.S. Treasury regulations, represent the first serious attempt to disrupt Houthi funding since the July 2024 U.N. deal, which lifted the Central Bank of Yemen’s economic restrictions on Houthi-controlled areas. That deal, which effectively drained the central bank’s momentum while providing the Houthis with a financial lifeline, demonstrates the limitations of half measures.
The implementation challenges for the new banking restrictions on the Houthis are multiple. While the central bank finally has the tools to squeeze Houthi coffers, history suggests the group will likely respond with military escalation rather than compliance.
In addition, Alimi’s government faces the task of threading multiple needles: maintaining pressure on the Houthis while preserving humanitarian access, stabilizing the economy while implementing sanctions, and advancing peace talks while dealing with a newly designated terrorist organization. Yemen’s Crisis Management Committee, a group within the Yemeni government established to coordinate and manage the response to the ongoing humanitarian crisis in the country, has been tasked with navigating this process.
Regional Reactions
Iran and its “axis of resistance” members swiftly condemned the designation. Tehran called it an “illegal” move that would escalate regional tensions, while Hezbollah in Lebanon and armed groups in Iraq echoed similar sentiments, framing it as U.S. aggression. Iran, seeing its investment in the Houthis paying continued dividends, at a time when its Lebanese proxy has suffered catastrophic setbacks, is unlikely to reduce its support.
The response to the designation from Saudi Arabia and the United Arab Emirates has been measured. Saudi Arabia, having weathered years of Houthi attacks, has refrained from wholehearted endorsement of the designation, despite having welcomed it in 2021. Riyadh’s cautious stance reflects both its ongoing diplomatic engagement with Tehran and a calculated wariness about U.S. security guarantees, stemming in part from the lack of a sufficient U.S. response to the September 2019 attacks on the Abqaiq and Khurais oil facilities. The Saudis’ strategic hedging underscores a broader regional realization that escalation carries its own risks. The UAE, which has once made a case for a foreign terrorist organization designation in the past, did not comment on the designation either as it seems to be carefully calibrating its public position vis–a–vis the Houthis.
The Houthis’ own messaging reflects this complex regional dynamic. In his first post-designation speech, Houthi leader Abdul Malik al-Houthi avoided direct confrontation with Saudi Arabia and the UAE, a departure from previous rhetoric. Instead, he offered only oblique warnings to “America’s allies” while focusing primarily on the United States and Israel, suggesting an awareness by the Houthis of their own interest in preserving space for future regional accommodation even as they escalate against international targets.
Publicly, the Houthis maintain a dismissive attitude toward the designation. Abdul Malik al-Houthi did not address it directly, preferring to project his strength by presenting unsubstantiated claims that the group had downed 14 U.S. surveillance aircraft in the Red Sea and forced a U.S. carrier (which was on a scheduled rotation) to retreat. Another senior Houthi leader, Mohammed Ali al-Houthi, framed the designation as mere “American arrogance” while vowing escalation. This public bravado contrasts sharply with the Houthis’ intensive behind-the-scenes efforts to mitigate the designation’s impact.
The Houthis have launched an aggressive lobbying campaign targeting international nongovernmental organizations and U.N. agencies, mirroring their successful 2021 effort to pressure the Biden administration into revoking the label. This dual approach – public bravado and private maneuvering – suggests an acute awareness of the designation’s potential impact.
Meanwhile, the Houthi media has already begun spinning the designation as collective punishment of the Yemeni people, a narrative that will require careful countering from both Yemeni and international actors. The Houthis’ messaging strategy – oscillating between threats against maritime security and claims of protecting civilian interests – underscores the challenge of implementing the designation without inadvertently reinforcing the Houthi narrative.
The Houthis may escalate their Red Sea campaign, testing international resolve and complicating maritime security arrangements. Abdul Malik al-Houthi’s recent rhetoric reflects the group’s continued pattern of using international tensions to justify their domestic power grabs, attempting to frame their Red Sea disruptions as leverage for territorial expansion within Yemen. Meanwhile, Yemen’s civilians, particularly in Houthi-controlled areas, face the prospect of even greater isolation and privation.
The U.N.‘s position on the designation reveals a fundamental challenge in international mediation. The Houthis’ track record of forced conscription and recruiting child soldiers, obstructing aid deliveries, and kidnapping U.N. personnel clearly demonstrates a pattern of coercion. The U.N.’s capacity to serve as an objective mediator, while subjected to such pressures, has been systematically undermined. In addition to the coercion having its impact, the situation exposes a broader question about the effectiveness of traditional diplomatic frameworks when dealing with actors who exploit humanitarian missions for leverage and hijack the narrative of humanitarian mission for its own illicit purposes.
Operationalizing the Designation
On the positive side of the agenda, the U.N. challenges leave an opening for Gulf states to play a larger role in de-escalating the situation in Yemen. However, the cautious positioning by Yemen’s traditional Gulf allies creates an additional challenge for Alimi’s government. While the government sees the designation as a diplomatic tool to pressure the Houthis, it must carefully calibrate its response to avoid outpacing its regional partners’ appetite for escalation. The Gulf states’ strategic recalibration with Iran effectively places a ceiling on how aggressively Yemen can operationalize the designation.
The broader international dimension presents even thornier challenges. While the designation gives Yemen’s government additional leverage, it complicates the already difficult process of negotiating peace. Humanitarian organizations, scarred by the bureaucratic paralysis that followed the 2021 designation, are concerned about their ability to operate in Houthi-controlled territory. The Houthis, however, uninterested in such concerns, exacerbate these challenges by creating a hostile environment for humanitarian organizations. The Houthis have kidnapped over 20 aid workers, under false espionage charges, making the price of service existential for Yemeni aid workers. By exerting control over aid deliveries, the Houthis have transformed humanitarian access from a basic right into a potent weapon of control and a bargaining chip in their broader campaign for regional leverage.
Nonetheless, the designation’s real power lies in its ability to trigger specific legal and financial consequences that constrain Houthi operations. By targeting Houthi funding networks and criminalizing support for their maritime aggression, the designation provides concrete mechanisms for international action. Financial institutions must now actively block Houthi assets while shipping companies and insurers face new legal obligations in their Red Sea operations. For Yemen’s government, these tangible restrictions offer a practical tool to reassert sovereignty and build international consensus against Houthi destabilization.
The designation’s effectiveness will ultimately hinge on how deftly Yemen’s government can navigate multiple constraints: regional allies’ appetite for confrontation, humanitarian imperatives, and the complex task of implementation. The outcome, like much in Yemen, will be determined by the granular details of implementation that follow on the broad strokes of designations and sanctions policy. Success will require navigating a careful path between pressure and diplomacy, maintaining regional and broader international support, while alleviating humanitarian pitfalls and ensuring the focus remains on Houthi obstruction and manipulation that are causing them.