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The Yemeni oil business unites Houthis and supporters of Hadi's government

October 6, 2021 at 1:11 pm

Supporters of Yemen’s Houthi movement raise their fists up as they chant slogans during a demonstration in front of the closed US Embassy in the capital Sanaa on January 18, 2021 [Mohammed Hamoud – Anadolu Agency]

What appears to be corruption at the highest levels in Yemen has been exposed by the Pandora Papers, the series of leaked documents obtained by the International Consortium of Investigative Journalists (ICIJ) which mark the biggest ever cross-border journalistic collaboration project. The allegations include businessmen and politicians, each accusing the other of being “corrupt”, and there are claims that figures within the internationally-recognised government of President Abdrabbuh Mansur Hadi are involved in companies operating and making profits in areas controlled by the Houthi “rebels”. In short, it is claimed that the oil business in Yemen unites the Houthis and supporters of Hadi’s government.

As Yemen’s government-owned oil company was filing a complaint at the Public Prosecutor’s office against oil trader Tawfiq Abdel-Rahim for stockpiling petrol and causing a crisis in the domestic market, two other traders were completing the paperwork to establish an offshore company, Red Sea Refinery Limited. Ahmad Saleh Al-Issi and Hussein Al-Huthaili are partnered with Zafar Ikram Sheikh, a Pakistani-born American businessman who lives in Dubai.

In early 2020, Al-Issi was appointed deputy director of the President’s Office for Economic Affairs. He believes that he is a suitable candidate to be the next president of Yemen. His competitors, however, describe him as a “crocodile”, and media reports have quoted the current Yemeni prime minister describing him as “corrupt”.

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In his early days, Al-Issi supervised a petrol station owned by his father in Yemen’s Hudaydah Governorate. According to Le Monde, this was the first step on his way to a monopoly of the fuel that reaches the port of Aden. This would not have been possible if it had not been for his relationship with Hadi when the latter was minister of defence in the 1990s. Hadi and Al-Issi both come from Abyan Governorate in southern Yemen, and their strong relationship helped them to build a fleet to transport fuel.

The leaked documents reveal that Al-Issi established an offshore company with Al-Huthaili and Sheikh in the British Virgin Islands on 7 May, 2014. Its main purpose was to invest and contribute to other companies, and have a bank account.

Earlier this year, Al-Issi denied having any business activities in northern Yemen, which is controlled by the Houthis. “I challenge anyone to try and prove it. Since the first day of Operation Decisive Storm [the Saudi-led military intervention in Yemen] in March 2015, I have not had any business activities in the Houthi-controlled governorates. My business has stopped as the Houthis have seized some properties such as houses and lands in Sana’a in addition to a hospital. They also shut down the corporate headquarters, my factories and Al-Shifa’ Medical College in Hudaydah. What I am doing now is charity work and paying employees who have been staying at home since 2015.”

This claim is not consistent with his partnership with Al-Huthaili, whose activities have not stopped in the regions controlled by the Houthis. The transfer of oil there continues.

On 28 October 2015, after the Houthi movement took control of most of the northern governorates, the director of the Yemen Petroleum Company (YPC) sent a letter to the acting minister of oil to complain about Al-Huthaili’s company selling oil on the black market. The company only seized oil trucks in Al-Sabahiyah region, as it does not have any authority in the Ras Issa area of Hudaydah, which is run by Al-Issi. At this point, the Houthis were not in control of Ras Issa or Hudaydah Governorate.

The same memo accused Al-Huthaili’s company of contributing to the hike in the dollar exchange rate from 215 to 280 Yemeni Riyals at that time. The company emptied the oil in Ras Issa and sold it on the black market. In just one week, it sold oil for $48 million.

The YPC signed an agreement with Al-Issi on 16 July 2012 to establish a company called Ras Issa Oil, which would store and trade oil derivatives in the port of Ras Issa in Hudaydah for a period of twenty-five years. With this agreement, Al-Issi has effectively monopolised the distribution and transportation of oil derivatives by sea through his tankers. Under the agreement, the Yemeni government pays $13 in rent for each ton of oil derivatives stored by the company.

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Abdullah Al-Daya’a is the Secretary-General of the Trade Union Coordination Council in Yemen. He told the workers and employees of the oil company that, “The agreement gives away the rights of the state and commits many legal violations.” According to older statements posted on Mohammad Al-Absi’s blog, Al-Daya’a emphasised the union’s intention to escalate the situation and go on strike in the event that the agreement was endorsed by the ministry. The agreement includes a clause allowing Al-Issi’s heirs to inherit the right to continue the partnership upon his death, and another that the contract would not be rescinded even if he declares himself to be bankrupt.

“Oil in Yemen has always been controlled by influential people,” explained one expert in Yemen’s oil affairs. “For the past 30 years, Al-Issi has monopolised the transportation of oil by sea. Ras Issa receives oil from Ma’rib, and then it is transported to the Aden refineries,” Abdel Wahid Al-Awbali told us.

In an interview on 16 March this year, Al-Issi basically declared war on Yemeni Prime Minister Mue’en Abdel-Malik who had accused him of corruption. “He has to prove what he claims,” insisted Al-Issi. “He is the prime minister. He says I am corrupt and that everything is under my control and that I control the oil. He has to prove that. Our disagreement with Mue’en is not because he is the head of the government nor because he is falling short of his duties but because he is a trader. So we hold him responsible for part of the corruption.”

According to Al-Issi, the prime minister is linked to large companies and commercial groups that facilitate their work and harness the state’s support. These companies pay taxes to the Houthis.

Abdel-Malik reacted by paying Al-Issi what was owed to him in April. Al-Issi had said that the Yemeni government owed him money and had not paid its debts.

This conflict over the import and distribution of oil between Al-Issi and the government is due to the prime minister’s decision to develop plans to allow traders to import oil to end the current monopoly.

The oil business in Yemen is linked to figures that have not changed for twenty-five years because they are connected to people in positions of power within the state. It is fairly common knowledge among Yemenis that Hussein Al-Huthaili, who owns an oil transportation fleet, is the frontman for Vice President Ali Muhsin Al-Ahmar, and Yemeni media outlets have published government directives to facilitate and protect Al-Ahmar’s business activities. Moreover, as noted above, Al-Issi has had a strong relationship with President Hadi and his children since the early nineties.

A report from a UN committee of experts reveals that it has an invoice for amounts in excess of $3 million issued by the Aden Refineries Company to the ASA Shipping Company FZ Co, a subsidiary of the Overseas Shipping and Stevedoring Company. This company is affiliated with Al-Issi’s group for chartering the crude oil tanker M Spirit. The committee is examining the reasons for the delay in payment, which led to the imposition of a fine.

The report said that the committee met with Al-Issi and that he categorically denied all charges and involvement in corrupt operations in running the port of Aden. He also claimed that he never benefits from his position as deputy director of the President’s Office for Economic Affairs and that the Yemeni government owes him money and cannot pay its debts.

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In October 2019, citizens of the oil-rich Ma’rib province protested when Al-Huthaili’s company was given the exclusive rights to transport oil from Ma’rib to Shabwa. Al-Huthaili’s oil tankers were attacked, and there were demands for the transportation of oil to be handed over to local people. The same thing happened earlier this year in the Hadhramout Governorate when a group of local people objected to the transfer of oil from their land by Al-Huthaili’s company. The minister of oil sent a message to the governor of Hadhramout and requested that the oil tankers owned by Al-Huthaili’s company be protected.

Al-Issi has said that the United Arab Emirates is fighting him and seeking to kill him, even while his business is run from Jebel Ali with his partner in the offshore company, Zafar Ikram Sheikh. “I have no money in Dubai,” insists Al-Issi. “I only buy oil from Dubai in the name of my company, and not in my name. I would not step into the Emirates; if I did, you would never see me again.” Al-Issi added that he only buys oil from the UAE because it is the best and closest market, but the government there is harassing him and accusing him of buying oil from Iran.

An invoice submitted by Al-Issi to the Yemeni government for the sum of $3 million was published in the report of the relevant UN committee of experts, and it included an account number for Al-Issi Group at the Islamic Bank in Dubai.

At the time of writing, Ahmad Saleh Al-Issi, Hussein Al-Huthaili and Zafar Ikram Sheikh had not responded to our request for comments.

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.