Huthis and Yemen govt strike financial 'De-escalation' deal, Says UN envoy

Yemen's government and the Iran-backed Huthi rebels have agreed to halt tit-for-tat banking sanctions as they wrestle for control of the country's financial institutions, the United Nations said on Tuesday.

The Huthis have been fighting a Saudi-led coalition since March 2015, months after they seized the capital Sanaa and most of Yemen's population centres, forcing the internationally recognised government south to Aden.

The rebels and the government had in December committed to a UN-led roadmap to end the war, agreeing to work towards "the resumption of an inclusive political process".

But Huthi attacks on Red Sea shipping since November and subsequent US and British retaliation have put peace talks on hold.

On Monday, the two sides informed Hans Grundberg, the UN envoy to Yemen, that they "agreed on several measures to de-escalate", said a statement from Grundberg's office, which thanked Saudi Arabia for its "significant role" in brokering the deal.

It came as the warring parties were locked in a fight for control over the country's banks, with both facing a severe financial crunch.

Their latest agreement involves "canceling all the recent decisions and procedures against banks by both sides and refraining in the future from any similar decisions or procedures", the envoy's office said.

In May, the government-controlled central bank banned transactions with six banks in Huthi-held Sanaa for failing to abide by an order to relocate to Aden.

As a result, currency exchange offices, money transfer agencies and banks in government-held areas could no longer work with those financial institutions.

The rebels, who run their own central bank and use different bank notes with different exchange rates, said the move was a disguised attempt by the United States and Saudi Arabia to exert financial pressure on the Huthi banking system.

The Huthis retaliated by banning any dealings with 13 banks in Aden, which means those in rebel-held areas could no longer receive remittances through them or withdraw and deposit funds.

 'Welcome' step 

 After striking their latest agreement, the warring parties will convene "meetings to discuss all economic and humanitarian issues based on the (UN) roadmap," said Grundberg's office.

It stressed, "the need for the parties to collaborate towards an economy that benefits all Yemenis and supports the implementation of a nationwide ceasefire and the resumption of an inclusive political process".

The statement said the warring parties have also agreed to settle disputes over Yemenia, the country's national airline, which has accused the Huthis of freezing its funds held in Sanaa banks.

Meetings will be "convened to address the administrative, technical, and financial challenges faced by the company," the statement said.

Yemenia flights will resume between Sanaa and Jordan, and the number of trips will be raised to three daily, according to the deal. Yemenia will also operate flights to Cairo and India "daily or as needed", the statement said.

Speaking at the UN Security Council later on Tuesday, Grundberg called the deal, which followed months of negotiations, a "welcome" step but stressed that deeper commitments were needed.

"Stop-gap measures might serve as bandaids but will not provide for sustainable solutions nor will they reasonably pave the way for a nationwide ceasefire and a political process without sustained dialogue," he said, urging direct negotiations between the warring parties.

Despite the expiry in 2022 of a six-month truce, levels of violence have largely remained low. But "we risk a return to full-scale war," the UN envoy said.

"Over the past month, we have witnessed an increase in military preparation and reinforcement," he told the council, adding that clashes have been reported on several frontlines across the country, although they have remained contained.