Who funds Yemen’s Houthi militants? Inside the $2.5 billion war economy behind attacks on Saudi Arabia

Dubai: How does Yemen’s Houthi militia continue launching missiles and drones against Saudi Arabia, threatening international shipping and expanding its military operations despite years of war and international sanctions?

Part of the answer lies in a sprawling financial network that combines Iranian support, oil trading, taxes, customs duties, business levies and control over commercial activity in areas under Houthi rule.

Research suggests the group has built a war economy involving billions of dollars annually, giving it financial resources beyond the weapons and military assistance it receives from Tehran.

A July report by the Mocha Center for Strategic Studies estimated that the Houthis’ parallel economic system generated direct and indirect financial resources and costs worth approximately $2.5 billion a year.

Separately, the US Treasury Department has said that the Iran-backed Houthis generate more than $2 billion annually through illicit oil trading.

The estimates cover different activities and should not be added together, but they illustrate the scale of the financial networks associated with the militia.

Iran remains a major external supporter of the Houthis, providing military assistance and, according to US authorities, helping sustain their finances through oil supplies.

The US Treasury said in January that Tehran sells oil to the Houthis and provides free monthly shipments through Iranian-owned or affiliated companies.

The oil can be sold within Yemen, generating revenue for the group.

US officials have also accused Iran of providing weapons, targeting information, military advice and technical expertise.

A Congressional Research Service report cited earlier US sanctions against Iranian individuals accused of helping the Houthis obtain ballistic missiles and related expertise.

The Houthis have previously denied using Iranian fuel to finance their operations.

Since taking control of Yemen’s capital, Sanaa, in 2014, the Houthis have established an extensive revenue-collection system across territories under their authority.

According to the Mocha Center’s estimates, the financial system includes:

These figures describe the estimated scale of the system, including costs imposed on the economy, rather than a single audited government revenue account.

Businesses operating in Houthi-controlled areas face multiple forms of taxation and additional payments, including collections described as contributions to the war effort.

The militia has also tightened its grip over commercial activity in areas it controls.

According to research cited by Al Jazeera, Houthi authorities revoked the licences of 4,225 established commercial agencies, potentially creating opportunities for businesses affiliated with the movement.

The Houthis defended the decision, saying the companies had failed to renew their registrations.

However, economic researcher Houssam Al Saeedi argued that the restructuring was part of a broader effort to redirect commercial activity towards networks aligned with the group.

Such arrangements can provide access to revenue streams that may survive even if the military or political situation changes.

Another important part of the financial network involves oil traders, exchange houses and companies operating inside and outside Yemen.

According to the US Treasury, Houthi-linked networks have used financial intermediaries to facilitate payments for oil and military-related purchases.

Sanctions-risk research firm Kharon has documented connections between Houthi-affiliated exchange companies and international financial channels, including cryptocurrency services.

The US has sanctioned the Sanaa-based Al Ridhwan Exchange and Transfer Company, alleging that Houthi leaders used it to facilitate payments for missile components, advanced weapons systems and other military equipment.

These networks are particularly important because sanctions restrict the group’s access to conventional international banking and commercial channels.

Territorial control also plays a major role in the Houthis’ financial and military strategy.

The group controls substantial stretches of Yemen’s Red Sea coastline, including the port of Hodeidah, while recent military advances have increased its presence near strategic shipping routes.

The Bab Al Mandab Strait connects the Red Sea with the Gulf of Aden and is one of the world’s most important maritime chokepoints.

Control over coastal territory provides strategic leverage and potential access to commercial activity, although international sanctions limit the group’s ability to exploit these gains through formal trade.

Analysts caution that recent territorial advances do not automatically translate into additional revenue.

The Houthis’ financial system operates against the backdrop of Yemen’s devastating humanitarian crisis.

The United Nations estimated in March that 22.3 million people across Yemen required humanitarian assistance and protection.

In Houthi-controlled areas, many public-sector employees have gone years without regular salary payments.

Analysts say the militia’s reliance on taxes, levies and wartime mobilisation has increased the financial burden on households and businesses already struggling with high prices and economic disruption.

The Houthis blame many of Yemen’s economic difficulties on the transfer of the central bank’s headquarters to Aden and restrictions affecting the country’s oil and gas revenues.

The group’s financial resources help explain its ability to maintain military operations despite sanctions and years of fighting.

Iranian weapons and technical assistance remain important, but locally generated revenue, commercial networks and oil trading provide additional means of sustaining the organisation.

The latest attacks on Saudi Arabia and threats to Red Sea shipping have brought renewed attention to these funding channels.

They also explain why efforts to weaken the Houthis may require more than intercepting missiles and drones.

The central challenge is not only stopping the weapons reaching the militia, but also disrupting the financial networks that help keep its war machine operating.