Saudi Arabia steps in with $347 million to stabilise Yemeni government

RIYADH – Saudi Arabia will provide 1.3 billion riyals ($347 million) to cover Yemeni government employees’ salaries and budget deficit, a Saudi official said on Wednesday.

The move comes weeks after the kingdom announced development projects across southern Yemen worth $500 million, with many in areas long held by the United Arab Emirates and allied Southern Transitional Council (STC). A Saudi-backed offensive routed the STC in January.

The Southern Transitional Council swept through parts of the south last year and advanced to within reach of the Saudi border.

Riyadh declared the move a threat to its national security, called on the UAE to withdraw and backed an offensive that swept the STC from power.

Over the last few months, the Iran-backed Houthi group has benefited from the swift rise and equally abrupt weakening of the STC after Abu Dhabi scaled back its military presence in Yemen.

While Saudi Arabia’s dominance within the anti-Houthi camp is now largely unchallenged, Riyadh finds itself navigating a complex mix of military and political pressures in Yemen, compounded by deep uncertainty across the wider region.

Anti-Houthi forces remain divided for the time being. However, with Saudi backing, the internationally-recognised Yemeni government is seeking to consolidate its authority by drawing former UAE-aligned factions into a single national command structure.

In January, Riyadh unveiled plans for a Southern Dialogue Conference intended to unite southern political and military groups to discuss what it described as fair solutions to the southern question, reflecting enduring demands in parts of the south for greater autonomy or self-rule. Despite the announcement, the Saudi-backed initiative has yet to materialise.

This internal recalibration in Yemen coincides with heightened tensions between the United States and Iran.

Washington has intensified its military posture in the region as leverage in renewed diplomatic efforts with Tehran, warning of consequences should negotiations collapse.

Any renewed confrontation between the two powers would carry significant repercussions for Gulf security and for Yemen in particular, given the Houthis’ strategic and ideological ties to Iran.

Against this backdrop, Saudi Arabia and the Yemeni government are likely to tread cautiously. Rather than rushing into a decisive confrontation with the Iran-aligned Houthis, they appear inclined to prioritise military restructuring and political consolidation, seeking to strengthen their position before determining their next move.