War, terrorism, a deepening secessionist movement, and interconnected economic and demographic trends threaten to overwhelm the Yemeni government, provide a breeding ground for terrorists, and destabilize the region. Strategically located Yemen has often teetered on the brink of collapse, but it has never faced so many challenges converging at one time. 

Christopher Boucek explains in a new Q&A and related video the risks facing Yemen and the policy recommendations for the Yemeni government and Western countries with a great deal at stake. 

What’s happening in Yemen? 
Yemen faces unprecedented challenges—violent extremism, economic collapse, a looming water shortage, and a growing secessionist movement. Any one of these challenges coming to a crisis point could overwhelm the Yemeni government. Unless appropriate steps are taken, Yemen is at risk of becoming a failed state and a training ground for Islamist extremism.
Yemen has frequently been discussed as a failing state, and with good reason. However, describing Yemen in this way does not much help our understanding of what is going on in the country. Owing to the central government’s historically weak control, the country has often been on the brink of chaos. Yemen has survived individual challenges in the past, but what differentiates the situation today is that multiple interconnected challenges are poised to converge at the same time. At the heart of the country’s problems is a looming economic crisis. Yemen’s oil reserves are fast running out, with few viable options for a sustainable post-oil economy. Moreover, the country’s limited water resources are being consumed much faster than they are being replenished. A rapidly expanding and increasingly poorer population places unbearable pressure on the government’s ability to provide basic services. Domestic security is endangered by Islamist terrorism, magnified by a resurgent al-Qaeda organization, an armed insurrection in the North, and an increasingly active secessionist movement in the South.

What does this mean for the rest of the world? Why should the West be concerned with the developments in Yemen?
Strategically located adjacent to both Saudi Arabia and Somalia, Yemen touches on a number of vital U.S. national security interests including access to energy supplies and the ongoing campaign against terrorism. Any single event—or more likely a confluence of worst-case events beyond the ability of the Yemeni government to control—could lead to a further erosion of central government authority in Yemen and destabilization of the region.
This trajectory has occurred in other countries, such as Somalia and Afghanistan, with disastrous consequences. Such a slow, emerging state of semi-lawlessness in Yemen would provide opportunities for extremists directed or inspired by al-Qaeda to regroup, organize, train, and launch operations against U.S. and allied targets throughout the Gulf.
What economic problems are plaguing Yemen? 
Yemen is the poorest country in the Arab world, with an annual per capita income of under $900 per year and nearly half the population earning less than $2 per day. Unemployment is at 35 percent, on par with the Great Depression in the United States. The dramatic fall in global oil prices had a severe impact on the Yemeni economy, and there are few viable options for a sustainable post-oil economy. 
The population growth rate, which exceeds 3 percent per year, is among the highest in the world. In the next two decades, the population is expected to double to over 40 million, placing unbearable pressures on government sources. 
The Yemeni population is also facing a food shortage. More than 5 million Yemenis go hungry each day and the country’s childhood malnutrition rates are among the highest in the world.
Is Yemen running out of water?
The country’s limited water resources are being consumed much faster than they are being replenished. Shortages are frequent and widespread, and the capital, Sanaa, may become the first capital city in the world to run out of water. This crisis is the result of several factors, including rising domestic consumption, poor water management, corruption, absence of resource governance, and wasteful irrigation techniques. Yemen’s water shortage is complicated by the population’s dependence on qat, a quick-cash crop for Yemen farmers, which requires heavy irrigation. 
While the use of surface water is regulated to ensure fair distribution, ground water is not. As a result, anyone who wants water (and can afford to do so) digs a well and draws out as much water as possible. As of January 2009, Water and Environment Ministry officials estimate that more than 800 private drill rigs are operating in the country. In contrast, there are only three in all of Jordan and India, whose population is more than 50 times that of Yemen, has just 100.
How effective is Yemen’s central government?

Historically, the central government has lacked control over much of the country and faces resistance in expanding its authority from a populace who associates the central government with corruption, cronyism, nepotism, and blocked economic and social opportunities. The Yemeni government is considering a policy of decentralization, granting more authority to local levels and thereby institutionalizing the informal patronage systems that operate in lieu of an effective national government. 
Corruption is a major challenge for the government, with allegations that almost 30 percent of government revenue is never deposited in government accounts. Fair and transparent prosecutions are needed to address the serious and continuing problem of corruption.
The situation is further complicated by a pending political transition. President Ali Abdullah Saleh has ruled the Republic of Yemen since its unification in 1990 and the next presidential election is scheduled for 2013. It is unclear whether Saleh will be eligible to stand for reelection for what would be a third term, and there is no obvious successor in place. 
Is Yemen a bastion for Islamic radicals?
There are increasing indications that al-Qaeda is regrouping in Yemen. Recent counterterrorism measures in Saudi Arabia have forced extremists to seek refuge elsewhere, and analysts have observed a steady flow relocating to Yemen’s under-governed areas. As they did in Afghanistan, a resurgent al-Qaeda could exploit the central government’s weakness and widespread poverty to destabilize the region, mounting attacks against U.S. and other Western targets throughout the Gulf.
What is the current fighting on Yemen’s border about?
Since 2004, the Yemeni government has been fighting a sporadic civil war against Zaidi Shi’a revivalists in the northern province of Saada. Over the course of the conflict, fighting has been both fierce and indiscriminate, punctuated by periods of relative calm brought about in part when government forces have exhausted munitions. The toll has been severe in Saada, including extensive damage to infrastructure and an estimated 130,000 internally displaced people.
The origins of the conflict are a complex combination of competing sectarian identities, regional underdevelopment, perceived socioeconomic injustices, and historical grievances. The Houthi rebels claim that the central government does not address their needs and does not work in their interests. Moreover, these grievances resonate in other parts of the country. The antagonism has only increased, and the rebels want little to do with the regime.
Sanaa claims that the rebels seek to overthrow the current government and establish a theocracy. Throughout the conflict, the Yemeni government has sought to link the rebellion to the larger “war on terrorism.”
The conflict’s strain on the Yemeni army has led to questions about the military’s ability to simultaneously engage in other operations, including counterterrorism. Moreover, the government’s failure to decisively put down the rebellion has prompted concerns that other domestic challengers may be emboldened and perceive the regime as vulnerable. Islamist militants or other disaffected groups could mount attacks on other fronts while the government is distracted by the war in Saada.
In recent days, the conflict has worsened and expanded, drawing in Saudi Arabia.  After an alleged incursion in to Saudi territory, Riyadh reportedly allowed the Yemeni military to transit through Saudi territory in order to attack Houthi positions.  Saudi aircraft later were reported to have hit Houthi positions inside Yemen.  This marks a major deterioration in the conflict, and is yet another example of how instability Yemen threatens regional stability.  
What steps should the Yemeni government take to address its economic and security challenges?

Failure to make progress on Yemen’s economic and demographic challenges issues directly contributes to the worsening security situation in the country. 
Economic: With a rapidly expanding and increasingly poorer population, Yemen needs help expanding social service provisions and bolstering employment and education opportunities. 
It is imperative that the country prepare for a post-oil economy. Yemen will need to become a net labor exporter in the future, and formalizing labor movements to the other Arab Gulf states will be a priority. Yemen and the Gulf Cooperation Council will also need to address trade and investment issues in order to bolster the Yemeni economy.
The Yemeni government must be supported by the international community as it makes difficult economic decisions, such as addressing corruption, inflation, unemployment, most critically, curbing government subsidies. 
Security: Strengthening border guard units is a first-order priority. The national government must be able to secure its own borders and should work in coordination with its neighbors, including Saudi Arabia and Oman. The Yemeni government needs additional resources and training for the Yemeni Coast Guard in order to better combat piracy.
Yemen must build local capacity in law enforcement, and its legal and judicial systems. Enacting counterterrorism legislation and terror finance laws would help build state resilience. Greater policing training and programs to professionalize the prison service would help
What should the United States do about the deteriorating situation in Yemen? 
U.S. aid to Yemen is disproportionately small considering the magnitude of the problems facing the country and Yemen’s strategic importance to U.S. foreign policy and national security interests. Development assistance, education and technical cooperation, capacity building, institution strengthening, and direct financial assistance can better address the interconnected challenges facing Yemen than military and security aid. But Yemen is slated to receive more U.S. military and security assistance funding than development assistance in fiscal year 2010, demonstrating a continued misallocation of priorities.
Ultimately, a regional approach is needed to help improve stability in Yemen. The international community should encourage the Gulf states to hold out membership in the Gulf Cooperation Council for Yemen in exchange for tough steps, including progress on curbing government subsidies, addressing corruption, and enacting measures to curtail security concerns.
Ultimately, there is not a Yemeni or U.S. government solution for Yemen’s problems. There must be an international and regional approach. The consequences of inaction are too severe to do nothing, especially as the country’s demographic and economic woes feed into the worsening security situation in the country.