Iran-Houthi stock exchange plans raise concern over illicit activity

ADEN -- Iranian and Houthi efforts to establish a stock exchange in Sanaa are primarily designed to control the Yemeni economy, facilitate money laundering operations and conceal the illicit drug trade, officials and economists said.

Iran's Securities and Exchange Organisation (SEO) head Majid Eshqi in late June signed an agreement with Hashem Ismail, governor of the Houthi-controlled Central Bank in Sanaa, to establish a stock exchange in Yemen.

Under this agreement, Tehran pledged to provide advisory, technical and structural services and to find new pathways for the exchange of funds, the Iranian news agency Fars reported.

According to Eshqi, the agreement aims to exchange the knowledge and infrastructure necessary to develop the activities of the financial market in order to establish a stock exchange in Yemen.

Yemeni Minister of Information, Culture and Tourism Muammar al-Eryani warned that this agreement is an attempt by the Iranian regime to tighten its control over state institutions and the private sector in Houthi-controlled areas.

He warned that the stock exchange will be used as a cover for the movement of funds and for the withdrawal of currency and cash reserves looted from Yemen's state treasury to invest in the Iranian stock exchange.

Al-Eryani said Tehran seeks to control the Yemeni economy by listing Yemeni public and private sector companies on the exchange, bringing them in as shareholders.

This would facilitate the movement of funds between the Houthis and Tehran, negating the need to use banking channels for such transfers, he said.

According to political analyst Adel al-Shujaa, Iran is trying to control the funds of the public and private sectors in Yemen.

"The [Iranian] establishment of a stock market in Sanaa will enable [Iran] to withdraw the hard currencies in the central bank and private banks to bolster its collapsed economy," he told Al-Mashareq.

Through this means, he added, Iran seeks to control the resources of the Yemeni economy, as it is doing in Iraq.

Money laundering

One of Iran's main objectives in establishing the stock exchange is to facilitate the transfer of "dirty money" generated from the illicit drug trade it engages in with its allies in the region, said economist Abdul Aziz Thabet.

These funds will then be reintroduced into the economy through the Yemeni private sector, he told Al-Mashareq.

The stock exchange in Sanaa will serve as a mechanism through which Iran can circumvent the international sanctions imposed on it, he said.

This will help it facilitate the sale of Iranian oil and collect the revenues this generates without going through the international banking system, thereby avoiding the sanctions monitoring mechanisms, he said.

According to economist Faris al-Najjar, the economic and financial environment in Yemen is not conducive to the establishment of a stock exchange.

"The establishment of a stock exchange requires a strong economy," he explained, noting that "the Yemeni economy is currently fragile, and the private sector is reeling".

"The laws and legislation that regulate the existence and operation of this market are non-existent, in the absence of the legislative authority in Yemen," al-Najjar said.

"The Houthis' aim in establishing the stock exchange in these difficult circumstances is not to establish a real stock market, but rather to create a phony stock market to provide cover for the movement of funds to and from Iran," he said.

With this move, the Houthis seek to "control the private sector", he said.

"We will see Iranians and Hizbullah companies buy shares in Yemeni companies, thus increasing Hizbullah's role and economic control over the private sector," he said.

"This will adversely impact the entire economic life in both the short and long terms."