ANALYSIS-For US, no good options to nudge Yemeni leader out
* US influence limited in Yemen
* Near zero options to force Saleh to step down
* US tells Saleh it's weighing "other options"
By Phil Stewart
WASHINGTON, May 26 (Reuters) - Yemeni President Ali Abdullah Saleh's refusal to step down is piling pressure on the White House to consider cutting U.S. aid to Yemen but, tempting as that may sound, it is unlikely to make much difference in the fast-deteriorating situation.
Indeed, the United States appears to have no good options in Yemen and remarkably little leverage over the course of events there, despite sending some $300 million in annual aid to the impoverished country on the Arabian peninsula.
Washington has sent a signal to Saleh that he must cede power by warning it may review its aid but experts say cutting assistance would only reduce U.S. influence further in a country crucial to American counter-terrorism efforts. It also would not likely change Saleh's calculus about whether to go.
The lack of options is a liability for the United States because al Qaeda's Yemen-based wing, already at the top of U.S. security concerns, is expected to step farther into the spotlight after U.S. forces killed Osama bin Laden.
Before Saleh's latest refusal to sign a power transfer deal on Sunday, White House counter-terrorism chief John Brennan called Saleh to press him directly to formally accept the agreement. Otherwise, Brennan warned, Washington would be looking at other options, a U.S. official told Reuters.
It remains unclear whether the White House will follow through on the threat. When it comes to Yemen, U.S. influence is limited, experts agree.
"What options do we have to force a resolution? Almost zero," Barbara Bodine, a former U.S. ambassador to Yemen, told Reuters.
"I don't really think sanctions are really going to bring this to closure ... Certainly not threats."
The situation in Sanaa, the Yemeni capital, has deteriorated markedly in recent days. Gunbattles between Saleh loyalists and opponents have killed more than 40 people since Monday.
The U.S. dilemma in Yemen highlights a problem Washington faces globally in fighting militants with the help of problematic governments. While cries in the U.S. Congress to cut aid to Pakistan rose after it was learned bin Laden was hiding in that country for years, that too seems unlikely to happen.
The United States is providing Pakistan about $3 billion a year -- 10 times more aid than in Yemen -- for an alliance that at best appears half-hearted.
President Barack Obama acknowledged imperfect alliances in the Middle East during a speech on Wednesday before the British parliament.
"We must squarely acknowledge that, yes, we have enduring interests in the region -- to fight terror, sometimes with partners who may not be perfect," Obama said.
Earlier in the day he called on Saleh to "move immediately on his commitment to transfer power."
But Saleh, in a Reuters interview on Wednesday, said he would not bow to international "dictates" to step down.
Saleh, in power for three decades, was until recently seen as a crucial U.S. ally who allowed U.S. forces to conduct clandestine operations, including unmanned aerial drone strikes, against al Qaeda's local offshoot -- al Qaeda in the Arabian Peninsula, or AQAP.
But increasingly, Saleh is seen as a liability whose political weakness has been accompanied by deteriorating security, which has in turn undermined the fight against AQAP.
Continued violence Wednesday in Sanaa reinforced fears that Yemen could become a failed state like Somalia, and on the doorstep of Saudi Arabia, the world's biggest oil exporter. More than 40 percent of Yemenis live on less than $2 a day, while a third face chronic hunger.
"The current chaos does pose problems that we're concerned about -- this ongoing insecurity and the effect that it could have on AQAP's ability to interfere," said State Department spokesman Mark Toner.
"But that again just reinforces the fact that President Saleh should indeed sign this agreement and put Yemen on a path towards a political resolution," he said.
U.S. officials, speaking on condition of anonymity, say the political instability has distracted Saleh from fighting AQAP.
The group claimed responsibility for a failed Christmas Day attack in 2009 aboard a U.S. airliner and an attempt in October 2010 to blow up two U.S.-bound cargo planes with explosive parcels. Even before bin Laden's death, many senior U.S. officials saw AQAP as the top U.S. terrorism threat.
Critics have accused Obama of miscalculating in not adopting a tougher stance toward Saleh earlier on, relying instead on cautious statements that sought to balance concern about the violence with calls to the protesters to negotiate.
Gregory Johnsen, a Yemen expert, said the United States spent too long asking what a country without Saleh in power would look like and being paralyzed by fears of greater instability.
"The question that they needed to be asking is: What does Yemen look like if President Saleh continues to rule?" he said. "What the U.S. has realized is that what Yemen looks like if President Saleh remains in power is going to be very problematic for the U.S. and particularly for U.S. security concerns."
But when it comes to options in Yemen, Johnsen says there are no easy answers. "I think what's happening right now is beyond the realm of outside engineering," he said.
(Additional reporting by Matt Spetalnick and Andrew Quinn; Editing by Warren Strobel and Bill Trott)
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