Aug 26 Yemen, the Arab world's poorest country, is combating a reignited Shi'ite revolt in the north, separatist unrest in the south and intensified al Qaeda militancy.
Oil output is dwindling and water resources are being depleted. The global economic downturn has limited the ability of President Ali Abdullah Saleh's government to cope with high unemployment, runaway population growth and widespread poverty.
If Yemen tipped further into instability, or even state failure, this could endanger its neighbours, especially Saudi Arabia, and complicate efforts to fight al Qaeda and protect international shipping routes from piracy in the Gulf of Aden.
Western alarm is growing.
Fierce fighting this month between Yemen's armed forces and Shi'ite rebels in the north has prompted the United States to urge both sides to return to last year's ceasefire agreement.
In May, Washington said violence in the restive south could undermine Yemen's unity and called for it to end.
The European Union's anti-terrorism chief said the same month that Yemen and Pakistan were in danger of becoming failed states and safe havens for al Qaeda-linked groups.
WHO RULES YEMEN?
Saleh, 67, took power in the former North Yemen in 1978 and has been president since the merger with the south in 1990, winning another seven-year term in a 2006 election.
The former army officer has dominated Yemen's formal democratic structures via his northern tribal power base, patronage networks and support in the armed forces.
Parliament voted in February to delay this year's parliamentary election to 2011 pending electoral reform.
Saleh has no assured successor. He faces multiple challenges in a country where a central government corroded by corruption exerts scant control in many areas awash with weaponry.
WHAT LIES BEHIND THE NORTHERN INSURGENCY?
Tribesmen led by the Houthi family began an intermittent revolt against the government in Saada, near the Saudi border, in 2004. The rebels are revivalist Zaidis, from a branch of Shi'ite Islam whose Imams ruled Yemen until the 1962 revolution.
They have economic and religious grievances, accusing Saleh, himself a Zaidi, of favouring Salafi Sunnis who lean towards Saudi-style Wahhabi Islam. The Yemeni government has suggested that Iran supports the rebels, but evidence for this is thin.
Rebel chief Abdul-Malek al-Houthi accepted a Qatari-mediated peace deal in 2007, which repeatedly broke down. Clashes this year escalated to full-scale battles in late July. Saleh has set tough ceasefire terms, which the Houthis have rejected.
Aid agencies say the fighting, in which the army has used air power, tanks and artillery, has displaced tens of thousands of people. The U.N. refugee agency said on Tuesday an already "dire and complex humanitarian emergency" was getting worse.
WHY ARE SOUTHERNERS DISCONTENTED?
Violence erupted this year after an April 28 opposition rally to mark the 1994 civil war, in which Saleh's forces defeated the secessionist south, known before the 1990 unity deal as the People's Democratic Republic of Yemen.
People in the south, home to most of Yemen's oil facilities, have long complained that northerners abused the unity agreement to grab their resources and discriminate against them.
Protests led by army officers, riled by their meagre pensions after forced retirement, turned violent in 2007. As discontent over jobs and economic grievances widened, some southern leaders talked of northern "occupation" and called for secession.
HOW BIG A THREAT IS AL QAEDA?
Yemen, where Osama bin Laden's father was born, has suffered a new wave of al Qaeda attacks over the past year. Saudi Arabia has said it fears al Qaeda could use Yemen to relaunch a 2003-6 campaign to topple the U.S.-allied Saudi royal family.
Yemen issued a list of 38 wanted militants after an al Qaeda suicide bombing killed four South Korean tourists in March.
Nine foreigners were kidnapped in the northern province of Saada, a rebel stronghold, in June. Three of them -- two German nurses and a South Korean teacher -- were found dead. The rest, a German couple, their three children and a Briton, are missing.
Al Qaeda's Yemen wing changed its name to al Qaeda in the Arabian Peninsula in February, suggesting it aimed to revive the struggle against Saudi Arabia, the world's biggest oil exporter.
Yemen cooperated with Washington after Sept. 11, 2001 and al Qaeda attacks at home, including one on a U.S. warship. Many Yemenis fought U.S.-led forces in Iraq after the 2003 invasion.
HOW IS YEMEN'S ECONOMY FARING?
Oil production, the source of 70-to-75 percent of public revenue and more than 90 percent of export earnings, averages 287,000 barrels per day, down from 300,000 last year and a peak of 457,000 in 2002. Oil revenue dropped 75 percent in the first half of this year, compared with the same 2008 period.
The Central Bank expects the economy to grow 5 percent this year, below target due to delays to a $5 billion gas export project. Gross Domestic Product (GDP) grew only 4.6 percent in 2008, despite high world oil prices in the first nine months.
The economy is expected to grow 7 or 8 percent in 2010, boosted by liquefied natural gas exports and an expected jump in projects funded by foreign aid. The Central Bank says energy subsidies will cost about 6 percent of GDP this year.
About 35 percent of Yemen's 23 million people live in poverty. The population is set to double by 2035. The poor were hard hit by a 60 percent spike in world food prices in 2007-8.
The global financial crisis has slowed inflows of investment and remittances. The World Bank says medium-term prospects beyond 2009 are poor due to declining oil output.
(Editing by Michael Roddy)