Published on: 2025-08-26

Intelligence Report: A Two-State Solution is the Only Way Forward for Yemen – Fair Observer

1. BLUF (Bottom Line Up Front)

The most supported hypothesis is that a two-state solution is increasingly necessary for Yemen, given the entrenched positions of the Houthis and the Southern Transitional Council (STC). Confidence in this assessment is moderate due to ongoing regional instability and the potential for unforeseen developments. Recommended action includes international mediation to facilitate dialogue between the two entities and support for humanitarian efforts to stabilize the region.

2. Competing Hypotheses

1. **Hypothesis 1**: A two-state solution is the most viable path forward for Yemen, as the Houthis and STC have established de facto control over distinct regions, making reunification under a single government increasingly untenable.
2. **Hypothesis 2**: Despite current divisions, a unified Yemen remains possible through sustained international pressure and negotiation, potentially leading to a federal system that accommodates both the Houthis and STC.

3. Key Assumptions and Red Flags

– **Assumptions**:
– Hypothesis 1 assumes that the Houthis and STC are unwilling to compromise on their territorial claims.
– Hypothesis 2 assumes that external diplomatic efforts can overcome deep-seated ideological differences.
– **Red Flags**:
– The Houthis’ rejection of federalism and their expansionist agenda suggest a low likelihood of compromise.
– The STC’s administrative capabilities and public support may be overstated, potentially affecting their long-term viability.

4. Implications and Strategic Risks

– **Implications**: A two-state solution could stabilize the region by reducing internal conflict, but may also embolden separatist movements elsewhere. A unified Yemen could lead to prolonged conflict if not carefully managed.
– **Strategic Risks**: Escalation of sectarian violence, increased influence of extremist groups, and disruption of humanitarian efforts pose significant threats. Economic instability due to targeted attacks on oil infrastructure could exacerbate the situation.

5. Recommendations and Outlook

• Engage in diplomatic efforts to initiate dialogue between the Houthis and STC, with a focus on humanitarian aid and economic stability.
• Scenario-based projections:
  – **Best Case**: Successful mediation leads to a peaceful two-state solution with international recognition.
  – **Worst Case**: Continued conflict results in humanitarian disaster and regional destabilization.
  – **Most Likely**: Prolonged negotiations with intermittent conflict, requiring sustained international involvement.

6. Key Individuals and Entities

– Nadwa Dawsari
– Martin Griffith
– António Guterres

7. Thematic Tags

national security threats, regional focus, conflict resolution, humanitarian crisis