U.S. Designates Houthis as a Global Terrorist Group, but Plans Big Sanctions Carveouts

Even if a transaction is not flowing through the US financial system, large banks that operate throughout the world often take US designations into account, said a second senior administration official.

"So, we do think that it will have an impact even if a lot of these transactions that are conducted may be with front companies," the second senior administration official said. "It's a critical piece of the entire puzzle when you're looking to stop financial flows to an entity," the official said.

The designation is unlikely to have a material impact on the oil markets given existing sanctions and the fact that most of the Houthis' counterparts, like Iran, are already engaged in illicit trade, said Rachel Ziemba, adjunct fellow at the Center for a New American Security.

But it may be an indication of the broader US view of the situation, Ziemba said. "To some extent, this designation is a sign that the US might be settling in for a longer conflict and realizing that the Houthis will not be quickly deterred," she said.

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