The government has increased patrols and roadblocks in the north, to prevent weapons and ammunition from getting to the remaining Shia rebels. The rebels want a truce, but are not willing to meet the government demands for the surrender of weapons and the risk of being prosecuted for crimes. The government wants to crush the fighting power of the Shia rebels, and the rebels don't want that. The rebels think they can win in the long run, if only because of the threat of civil war in the country (and a renewed split into north and south Yemen.)
The government is trying to negotiate the surrender of Islamic radical leader Anwar al Awlaki (who was involved in the last two terror attacks in the United States; the Christmas bombing attempt and the Fort Hood shootings). Born in the U.S. (where his father was studying), he was raised in Yemen and went to college in the U.S. He became a radical preacher, and left the U.S. in 2004. He uses the Internet a lot to encourage like minded radicals. Awlaki is hiding out, protected by his tribe, in the southeast (a mountainous area with some coastline.) Awlaki does not claim any direct ties with al Qaeda, and is basically a freelance Islamic radical who encourages terrorism. There are known al Qaeda operatives in Yemen, hiding out with tribes that share Islamic radical attitudes.
The United States has been very useful by providing training (using about 200 Special Forces troops, with lots of experience fighting tribesmen in mountains) and intelligence (via UAVs and electronic eavesdropping.) Its the latter assistance that has enabled the government to stage raids and bombing attacks on concentrations of rebels and Islamic terrorists.
In the north, the fighting, during the last six years, has caused over 200,000 people to flee their homes and villages. Many have not returned home. The Shia rebels like to use ambush and sniping, while the government calls in artillery and air strikes. So the civilians get out of the way if they discover Shia rebels in their midst. The rebels are on the run, but far from destroyed. The army has greater numbers, artillery and air power, and American and Saudi airpower. Then there is the American ability to intercept cell phone or radio communications. This has left the rebels with a growing inability to stay in contact with each other. Use radio or satellite phone, and you are liable to be located for an air strike or army raid. Don't communicate, and you cannot cooperate and coordinate with other rebel groups.
The government is faced with a growing separatist movement in the south, and has to be more concerned with that than antagonizing southern tribesmen with searches for al Qaeda hiding out in the hills. The southern rebels, who are more secular than the rest of the country, are centered around the port of Aden (which is close to the oil fields to the east). The potential civil war is basically between educated and urban Yemenis, and less affluent, but armed, tribesmen. There are still many Yemenis from the north and south who want to keep the country united, and, for the moment, they are succeeding.
The government has again called on its oil rich neighbors to be more generous with economic aid. The neighbors are willing, but uncertain of Yemens' ability to effectively use a lot of aid. Corruption and poor education (half the population is illiterate) make it difficult to undertake a lot of economic development right away.
February 2, 2010: The Shia rebels have started shooting again, apparently concluding that they were not going to get a truce. Typically, the Shia tribes up north make peace when they are overwhelmed by the army and police. Then they rebuild their armed strength, and the cycle of violence starts all over, as it has since 2004.
February 1, 2010: The Shia rebels offered to return six Saudi soldiers they hold, if the Saudis will agree to a truce. The government wants rebels weapons as well, and that is a deal breaker. The Saudis claim Shia snipers are still operating in Saudi territory. The Shia rebels deny this. Shia rebels ambushed the deputy governor of Saada province (where the rebels are centered), and wounded him. The victim is also an army brigade commander.
The Saudis announced that their involvement in the Yemen war was over, now that the Shia rebels had been driven back into Yemen, and the rebels had agreed to stay there, more or less.
January 31, 2010: The government rejected a Shia offer of ceasefire. Some 60 kilometers from the capital, a police patrol interrupted an attempt to blow a hole in an oil pipeline. Yemen produces 300,000 barrels (worth $20-25 million) of oil a day.
January 30, 2010: The government has offered the Shia rebels a truce, but only if the rebels surrender all weapons and prisoners, withdraw from Saudi Arabia, and allow the police to go wherever they want. The Shia rebels refused this, as these conditions would destroy the rebels ability to renew the fighting (at least in the near future). The rebels also fear the police would round up ringleaders, and make it more difficult to renew fighting. Some rebels were willing to accept the truce, but most were not, and it was rejected. The rebels still offer their own version of a truce, which keeps the rebels armed.
January 29, 2010: An opinion poll showed that 70 percent of southern Yemenis preferred splitting the country into two countries (North and South Yemen, as it was until 1990.)
January 27, 2010: The Shia rebels announced that all of their fighters had withdrawn from Saudi territory. In response, Saudi Arabia claimed that its military forces had driven all the Yemeni gunmen out.