Quotes of the Day

Yemen's President, Ali Abdullah Saleh, flew into the Gulf of Aden on Nov. 7 to celebrate the first exports of liquefied natural gas from a sprawling $4.5 billion plant — the biggest ever investment in his otherwise impoverished desert country. A brass band played and politicians applauded the gas tanker as it set sail for South Korea, but Saleh's attention was elsewhere — on the attacks that Saudi Arabia's military forces were waging against antigovernment Shi'ite rebels in the north of Yemen. The rebels "are trying to demolish the economy," Saleh tells TIME, vowing, "We will crush them."

Low-level skirmishes between the rebels, called Houthis, and Saudi and Yemen forces, have dragged on for five years, and indeed the Saudis claim they successfully cleared the rebels from the border on Sunday. But the conflict has rapidly intensified during the past week, since, according to the Saudis, the Houthis crossed into Saudi Arabia and killed a Saudi officer, leading Saudi Arabia to send fighter jets to bomb Houthi territory on Nov. 5. Suddenly a lingering battle threatens to turn into a wider conflict, potentially drawing in Iran, the region's biggest Shi'ite power. Saleh says he suspects Iran is already involved. "They want to follow the system of Iran," he says of the rebels. "It is impossible. Our people are one people." Using his public speech at the ceremony, Saleh told the crowd, "There will be no compromise or cease-fire until we finish the jihad."

Saleh talks tough about the rebels, but last week's battle was just one of many security problems for a government that's struggling to maintain control over its large, underdeveloped territory at the southwestern edge of the Arabian Peninsula. Saleh, 67, who has ruled for 31 years, faces not only northern rebels but hostile groups in the south who have fought violent battles for autonomy and extremists who are tied to al-Qaeda. As Yemen's security crumbles, militants find it easier to operate, according to the risk consultancy Eurasia Group in a research note on Nov. 5. "The Yemen-based al-Qaeda in the Arabian Peninsula is establishing more sophisticated infrastructure in Yemen," the report said. "A collapse or severe weakening of the Yemeni state would likely send millions of refugees into Saudi Arabia, threatening stability there."

Even in the capital, Sanaa, there were high-profile killings of foreigners earlier this year and a suicide attack against the U.S. embassy in 2008. When executives from the French energy giant Total, which built the new Balhaf gas plant, decided to go sightseeing in Sanaa's ancient quarter after the ceremony on Nov. 7, they drove through the city in a police-led convoy.

The mounting hostility to Westerners is one reason Total opted to hire thousands of Yemenis to construct its new natural-gas facility, despite the fact that most needed extensive training. The company says Yemenis comprised about 70% of the 11,000 or so people who built the project. Total even negotiated separately with each of the 22 tribes whose land the pipeline travels through in order to avoid angering locals.

At full capacity, the port is expected to export about 6.7 million tons a year of liquefied natural gas to Asia, Europe and the U.S., earning between $30 billion and $50 billion for Yemen's government over the next 25 years. That's an attention-getting number for any economy. Another notable figure is 500. That's the number of Yemeni soldiers who were hired to guard the heavily fenced facility and pipeline. Because in a country as unstable as Yemen, any symbol of progress is a target.

• Vivienne Walt / Balhaf
• Yemen should be celebrating its first exports of liquefied natural gas. But with an insurrection in the north threatening to spin out of control, President Saleh has a big problem to worry about