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Yemen has frequently been described as a failing state -- and with good reason. Civil war, terrorism, a deepening secessionist movement and economic and demographic trends threaten to overpower the Yemeni government, provide a breeding ground for terrorists and destabilize the region. Yemen has often teetered on the brink of collapse, but it has never faced so many interconnected challenges at one time.

At the heart of the country's problems is a looming economic crisis. Oil is the source of nearly 80 percent of government revenue, and it is quickly running out. There are few viable options for a sustainable post-oil economy, and Yemen is already the poorest country in the Arab world with an unemployment rate conservatively estimated at 35 percent. Yemen's pending economic collapse has been greatly accelerated by the civil war in Saada. Government forces have been unable to decisively put down the rebels in the north of the country, and there is no military solution to the conflict. The toll in Saada has been severe, with extensive damage to infrastructure and an estimated 175,000 internally displaced people. The conflict's strain on the Yemeni army has led to questions about the military's ability to simultaneously engage in other operations, including counterterrorism. The government is spending foreign currency reserves at an alarming rate, recently estimated at more than $200 million per month. Spending on the war will create a major budget deficit next year. Every dollar spent on the civil war is a dollar not spent on addressing the underlying causes of instability in Yemen. Yemen also is facing a growing secessionist movement in the south of the country. When the war in Saada subsides, it is feared that the secessionist movement will again flare up.  The government does not control the entire territory of Yemen, and the emergence of additional areas outside of the capital of Sanaa's control will create more under-governed spaces that can be exploited by terrorist movements.

Military operations to kill or capture al Qaeda operatives will likely increase in 2010. These actions carry risks. Publicly acknowledged American involvement in counterterrorism operations in Yemen would be deeply unpopular in the country, likely undermine the legitimacy of the Yemeni government and feed into the grievances that help fuel al Qaeda militancy. Development assistance is one of the most effective tools available to address the interconnected long-term challenges facing Yemen. But, U.S. aid is disproportionately small considering the magnitude of the problems facing the country and Yemen's strategic importance to the United States. In addition to the reported $70 million of military and security assistance, the United States recently announced $121 million in development aid over the next three years, a significant increase from previous years and a vital step in the right direction. Still, the amount pales in comparison to the $1.5 billion allotted to Pakistan in the next year alone. This disparity persists even as U.S. officials increasingly cite Yemen as a terrorism and security priority second only to Afghanistan and Pakistan.

The formation of a new government does not push back the specter of another war with Israel. In July 2006, Hezbollah abducted two Israeli soldiers in a cross-border raid, setting off a 34-day war that crippled Lebanon's infrastructure, displaced 1 million people, and killed more than 1,200 Lebanese – the majority of them civilians. Since that conflict ended, both sides have been preparing for a new round.Hezbollah leaders boast that the group now has an even larger and more potent cache of missiles than it did three years ago. Israeli officials, who are also escalating their war rhetoric, estimate Hezbollah's arsenal at between 40,000 and 80,000 rockets. On Nov. 3, the Israeli navy intercepted a ship in the Mediterranean Sea that was carrying 500 tons of rockets, mortars, and other weapons. Israeli officials claimed that it was an Iranian arms shipment intended to reach Hezbollah through Syria, which led to a new round of bellicose threats from both sides.The basic problem is that Hezbollah makes decisions that could lead to war – without consulting or involving the Lebanese state. And Israeli Prime Minister Benjamin Netanyahu has threatened to hold the Lebanese government responsible for the militia's actions. This puts Hariri in a difficult position and it will make him reliant on the Obama administration to keep Israel at bay.

While Hezbollah has shown a willingness to adapt and evolve politically, it is unlikely that the movement would give up its weapons – or the idea of perpetual resistance – without a political settlement between the West and Hezbollah's main patron, Iran.The Obama administration can avert a new conflict by keeping its attention focused on Lebanon, continuing to support Hariri's government, and helping to strengthen state institutions like the Lebanese Army. But US officials must eventually reach out to Hezbollah, which is designated a terrorist organization by the State Department. Washington could begin indirect outreach through France and other Western countries that maintain contact with Hezbollah.

But getting more European troops for Afghanistan is proving to be something like getting blood from a stone, as Obama learned on Monday when British Prime Minister Gordon Brown, whose country has the second-largest contingent of foreign forces in Afghanistan, approved 500 additional troops for the war after weeks of hand-wringing. Britain currently has 9,500 soldiers in Afghanistan.

France's Defense Minister Herve Morin bluntly ruled out adding to his country's 3,400 troops on Monday, saying France "has made an extremely big effort and that there is no question for now of raising numbers."

German Chancellor Angela Merkel, whose force of 4,500 troops is the third largest in Afghanistan, said Monday she'll consider sending more troops only after an international conference on Afghanistan scheduled for London on Jan. 28. But even if convinced then, her ability to deliver may be constrained by domestic politics, as she faces mounting opposition to the war at home, particularly since a German airstrike near Kunduz in early December killed 142 people, many of them civilians.

With an estimated presence of more than 1,000 Al Qaeda operatives, Yemen is steadily becoming more important in the war against terrorism. It is a large country on the Arabian Peninsula with some 22 million people with an unemployment rate of about 40 percent that is expected to double in the next few decades. The availability of water is dwindling, and the oil revenues upon which the country depends are quickly evaporating. By 2017, those revenues are expected to bottom out, according to a report published by BP and cited in a report by the Center for a New American Security (CNAS), a think tank in Washington.

The US has spent about $70 million this year to support training and buy equipment for Yemen, compared with no funding last year, according to the Associated Press. Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, on his military jet as he returned from Iraq and Afghanistan Sunday said he is comfortable with the level of support the US is currently providing.

Voting patterns in Afghanistan show strong overlap with ethnic identity. (See map.) Afghanistan was torn apart in the 1990s during a civil war among ethnic-based warlords, and the outcome of the controversial election in August threatens to rekindle ethnic tensions and burnish the power of the old warlords. The present conflict already has ethnic undertones: The Taliban are almost entirely Pashtun, the dominant Afghan group. Now the fraud-ridden presidential vote has alienated the Tajiks, who largely backed the losing candidate, Abdullah Abdullah. In Tajik parts of the country, leaders openly question the legitimacy of the resulting government of President Hamid Karzai (a full-blooded Pashtun).

But strong bulwarks remain against any return to outright ethnic strife. First, Afghans themselves have been conditioned through bloody history to deny the legitimacy of ethnic divisions. Political leaders avoid overt appeals to ethnicity, and ordinary Afghans will often deny that clannish behavior is linked to ethnicity.Second, Dr. Abdullah has fastidiously avoided calling for “peaceful demonstrations,” an oxymoron in Afghan culture. Abdullah’s fondness of his emerging image as a statesman may keep him as a force for peace even if Karzai does little to share the spoils of victory (something unknown at press time).Third, perhaps the only ethnic red line that exists in Afghanistan lies with Pashtuns who feel it is their historical and demographic right to lead the nation. The final election result returned Karzai, a full-blooded Pashtun, to power. In some ways, concerns of a coming ethnic clash would have been more serious if Abdullah had won, given that he is viewed as Tajik, despite having one Pashtun parent.

There's no question, however, that American attitudes toward marijuana have changed. National polls show that Americans increasingly favor legalizing marijuana. More than 40 percent of Americans consistently supported legalization this year. Gallup surveys put that support at 44 percent now, up from 25 percent in 1995.

Even California may be having some regrets. Some 120 towns and cities there have banned medical-pot outlets since 2006, according to Americans for Safe Access.

Another Reuters report adds that Yemen has become an attractive home base to Al Qaeda since the group has come under pressure in Pakistan and Afghanistan and because the Yemeni government is incapable of controlling all its territory. The New York Times reported Sunday that because of this concern, the US is quietly aiding and equipping Yemeni security forces and providing them with intelligence. The Pentagon will spend $70 million over the next 18 months on counterterrorism in Yemen, and uses teams of special forces to train Yemen’s military. The Times reports that this more than doubles previous military aid levels.

The Wall Street Journal reports that the US involvement in Yemen may have provoked increased threats toward the West from Al Qaeda in Yemen. Those threats, particularly against Western aviation, increased in the months before Friday’s attempted bombing by Umar Farouk Abdul Mutallab. A growing number of militants fighting in Pakistan and Afghanistan are also retreating to Yemen, reports the Journal.

Russia's only Caucasus ally, Armenia, has suffered badly from the cutoff of land transport links. Moscow maintains a cold war-era military garrison in Armenia, reportedly with more than 1,000 troops, and has had chronic difficulties resupplying them."Russia's ties with Armenia are important, and so it would be of some benefit to Russia if it could normalize the transport links," says Alexei Makarkin, deputy director of the independent Center for Political Technologies in Moscow.