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Inside Yemen -

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CHRIS UHLMANN, PRESENTER: Until recently the Republic of Yemen rarely featured in the headlines.
But that's all changed.

It's now considered a terrorist hotspot and a threat to global security after a Yemen-based Al
Qaeda cell claimed responsibility for the attempted attack on a US bound plane on Christmas Day.

Security concerns have forced many countries, including the US, Britain, France and Japan, to shut
their embassies or take precautionary measures.

And Yemen will be at the top of the agenda when US President Barack Obama meets with his security
chiefs tomorrow.

In a moment I'll be speaking to a leading expert on Yemen, but first Tracy Bowden profiles this
ancient land.

TRACEY BOWDEN, REPORTER: The Republic of Yemen was known to the Romans as Felix Arabia, or Happy
Arabia, because of its rich trade in spices. But now this desert country with a mainly Muslim
population of around 23 million people is the poorest in the Arab world.

Positioned at the southern tip of the Arabian Peninsula, Yemen is boarded by Saudi Arabia and Oman
on land, and by the Red Sea and Gulf of Aden. Further south are Ethiopia and Somalia.

The ancient city of Sana'a on the Yemeni plain is the country's capital. Inhabited for more than
2,500 years, it's considered one of the most beautiful cities in the Islamic world. With an array
of historic architecture, including 50 mosques, it was declared a World Heritage City by the United
Nations in 1986.

Yemen is Osama bin Laden's ancestral home. His father was born in this region in the east. The
country has long held strategic appeal for the Al Qaeda leader, viewed as the ideal location for
establishing a base of operations.

Western intelligence officials believe the country has already become a new home for Al Qaeda
fighters fleeing Pakistan and Afghanistan. Now revelations that the Nigerian behind the attempted
US airplane bombing on Christmas Day, Umar Farouk Abdulmutallab, received training from Al Qaeda in
Yemen has thrust the country back onto the international terrorism radar.

HILLARY CLINTON, US SECRETARY OF STATE: We see global implications from the war in Yemen and the
ongoing efforts by Al Qaeda in Yemen to use it as a base for terrorist attacks far beyond the
region.

NEWSREADER, OCTOBER 2000: A five by 12 metre hole was blown in the side of the USS Cole through
steel nearly 1.5cm thick.

TRACEY BOWDEN: Yemen became the focus of US counterterrorism attention back in 2000 after a suicide
boat rammed the American Warship the USS Cole, killing 17 sailors.

BILL CLINTON, FORMER US PRESIDENT: It was a despicable and cowardly act. We will find out who was
responsible and hold them accountable.

TRACEY BOWDEN: Two years later, acting on a tip off from the Yemenis, a CIA predator drone fired a
missile at a vehicle travelling across the Yemeni desert. All six occupants killed, among them Abu
Ali al Harithi, Al Qaeda's top man in Yemen, thought to be the mastermind of the USS Cole bombing.

With his nation back in the terrorist spotlight, the Yemeni President Ali Abdullah Saleh has vowed
to clamp down on militancy, but Government control is weak outside the capital. The Government is
besieged by crises, bogged down fighting a war in the north with Shi'ite rebels, and dealing with
separatist unrest in the south.

Oil prices are falling and there's a chronic shortage of water. It's also become a dangerous place
for foreigners, with scores of tourists and international workers being kidnapped. If the
struggling Yemeni Government collapses it would create a failed state in which Al Qaeda could
thrive.

HILLARY CLINTON: There have been numerous conflicts in Yemen. They seem to just get worse and worse
with more players involved now, and it's time for the international community to make it clear to
Yemen that their expectations and conditions on our continuing support for the Government, so that
they can take actions which will have a better chance to provide that peace and stability to the
people of Yemen and the region.

TRACEY BOWDEN: In recent months the Yemeni Government launched a major offensive to try to end the
uprising in the north. This is viewed as a critical step in stamping out Al Qaeda's growing
presence in the region.

DAVID PETRAEUS, GENERAL, US CENTRAL COMMAND: Some years ago actually, this is when I was in Iraq,
we could see the development of cells of Al Qaeda in Yemen.

TRACEY BOWDEN: US General David Petraeus, who oversees the wars in Iraq and Afghanistan, made a
surprise visit to Yemen over the weekend, a day after announcing that the Obama administration will
this year more than double the country's counterterrorism aid of $US67 million provided in 2009.

Highlighting Yemen's security threat, the British Prime Minister Gordon Brown has announced an
international summit in London later this month to discuss strategies to increase stability in the
area.

GORDON BROWN, UK PRIME MINISTER: We've been working with the Americans to strengthen
counterterrorism cooperation in Yemen. Yemen has been recognised, like Somalia, to be an area where
we've got to not only keep an eye on, but we've got to do more.

CHRIS UHLMANN: Tracy Bowden with that report.