Saleh's foreign policy as the leader of North Yemen was characterized by the principles of "positive neutrality" and Arab unity. Under Saleh, Yemen cultivated close ties with Saudi Arabia and other pro-West states in the region. He also purchased military equipment from the United States and expanded economic relations with the West. At the same time, Saleh also tried to maintain friendly relations with the then-Soviet Union (which broke apart in 1991). In October 1984, he renewed the treaty of Friendship and Cooperation that was originally signed in 1964 by San'a and Moscow.
Saleh has emerged as one of the staunchest supporters of Arab unity. After the 1982 Israeli invasion of Lebanon, he sent Yemeni volunteers to assist Palestinian fighters in Lebanon and provided the Palestine Liberation Organization with training facilities in Yemen. During the Iran-Iraq War, Yemeni volunteers were dispatched to fight alongside the Iraqis. In 1989, Yemen—along with Egypt, Iraq, and Jordan—formed the Arab Cooperation Council to facilitate the movement of capital and labor among member states. Yemen's refusal to publicly condemn the Iraqi invasion of Kuwait of August 1990 indicated the new Republic's foreign policy would continue to be guided by the principle of Arab unity. Indeed, when the UN Security Council voted in November 1990 to authorize the use of force to remove Iraqi troops from Kuwait, Yemen and Cuba were the only countries to vote against the resolution. U.S. foreign aid to Yemen, which then amounted to around US $70 million a year, was eliminated for a decade. In 1999, Yemen was one of nine Arab Parliaments that appealed to UN Secretary-General Kofi Annan to lift the sanctions on Iraq, which they claimed amounted to genocide.
In the summer of 2000, Yemen and Saudi Arabia signed an International Border Treaty settling a 50-year-old dispute over the location of the border between the two countries. Yemen settled its dispute with Eritrea over the Hanish Islands in 1998.
In early 2002, President Saleh cancelled a scheduled visit to Egypt when that country requested extradition of 22 Islamic militants, one of whom was a possible suspect in the 1996 attempted assassination of Egyptian President Hosni Mubarek. International observers feared that Yemen was providing safe haven for extremists connected with the terrorist organizations al-Qaeda and Islamic Jihad, a suspicion discounted by President Saleh as of early 2002. Saleh admitted, however, that tribal groups may harbor terrorists without government knowledge or support.
Yemen's connections to international terrorism are also linked to the 12 October 2000 suicide bombing against the USS Cole in Aden harbor, in which 17 Americans died and 37 were wounded. The United States held al-Qaeda responsible for the attack.
Yemen is also the ancestral homeland of Osama bin Laden, whose father was born in Yemen. Yemen's international standing as a nation friendly to the West was questioned in December 2002 when a North Korean ship laden with 15 Scud missiles, warheads, and chemicals headed for Yemen was apprehended by U.S. and Spanish naval vessels before being allowed to proceed on its way and deliver its shipment. The United States seized the ship in an effort to curb the proliferation of weapons of mass destruction and missile delivery systems. Although highly critical of North Korea's role in arms dealing, the United States recognized the legality of the weapons sale to Yemen and did not want to jeopardize relations with a country it considered to be cooperating with its War on Terror.
Since 11 September 2001, Yemen has tightened security at its borders, improved visa procedures, and worked to develop its cooperation with the United States in the areas of intelligence gathering, law enforcement, and the military. In 2002, US $30 million was allocated to Yemen for security assistance. However, in April 2003, ten suspected terrorists disappeared from a high-security Yemeni prison. Two of the ten were suspects in the bombing of the USS Cole , and the other eight were alleged members of al-Qaeda. Tens of thousands of Yemenis protested the U.S.-led war against Iraq that began on 19 March 2003. The Yemeni government opposed the war in Iraq, but leaders tried to control the demonstrations, afraid the protests could turn against them.