Piracy Threat Escalating for the Global Shipping Industry

Piracy is perhaps is one of the biggest concerns for the freight industry, second to the fluctuations in crude oil prices. Liners have implemented many ways of protecting their vessels from pirates, from water cannons to armed guards onboard. Most recently, the killing of two Indian fishermen by Italian marines in international waters off the coast of Kerala has brought this very subject to everyone’s attention. The Italian mariners Salvatore Girone and Massimiliano Latorre (pictured below) were part of the cargo ship’s security team, and are currently being held by the Indian government in a government guest house, in Kochi, India, accused of mistaking the fishing boat for a pirate ship.

The unfortunate killing highlights the need for effective rules governing the use of armed guards on vessels. Examining the issue closely, one can easily recognize that the problem of piracy cannot be solved through onboard deterrence and policing actions by naval forces alone, but that an ongoing political solution in Somalia is essential. The stakes are becoming ever-higher in the struggle against maritime piracy. Although incidents in other reaches of the world such as the Gulf of Guinea are escalating, Somalia remains the focal point of global piracy incidents, just as the activities of the Somali pirates focus around what can be described as the world’s most important shipping lanes. According to the International Maritime Bureau’s Piracy Reporting Centre (IMB PRC), worldwide attacks in 2011 numbered 352, of which 199 (56%) took place around the Gulf of Aden and the Indian Ocean, up 57.9% from the 126 attacks in the same region in 2010. Of these attacks, only 24 (12%) were successful, down from 35 (27.8%) the previous year. So far in 2012 there have been 26 Somali incidents, with four hijackings, resulting in 64 hostages being taken. This takes the total number of hostages currently being held by Somali pirates to 177, and 12 vessels.

The drop in success rates of the Somali pirates can largely be attributed to the adoption of the IMB’s best management practices. These include measures such as retreating to a citadel within the vessel at the first sign of an attack, and contacting any one of the naval forces patrolling the waters, which operate a first response tactic. In addition to the EU NAVFOR force, there are also a number of other navies involved in patrolling the waters for pirate activity, including the US, India, Japan and Iran, with the closest unit responding to any pirate attack.

In a recent EU NAVFOR briefing, Chief of Staff Captain Phil Haslam said: “The anti-piracy forces have had some success in 2011, but all gains to date are reversible. Piracy is not over, the pirates’ intent is clear and they are as adaptive and agile as ever.” This is unsurprising given the sums pirates can earn from ransoms. Lets take a look at the pirates’ “global revenue” in recent years:

It is reported that US$79.8 million was spent in 2010 for 25 ransoms, US$146.2 million in 2011 for 30 ransoms, and already US$9.4 million have been paid this year for two ransoms. Regardless of how the world economy is doing, pirates are doing quite well. It is thus unsurprising that attacks are becoming bolder and more coordinated, as pirates step up their efforts for successful missions. Somali pirates are increasingly operating from hijacked vessels acting as ‘mother ships’, enabling them to operate further out to sea. They are attacking in larger groups, as seen on February 27, 2012 a bulk carrier was approached by a group of 10 skiffs in the Bab el-Mandab, following a similar incident on February 15, and on February 25 the closest-ever incident to the Strait of Hormuz was recorded. This will be of particular concern given the importance of the strait to the global economy – around 35% of seaborne crude oil passes through the waterway, and tensions in the region are already heightened following Iranian threats to close it. Further, violence against crews is heightening, and some are effectively used as slaves.  Danish naval forces freed a Pakistani and Iranian crew freed in February, and it was revealed that they had been used to operate the Iranian vessel as a mother ship, with no ransom demanded for them or their ship.

The cost of Somali piracy to global shipping is staggering. According to the IMB, piracy cost US$6.9 billion in 2011, with US$2.7 billion spent on sailing through the affected area at a greater speed and US$1.27 billion on military operations. The cost of hiring armed guards for vessels sailing through pirate danger zones is also escalating. This has spawned a rapidly growing business of security firms offering guards for ships, in an industry that nets around US$55.2 million a month according to the Financial Times. The cost of hiring armed guards can be extremely expensive, reaching up to US$21,000 per day for an entourage of three.

As noted before, the problem of Somali piracy can’t be eliminated through preventative and policing measures by vessel operators and naval forces alone. Rather, a political solution which helps to address the underlying causes of the pirate scourge must also be found. Somalia has been without a stable central government since the fall of Siad Barre’s regime in 1991, and the lack of effective governance, the dearth of opportunities, and the relatively easy pickings of the international shipping lanes off its waters has created the piracy industry. In a recent Somalia conference held in London, Koji Sekimizu, secretary-general of the International Maritime Organisation (IMO), said:

“Cooperation between and among states, regions and organizations holds the key for a lasting solution to Somalia’s problems. Piracy is a symptom; and, while a symptom can be treated and its effects can be alleviated, real progress is actually higher than it has ever been.”

With diminishing success rates, growing prosecutions of pirates, and attacks on landside pirate infrastructure, the lure of piracy for Somalis may begin to diminish. With the problem of poverty and lack of opportunities in the country unlikely to be solved in the near future, the same goes for the piracy threat around the Gulf of Aden. In light of this, armed guards are likely to become a regular presence on ships. However, while it is true that a vessel protected by armed guards has not yet been hijacked, there is a question as to how many vessels with armed guards have been attacked. As the industry becomes better regulated – as it must if more illegal killings are to be prevented – costs will continue to climb. The industry soon will be debating how these extra costs are shared between shippers and vessel operators.

About Mahab Rahman

Mahab is an Assistant Operations Manager at MTS Logistics, and has been with the company since 2009. He graduated from Baruch College with a BBA in Economics.

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