21 Ships Are Held Captive By Somali Pirates -- Piracy on the Rise?

Currently, a record 21 ships are being held captive off the coast of Somalia. Captain Pottengal Mukundan, director of the International Maritime Bureau, said a global response would be necessary to secure their release. “What is required are more assets on the water to protect vessels and a proper system of arrest and prosecution of the pirates,” he said. The latter, he added, is unlikely for now given the weakness of the nominal Somali government.

Somalia’s Transitional Federal Government (TFG) lacks the resources to prevent piracy and it does not pay ransoms for captured foreign vessels or crews. In fact, according to Emira Woods of the Institute of Policy Studies, Somali pirates have more power than the fractured U.S.-backed TFG. Additionally, she cautioned that the Somali bandits are likely to become more desperate as foreign Navies box them in.

“The TFG is not seen as a credible force to withstand piracy attacks,” said Woods. “What's worse, the steady shipments of U.S. arms and military equipment are adding to growing anti-American sentiment.”

Analysts say the last two decades of piracy are a response by Somali fishermen to illegal fishing and toxic waste disposal by foreigners off the coast. Although some pirates appears to be developing links with the militant Islamic group al Shabaab, most appear to be displaced fishermen and teenagers unable to survive off the sea.

“The regions where the piracy flourishes saw these attacks start off as local efforts to provide a coast guard,” Woods said. The pirates tend to hold vessels and crews hostage to collect a ransom, rather than rob the cargo.

Many countries have deployed warships to the Indian Ocean in order to thwart attacks. At any given time, there are up to 30 vessels in the water to guard cargo ships passing through, including vessels from the European Union, North Atlantic Treaty Organization, Combined Taskforce 151 and companies safeguarding their own cargo.

Not a single African country has sent out warships, something worthy of notice, cautioned Deborah Osiro, an analyst for Nairobi’s Institute for Security Studies. The European Union’s budgeted amount for patrol vessels totaled $450 million in 2009. Safeguarding cargo through the Gulf of Aden costs an estimated $1.3 billion per year, according to RAND Corporation’s piracy expert, Peter Chalk.

The costs to outside nations are mounting. However steep the costs of an armed escort might be, Chalk said cargo vessels continue to sail near Somali shores. The route remains a quicker and cheaper option than alternatives which could take up to 20 extra days and cost an additional $1.5 to $2 million for cargo shipment.

“The risks are not sufficient enough to make it economically worthwhile to bypass the Gulf of Aden,” Chalk said.

When vessels are taken hostage, the shipping companies and cargo owners chose whether or not to pay the ransoms demanded for the boats’ release. Governments have not publicly assisted with ransom payments. Some argue there ought to be a ban on shipmasters paying for the release of their vessels, as ransoms provide money for criminal activities. However, the fees demanded by pirates are less than the wholesale cost of losing cargo. And when boats are not moving, they cannot make money.

There are substantial losses when vessels are kept inactive for months. The cost of one ship held hostage for two months averages $3 million. This includes “loss of hire, damage to the vessel and the cost of recovering the ship, including the payment and delivery of the ransom,” Mukundan said.

Some companies opt for kidnapping insurance when crossing the Gulf of Aden. “From their increased premiums and profits, you can extrapolate the damage to the shipping industry,” said Osiro. However, no economy-wide impact study has been done for the regional countries.

War binder insurance coverage can cost about $20,000 each year, whereas insurance premiums cost $500 in 2007. This excludes coverage for ransom payments. Last year the average ransom payment equaled $2 to $3 million. These amounts have more than doubled over the past 22 months, according to Chalk. Recently, $10 million was paid to release a South Korean freight, the largest known naval ransom to date.

Chalk noted that kidnapping insurance has become a lucrative business and more companies are offering it as an option, which then brings down premiums because of increased competition in the markets.

There are about 20,000 transits through the Gulf of Aden each year. The risk of attack ranges from 0.5 to 1 percent. According to the International Maritime Bureau, there were 420 incidents between 2008 and June 2010.

Somali piracy is unlikely to abate anytime soon. Since May 20th, there have been 14 reported incidents on the Red Sea, despite the monsoons, which many hoped would prohibit small attack boat activity. Osiro predicted many more attacks, and speculated that they are likely to become more indiscriminate as a result of the warships stationed in the Gulf of Aden and the Somali basin. Pirates still hold 405 hostages and 21 vessels for ransom. Military solutions will only lead to increased violence against captives, she said.

“The business of piracy is becoming more typical like the traditional organized crime,” Osiro added. “There is likely to be more human rights violations, illegal executions, illegal trials and the increasing role of armed private security providers.”

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