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Sea Transportation: Pirate Economics
   Next Article → COLOMBIA: Dirty Money
May 20, 2011: In the first three months of this year, Somali pirates attacked 97 ships (and captured 15), compared to 35 attacked in the first three months of 2010. Last year, pirates got paid over $200 million in ransom. Most of that was taken by the pirate gang leaders, local warlords and Persian Gulf negotiators who deal with the shipping companies. But for the pirates who took the ship, then helped guard it for months until the money was paid, the take was still huge. Pirates who actually boarded the ship tend to receive at least $150,000 each, which is ten times what the average Somali man makes over his entire lifetime. Even the lowest ranking member of the pirate gang gets a few thousand dollars per ransom. The general rule is that half the ransom goes to the financiers, the gang leaders and ransom negotiators. About a quarter of the money goes to the crew that took the ship, with a bonus for whoever got on board first. The pirates who guard the ship and look after the crew gets ten percent, About ten percent goes to local clans and warlords, as protection money (or bribes). There is no shortage of eager young Somalis seeking to join the pirate gangs. Most will not get much more than weapons, food, and the use of a speed boat. If they want to make more, they have to capture a ship and hold it for ransom. The dozen or so pirate gangs, led by men who were local warlords or tribal leaders, get really rich. There are plenty of local warlords and merchants who will finance new pirate gangs, in return for up to 50 percent of whatever that gang gets in ransoms over a certain period. The money men will advance several hundred thousand dollars, often selling needed weapons and equipment, as well as providing technical advice. For the pirates, it's a business.

For the last three years, Somali pirates have been operating as far east as the Seychelles, which are a group of 115 islands 1,500 kilometers from the African coast. The islands have a total population of 85,000 and no military power to speak of. They are defenseless against pirates. So are many of the ships moving north and south off the East Coast of Africa. While ships making the Gulf of Aden run know they must take measures to deal with pirate attacks (posting lookouts 24/7, training the crew to use fire hoses and other measures to repel boarders, hanging barbed wire on the railings and over the side to deter boarders), this is not so common for ships operating a thousand kilometers or more off the east coast of Africa. Ships in this area were warned last year that they were at risk. Now, the pirates are out in force, demonstrating that the risk is real.

But these cargo ships and tankers are big business. The big ones cost over $50,000 a day to operate and are at sea most of the time if they want to make a profit. The crews are small (rarely over 30 people) because the ships are highly automated. Extra insurance for pirate risk can run several thousand dollars a day, or more, depending on exactly what route the ship takes and how much security you want. These rates keep changing, and generally increasing, as the pirates change tactics. If a ship wants to guarantee safety, it can pay up to $50,000 a day for it (insurance, security personnel on board, extra equipment). Most ships buy some insurance and take their chances. They do that because only 1-2 percent of ships are even attacked.

The pirates are media savvy, and are pushing the line that they are simply patriots, getting payback for the foreigners who illegally fish in Somali waters (common) and dump toxic wastes off the coast (rare, but makes for great headlines). There are over a thousand gunmen attached to pirate gangs in the north, although the group operating off the east coast pay "taxes" to al Shabaab for the use of several fishing villages. Most of the ships seized late last year were taken closer to the Yemeni coast, thus showing that the entire Gulf of Aden (between Yemen and Somalia, with the Indian ocean to the east and the entrance to the Red Sea to the west) was subject to pirate attacks. Despite the scary headlines this has generated, world trade, or even traffic to the Suez Canal (at the north end of the Red Sea) is not threatened. While ten percent of world shipping traffic goes through the Gulf of Aden each year, most of it is in ships too fast for the pirates to catch, and too large for them to easily get aboard. These ships pay higher fuel costs (for the high speed transit), higher insurance premiums, and two days of "danger pay" for their unionized crews, and that's it. This increases the annual operating costs of these ships by a fraction of one percent. But for smaller, and slower, freighters, mostly serving local customers, the pirates remain a problem. These ships tend to be owned by African and Arab companies, and manned by African and Arab crews.

In dealing with a piracy problem like this, you have three main choices. You can do what is currently being done, which is patrolling the Gulf of Aden and shooting only when you see speedboats full of gunmen threatening a merchant ship. The rule appears to be that you fire lots of warning shots, and rarely fire at the pirates themselves. This approach has saved a few ships from capture, and the more warships you get into the Gulf, the more pirate attacks you can foil. But it won't stop the pirates from capturing ships. Establishing a similar anti-piracy patrol off the east coast of Africa would cost over half a billion dollars a year, at least.

A second approach is to be more aggressive. That is, your ships and helicopters shoot (pirates) on sight and shoot to kill. Naturally, the pirates will hide their weapons (until they are in the act of taking a ship), but it will still be obvious what a speedboat full of "unarmed" men are up to. You could take a chance (of dead civilians and bad publicity) and shoot up any suspicious speedboat, or larger mother ship. Some of the pirates would probably resort to taking some women and children with them. Using human shields is an old custom, and usually works against Westerners. More pirate attacks will be thwarted with this approach, but the attacks will continue, and NATO will be painted as murderous bullies in the media.

The third option is to go ashore and kill or capture all the pirates, or at least as many as you can identify. Destroy pirate boats and weapons. This is very dangerous, because innocent civilians will be killed or injured, and the property of non-pirates will be damaged. The anti-piracy forces will be condemned in some quarters for committing atrocities. There might even be indictments for war crimes. There will be bad publicity. NATO will most likely avoid this option too. The bottom line is that the pirate attacks, even if they took two or three times as many ships as last year, would not have a meaningful economic impact on world shipping. Total cost to shipping companies (ransoms, extra fuel, security equipment and services) is over $5 billion a year.

For example, the international anti-piracy patrol in the Gulf of Aden costs $300 million a year, a fraction of a percent of the defense budgets of the nations involved. Politicians and bureaucrats can stand that kind of pain, and will likely do so and refrain from doing anything bold in Somalia.

 

Next Article → COLOMBIA: Dirty Money
  

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DavidE    4th option   5/20/2011 6:56:22 AM
You could blockade the ports, search all ships coming and
going, and seize any ships containing arms. Pirates can't
operate motherships from any old place on the Somali coast,
they need a port, especially if they want to berth a captured
ship.  So you don't need to blockade long stretches of coast.

And option 3 -- going ashore and clearing out the pirates --
won't work if you don't stay and keep it clear of pirates.  But this means
exposing the troops to an insurgency.   
 
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Little Ray       5/20/2011 9:23:51 AM
The laws of the sea need to changed to allow the vermin to be wiped out.  
In order for piracy to flourish, they have to make money. So the very first thing is NO RANSOM.  Any corporation that pays ransom for ship or crews should be sanctioned into bankruptcy. 
All pirates captured should be tried, convicted, and executed right there at sea.  No delays.  No appeals.
The navies of the Civilized World should burn the waterfronts and sink or destroy everything that floats in the coastal towns  that harbor the pirates.
Private ships should be allowed to carry arms for their own defense.  Instances of successful defense that result in pirates killed and pirate vessels destroyed should be rewarded with a bounty.
The murder of crews should be punished with massive and indiscriminate retaliation, the destruction of entire towns, etc.  
We should find out where pirate leadership lives, and take them out with bombs.  
Finally, they need to go after pirate logistics.  Find out who is providing the weapons, speedboats, who is banking for them, who is providing information on ships to them, etc., then kill them and destroy their businesses.  
 

 
 
 
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Tucci78    Perhaps more importantly...   5/21/2011 8:38:47 AM

The laws of the sea need to changed to allow the vermin to be wiped out.  

In order for piracy to flourish, they have to make money. So the very first thing is NO RANSOM.  Any corporation that pays ransom for ship or crews should be sanctioned into bankruptcy. 

All pirates captured should be tried, convicted, and executed right there at sea.  No delays.  No appeals.

The navies of the Civilized World should burn the waterfronts and sink or destroy everything that floats in the coastal towns  that harbor the pirates.

Private ships should be allowed to carry arms for their own defense.  Instances of successful defense that result in pirates killed and pirate vessels destroyed should be rewarded with a bounty.

The murder of crews should be punished with massive and indiscriminate retaliation, the destruction of entire towns, etc.  
 
We should find out where pirate leadership lives, and take them out with bombs.  

Finally, they need to go after pirate logistics.  Find out who is providing the weapons, speedboats, who is banking for them, who is providing information on ships to them, etc., then kill them and destroy their businesses.

Let's ask a question. It's appropriate to focus on piracy out of the coastal towns of Somalia. It's become a problem that even the MSM hasn't been able to bury in favor of political correctness. But why isn't such piracy occurring everywhere?
 
Criminals in third-world hell holes all over the planet have got to have been observing the profitability of the Somali method, taking big ships far out to sea, holding them and their crews for ransom, and all with the kinds of loss potential that criminals (and especially third-world thugs) consider minimal to zip.
 
So why aren't we seeing the same kind of piracy hammering international commerce all over the place, particularly at the other end of the Indian Ocean? Are the Thais, the Malaysians, the Indonesians, and the Filipinos doing something different, something effective, to suppress such criminality, or is it simply that the MSM isn't reporting about what's happening over here?
 
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Corsair700       5/21/2011 10:01:14 PM
Check the information available and you will find that pairacy in the Indonesian archipeligo is a HUGE and growing problem. From memory, attacks in the regiod doubles last year and have been an ongoing problem for many years.
 
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Tucci78    Any whiff of this in StrategyPage?   5/21/2011 11:53:05 PM

Check the information available and you will find that piracy in the Indonesian archipelligo is a HUGE and growing problem. From memory, attacks in the region doubled last year and have been an ongoing problem for many years.

I know that StrategyPage.com is a digest of information found in various published sources, and while I recall some years ago reading occasional pieces on this site about piracy in the Straits of Malacca, there's been nothing here compared with the reports on pirates based on the Somali coast.  I assume that this has been due to recent reports that predation upon international sea traffic in those narrow waters has been "almost eradicated" (see Wiki-bloody-pedia), but it's not possible to believe that the waters around Indonesia, Brunei, Malaysia, Vietnam, and the Philippines - less heavily traveled by the international shipping critically important to the First World - are not still plagued by the "criminals of opportunity" seeking easy profit. The economies in all of these countries rely upon marine transportation for moving people and goods. 
 
That fruit might not be particularly juicy, but there's a helluva lot of it, all of it low-hanging. 

How have the governments in the regions of the Straits of Malacca been able to render that particular zone safe for transit by the big-money stuff, and can their methods be replicated on the western side of the Indian Ocean? 
 
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WarNerd       5/22/2011 4:21:59 AM


everywhere?

Criminals in third-world hell holes all over the planet have got to have been observing the profitability of the Somali method, taking big ships far out to sea, holding them and their crews for ransom, and all with the kinds of loss potential that criminals (and especially third-world thugs) consider minimal to zip.

So why aren't we seeing the same kind of piracy hammering international commerce all over the place, particularly at the other end of the Indian Ocean? Are the Thais, the Malaysians, the Indonesians, and the Filipinos doing something different, something effective, to suppress such criminality, or is it simply that the MSM isn't reporting about what's happening over here?
Piracy around the areas you list was very bad for a few years, with most of the crime taking place in or near the Strait of Malacca, but the other areas were used as safe havens for transferring cargo and abandoning the ships. Activity peaked in 2005, then dropped rapidly when Indonesia was confronted with an ultimatum to carry out its duties to suppress piracy on their side of the border, or members of the international community would do it for them.  When Indonesia proved it was not up to the task they negotiated help from India, in order to keep the UK and USA out of their waters.

Most piracy involving capture of ships (as opposed to sneaking on board and stealing supplies or robbing the crew) is now centered around Somalia (of course) and Nigeria (oil tankers).

For up to date reports look here ICC Commercial Crimes Service -- Live Piracy Report
 
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Tucci78       5/22/2011 3:15:30 PM

Piracy around the areas you list [the eastern Indian Ocean, the waters around Malaysia, Thailand, Indonesia, and the Philippines] was very bad for a few years, with most of the crime taking place in or near the Strait of Malacca, but the other areas were used as safe havens for transferring cargo and abandoning the ships. Activity peaked in 2005, then dropped rapidly when Indonesia was confronted with an ultimatum to carry out its duties to suppress piracy on their side of the border, or members of the international community would do it for them.  When Indonesia proved it was not up to the task they negotiated help from India, in order to keep the UK and USA out of their waters.

Most piracy involving capture of ships (as opposed to sneaking on board and stealing supplies or robbing the crew) is now centered around Somalia (of course) and Nigeria (oil tankers).

For up to date reports look here
ICC Commercial Crimes Service -- Live Piracy Report

Appreciated. But what was it - specifically - that the Indonesians, the Thais, and the other nations in that area did to successfully abate piracy?
 
If we have a precedent in the South China Sea and the Straits of Malacca and thitherabouts which worked, can these methods be applied in the western Indian Ocean off the coast of Somalia?
 
Knowing what I know about the Indonesians - with the exception of Barry Soetoro, citizen of that nation and faux president of these United States - it's likely to have been "Kill 'em all, and let Allah sort 'em out."
 
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Corsair700       5/23/2011 10:03:46 AM

Mariners are warned to be extra cautious and to take necessary precautionary measures when transiting the following areas:

SOUTH EAST ASIA AND INDIAN SUB CONTINENT

Bangladesh : The area is still  listed as high risk. Pirates are seen targeting ships preparing to anchor. Most attacks reported at Chittagong anchorages and approaches.

Indonesia : Anambas / Natuna / Mangkai / Subi Besar / Merundung islands area. Pirates normally armed with guns / knives and / or machetes. Generally be vigilant in other areas. Many attacks may have gone unreported. Pirates normally attack vessel at night. When spotted, pirates usually abort the attempted boarding.

Malacca Straits : Although the number of attacks has dropped due to the increase and aggressive patrols by the littoral states authorities since July 2005, ships are advised to continue maintaining a strict anti piracy watch when transiting the straits. Currently, there are no indications as to how long these patrols will continue or reduce.

Malaysia : Off Tioman / Pulau Aur / South China Sea. Although no reported attacks recently, vessels are advised to remain vigilant. In the past, pirates armed with guns and knives attack vessels during the hour of darkness. A number of tugs / barges were also hijacked in the area.

Singapore Straits : Vessels are advised to continue maintaining adequate anti piracy watch and measures despite the reduction in attacks. Pirates attack ships while underway or while anchored at Eastern OPL.

South China Sea : in the vicinity off Anambas / Natuna / Mangkai islands / Subi Besar / Merundung area.

Vietnam : Vung Tau
 
The most recent 10 attacks (over the past 7 days):
Somalia      4
Iran             1
Congo         1
Indonesia    1
Ghana         1
Singapore   1
Benin          1
 
 
 
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