Sea Transportation: The Incentives


August 31, 2011: The Somali pirates are an excellent example of how incentives succeed. Give a bunch of gun loving, entrepreneurial, ruthless, very poor people a way to make a lot of money, and they will come up with an endless number of surprises when you try to stop them. For over a decade, the Somali pirates have overcome every effort to stop their seizing of merchant ships.

For example, on August 20th, Somali pirates boldly attacked a chemical tanker waiting to dock at the Omani port of Salalah (not far from the Yemeni border). Salalah is a major port, built in the late 1990s and handles nearly a million tons of cargo a month. The pirates grabbed the Indian tanker before the local port security police could show up at the ship, which was anchored three kilometers (two miles) from the port itself (waiting for some dock space to open up). The pirates then told the port security forces to back off or the Indian sailors would be killed. The Indian ship then got under way and moved off towards Somalia and months of captivity, and a huge ransom for the bold pirates. Now Oman, and any other major port (catering to big ships that can earn a big ransom) along the mouth of the Persian Gulf, have to consider increasing their security considerably. It’s not just ships anchored off these ports, waiting for some dock space, but the ships that slowly approach these busy ports. Slow, big, ships, especially at night, are what pirates seek.

Meanwhile, the pirates have improved their tactics on the high seas. Instead of single mother ships sneaking up on a large ship at night, and sending one or two speed boats after it, several mother ships are coordinating their movements so that a half dozen or more speed boats, each with four or more pirates aboard, can quickly surround the ship. Even if one or more of the speed boats are spotted, with so many closing in, and boarding at once, the pirates now have a chance of overwhelming any defense the ship has (including the increasingly popular armed security detachment of about four former soldiers or marines).

Finally, the pirates are using more and more of their ransoms to bribe people in the shipping and maritime insurance business to pass on information about choice targets (where they are, what their cargo is and what the defenses are.)

The pirates remain in business because the nations suffering the billions of dollars a year in losses (most of it for higher insurance and security costs) are unwilling to go ashore and destroy the pirate bases in northern Somalia. For as long as there have been pirates, this has been the only way to shut the brigands down. But the foreigners would rather continue suffering from pirate attacks, than get involved fighting Somalis in Somalia.



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