Higher speeds, hired guns drive Somali piracy cost
Wed Feb 8, 2012 10:56am GMT
* Total costs estimated at around $7 billion in 2011
* Ships forced to travel faster over longer routes
* Many more using armed private security guards
By Peter Apps, Political Risk Correspondent
LONDON, Feb 8 (Reuters) - Somali piracy in the Indian Ocean costs the global
economy some $7 billion a year, a study said on Wednesday, with ships forced
to travel faster over longer routes and increasingly hire armed security
"The question for the shipping industry is how long this is sustainable,"
said Anna Bowden, programme manager for the research by the U.S.-based One
Earth Future foundation.
For the last five years, a few hundred pirates sailing from a handful of
towns in the Somali enclave of Puntland have pushed ever deeper into the
Indian Ocean despite the dozens of international warships trying to stop
The study showed world governments spending at least $1.3 billion trying to
control the problem, a figure dwarfed by shipping industry costs estimated
at up to $5.5 billion.
The biggest single item was the $2.7 billion it costs for lone container
ships to hurry through at much higher, and much less economic, speeds.
Non-container ships with less flexibility to increase speed were adopting
other costly strategies.
Shippers also spent more than $1 billion on private security guards, often
armed, a figure that was rising sharply, the study showed. Half of all ships
were carrying guards by the end of last year, against an average of 25
percent for the whole year.
That means the private security companies, many based in Britain or
elsewhere in northern Europe, that combat the pirates were earning much more
than the pirates themselves.
COMPLACENCY SETTING IN?
The report estimated the total paid in ransoms at $160 million although the
average ransom for a ship paid in 2011 rose from $4 million to $5 million.
Whilst slightly fewer ships were taken in 2011, the amount of time vessels
and crews were held hostage kept increasing, as did the level of violence
used in attacks and against hostages.
Nonetheless,, protective measures have proved relatively effective, the
study said. So far, pirates have never seized a ship travelling faster than
18 knots. Armed private security guards also had a 100 percent success rate
in protecting ships.
Shippers have added barb wire and an array of other measures to vessels,
including "citadels" - armoured safe rooms in which crews can shelter from
attack until naval help arrives.
That has helped bring down insurance premiums, although shippers are still
paying some $635 million in extra premiums.
Re-routing ships to hug the Indian coast to avoid the mostly unpatrolled
Indian Ocean cost $486-680 million. Crews demanded some $195 million in
higher wages to transit the region.
"A major risk for 2012 is that complacency sets in if we think piracy is now
under control," said Jens Vestergaard Madsen, a senior researcher on the
project. "Pirates were less successful in 2011, but the piracy problem is
still not resolved. Ninety nine percent of these costs are spent mitigating
the problem, not resolving it."
In its first attempt to put a price tag on Somali piracy a year ago, the
foundation estimated an annual global cost of $7-12 billion.
This year's estimate was at the lower end of that range partly because of a
better dataset and partly because some numbers used earlier, such as
estimates from insurance firms of ransom costs, appeared unrealistically
high, the authors said.
The full report can be found at <http://oceansbeyondpiracy.org/
oceansbeyondpiracy.org/ (Editing by Alistair Lyon)
C Thomson Reuters 2012 All rights reserved
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Received on Wed Feb 08 2012 - 16:16:54 EST