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Old 04-14-2009, 04:19 PM   #1
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I have been left asking this question since yesterday waiting for some kind of policy to be presented by the US or UN as to how the world plans to deal with the Somali priracy problem.

So I ask the question: How should the world deal with this piracy problem that obviously results from poverty?

The real cost of piracy

Last year, Somali pirates collected millions of dollars in ransom payments for captured ships, but that only scratches the surface of the costs associated with modern-day piracy.

By Catherine Holahan

MSN Money

Given the life-or-death stakes, the rewards of high seas piracy are hardly impressive. Last year, Somali pirates collected an estimated $18 million to $30 million in ransom payments for captured ships, crew and cargo. That's less than half a percent of the total value of cars stolen in the U.S. last year.

But costs related to passing through the nearby Suez Canal, a crucial transit point for much of the oil and other cargo destined for Europe, have skyrocketed. The price of insuring and securing voyages has more than quadrupled, forcing some companies to spend millions per trip just to avoid the area.

"The economic problem is out of all proportion to the size of the piracy problem," says Peter Townsend, head of marine hull at insurance broker Aon, which sells policies that protect against losses from pirate attacks.

Piracy off the Somali and Nigerian coastlines was once a relatively small problem. The pirates primarily targeted fisherman and cruise ships in what amounted to petty theft, says Townsend. Over the years, they used the stolen money to buy better ships, rocket-propelled grenades, and additional weapons and ammunition with which to halt bigger ships. In recent years, as the Somali government has become less effective, the pirates have grown bolder.

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Piracy attacks increased 11% worldwide last year, according to the International Maritime Bureau's Piracy Reporting Center. Much of that was due to a spike in piracy off of the Somali coast. In March alone there were 15 attacks on vessels. Somali pirates have nabbed an additional three vessels since the U.S. Navy shot and killed three pirates in Sunday's successful rescue of cargo ship Captain Richard Phillips.

Increasingly, the attacks have strayed further into international waters, and there is now a 1.4 million square-mile area off the Somali and Nigerian coasts that is considered vulnerable to attack. Avoiding that area can easily add $1.5 million to $2 million in extra fuel, time and labor, to the cost of a shipment to Europe, but the cost of going through those waters is higher still. Insurance premiums protecting against vessel damage and delays due to piracy have increased five- to tenfold, says Townsend. The cost of hiring a security escort to pass through the Suez Canal is up to $100,000, depending on a ship's size and the value of its cargo. There are also additional military costs of patrolling the canal.

Many of the protective measures have proved ineffective. There are an estimated 600 to 1,000 pirates in the waters off of Somalia, says Townsend. Meanwhile, only about 30 ships patrol an area that about 1,400 merchant vessels passed through last month alone.

Delays from piracy cause some of the biggest cost increases. To avoid raising shipping rates during a downturn, some shipping companies have tried wrapping their hulls with razor wire or using several smaller, more nimble boats to transport cargo, because slower vessels are more easily boarded by pirates. Shipping crews are not allowed to be armed, though some carry weapons anyway, says Townsend.

Of the nearly 80 pirate attacks this year alone, pirates are still holding about 16 vessels, according to the maritime bureau. "It's akin to sitting in a taxi in a traffic jam," says Townsend. "The meter is still ticking and the ship owner is liable for the cost of the vessel and the time she is delayed."

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Old 04-18-2009, 11:35 PM   #2
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This thread reminds me of a very good article that was in an issue of Foreign Affairs in the 1991-1993 time frame. The discussion back then was the huge military) cost to the USA of protecting our oil interests in the middle east using US military power. At the time, the first Gulf War had just been completed and folks were considering the value of projecting power in the region vs just getting our oil from elsewhere. As I recall, the numbers were staggering in that it was calculated that we would have to triple or quadruple the price of crude in the USA to pay for the military presence in the middle east due to our interest in the oil there. The cost of the US military in the region remains staggering and that's without even including the present wars in Iraq and Afghanistan.

There have always been trade issues and economic incentives for the world's leading powers to intervene and be involved in politics of a region. Sometimes it is escorting ships in trade. 300-400 years ago it was the Brits escorting vessels in trade off north Africa to keep pirates and the Spanish at bay...more recently I remember when the USA was escorting Kuwait oil tankers between 1987-1990 as hubby David was flying missions off an aircraft carrier in support of those activities... Or sometimes it is undermining a political regime. History is full of examples where a world power has undermined a banana republic...often is association with a war...just think of all the countries the USA alone has manipulated over time...Iran and Iraq are just a recent couple examples. Its ironic that we helped put Saddam in power years ago and then ended up starting a war to take him out recently...other world powers have done the same in the past...its a bad and bullyish habit big powerful countries seem to have to protect their own interests.

Here on CL, the discussion is the cost of shippers avoiding a region or having world leaders involved by providing economic intervention to dissuade piracy in the region or providing military escort and patrol ships for the region to be safer. Again, always a matter of self-interest to the first world powers--intervention only seems to happen when there is a large economic incentive for the first world to intervene. Having "enough" ships in trade at risk is very much an economic incentive to take action. Thus, I expect action will be taken by the world's economic leading powers.

Cruisers are nobody and nowhere in this big picture. Sadly, our plight is a signal lost in the noise...something going on down in the weeds as they say...we're not in anyone's real play book regarding safety and piracy. The more big ships that are impacted by piracy the more patrol action or economic action we will see. In the interim, I'd suggest that any cruiser considering the waters near Somalia and the Horn of Africa re-route and consider other plans. JMHO take it or leave it.

Fair winds


"Do or do not. There is no try." - Yoda

What we're doing - The sailing life aboard and the Schooner Chandlery.

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Old 04-20-2009, 02:42 PM   #3
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I am hoping that he international community comes up with a solution before we get there

It is one of those situations that when you try to come up with a reasonable solution, it always comes back to Somalia needing to have a strong government and establish a Coast Guard with law and regulations....which means there will probably still be pirate issues when we hope to get insurance for a Red Sea transit.
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