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
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."