Pirates Plunder International Trade Ransoms

Black Market Entrepreneurs Profit From Gulf of Aden Ambushes

Nov 28, 2008 Daniel Workman

In the Gulf of Aden en route to the Suez Canal, sea-savvy pirates are waiting to attack merchant ships transporting cargo valued at hundreds of millions of dollars.

Off the northeast coast of Somalia but closer to the main shipping passageway along Yemen’s southern shores, heavily armed pirates in fast-moving motorboats, rowboats and even sailboats spearhead an illegal business venture that rakes in millions of dollars from ransom demands.

Larger pirate ships move stealthily across the Gulf of Aden - one of world trade’s busiest waterways - then launch these smaller and nimbler pirate attack vessels once a vulnerable tanker has been targeted.

Closing in on one of the 200 tankers that travel the Gulf of Aden daily, the pirates’ plan of attack is simple and effective.

They use hand-held GPS navigation devices to track down and board large cargo ships like the Saudi supertanker carrying US$100 million worth of crude oil seized earlier in November. Brandishing shoulder-fired rockets, machine guns or grenades, pirates kidnap the crews then hold them at gunpoint. The captured cargo ships are usually moved to an area near the towns of Hobyo or Eyl on the southern side of the Somali coastline where the captured goods are kept until a hefty ransom is paid.

Key International Trade Shipping Lane

Annually, about 20,000 vessels pass through the Gulf of Aden, an international trade conduit through which some 11% of the world’s seaborne petroleum passes. The Aden passage links the Indian Ocean with the Suez Canal and the Mediterranean Sea.

In the first 11 months of 2008, pirates have attacked 100 international cargo ships in the Gulf of Aden – four times the number of attacks that the International Maritime Bureau in Malaysia reported for all of 2007. Pirate attacks are so common that the Gulf of Aden can also be found on online Google maps by searching for its nickname ‘Pirate Alley’.

In late September, Somali pirates abducted the Ukrainian freighter MV Faina packed with tanks and other heavy weapons. In October, a Turkish ship transporting Canadian iron ore to China was captured. More recently, the pirates attacked a Saudi-owned crude oil supertanker loaded with 2 million barrels of oil. And just today, pirates hijacked the Liberian-flagged chemical tanker MV Biscaglia operating out of Singapore.

According to New York Times’ Jeffrey Gettleman, Somali piracy profits should hit US$50 million in 2008.

Ransoms Grow As Pirates Become Bolder And Richer

Pirates are making so much ransom money that they are expanding the territories in which they operate. And rather than discouraging the pirates, growing publicity about their crimes has in fact increased the negotiated price for the abducted Ukrainian ship from $1 million to an estimated $5 million.

Exporter Insurance Excludes Piracy Risks

One of the major reasons that pirates can demand million-dollar ransoms is that most export insurance coverage doesn't cover losses due to piracy.

Typical insurance policies for exporters cover a defined list of commercial and political risks. Commercial risks include buyer bankruptcy, default, refusal to accept shipments and trade contract termination. Political risks range from blocked funds, war, import permit cancellation, revolutions, civil commotion and government seizure of property. Neither category insures a criminal activity like piracy.

Piracy Threatens International Trade

Chaos reigns in impoverished Somalia, with its Gross Domestic Product of only US$600 per capita. Instead of stable government, the country has a loose coalition of clerics, business leaders and Islamic court militias.

Since the Somali coalition doesn’t recognize the International Court of Justice which arbitrates international legal disputes, many countries conclude that they don’t have jurisdiction to prosecute pirates operating in waters outside the shipping countries’ territories. Instead, nations are turning to the United Nations for help.

Meanwhile, pirate gangs help each other get rich unfettered by government interference even though the pirates don’t pay taxes. New York Times’ Jeffery Gettleman interviewed jailed pirate Farah Ismail Eid, who claims that ransom loot is divvied up 4 ways:

• 30% to Somali government officials
• 30% to pirate gunmen on the ship
• 20% to pirate bosses
• 20% to buy supplies like cigarettes, fuel and guns for financing future missions.

Actions Required To Stop Piracy

A multinational naval force led by countries like Russia, India, the United Kingdom and the United States have been patrolling a guarded corridor through the Gulf of Aden. About 90% of ships navigating Pirate Alley use this corridor, with no hijackings inside the zone since it was set up on August 22.

Other exporters are diverting their shipments around Africa's southern Cape of Good Hope rather than through the Gulf of Aden to the Suez Canal – even though the more southern route is much longer and more expensive.

Piracy has become an international crime that threatens global commerce shipments, leading to higher prices around the world for everyone. It may take an act of war before the increasingly rich and greedy pirates are brought to justice.

See also: Somali Pirates Force Insurance Premiums Up

The copyright of the article Pirates Plunder International Trade Ransoms in International Trade is owned by Daniel Workman. Permission to republish Pirates Plunder International Trade Ransoms in print or online must be granted by the author in writing.

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