Piracy holding shipping trade to ransom

24 February 2010

The threat of piracy in the Gulf of Aden saddles the region’s shipping companies with increasing costs, longer routes and costly payoffs

The Gulf of Aden is one of the world’s busiest shipping routes. But it is also the most dangerous place for cargo ships. Pirates operating off the coast of Somalia are not only seizing ships, they are also raising the cost of international trade.

In Numbers

  • 204 - Number of ships attacked by Somali pirates in 2009
  • 49 - Number of vessels seized by Somali pirates in 2009
  • 10,000 - Miles added by diverting a ship around the Cape of Good Hope from the Suez Canal
  • $15,000 - Insurance premium on a $100m vessel sailing through the Gulf of Aden

Source: MEED

On 4 February, a Libyan-owned cargo ship was hijacked by Somali pirates in the Gulf of Aden. The 4,800 tonne MV Rim was captured south of the Yemeni coast. Its 17-crew members, most of whom were Romanian and Libyan, were taken to Somalia’s semi-autonomous northern region of Puntland.

In the same week, maritime officials confirmed a ransom had been paid for the release of another ship captured by Somali pirates, the Marshall Islands-flagged MV Filitsa.

Piracy in the region follows a cyclical pattern with seasonal variations

Jonathan Wood, analyst, Control Risks

With attacks on commercial vessels in the Gulf of Aden having risen to more than 200 in 2009, pirates represent a major threat to the Middle East’s shipping industry.

“We are seeing increases. As more attacks take place, we expect the market to be more cautious,” says Marcus Baker, managing director, global marine and energy practice, at insurance broker Marsh.

Naval patrols

The UK-based International Chamber of Shipping, which represents about two-thirds of the global maritime industry, has expressed frustration at the international community’s inability to combat the increasing scourge of pirates. 

According to the London-based International Maritime Bureau (IMB), there was a dramatic increase in the number of pirate attacks in 2009, up 40 per cent to 409 incidents globally, from 293 in 2008. Somalia pirates accounted for more than 50 per cent of the attacks in 2009, with gunmen seizing 49 vessels and holding 1,052 crew members captive. Eight were killed and more than 80 injured.

The increasing attacks in the Indian Ocean can be attributed to a combination of the time of year, the pirates’ increased reach and capabilities thanks to new powerful vessels, and increased naval activity in the Gulf of Aden, which has moved attacks to the Indian Ocean.

Some navies will not detain them. They confiscate items used for piracy and send them on their way

Jonathan Wood, analyst, Control Risks

“The naval patrols have done a good job monitoring the [Gulf of Aden] corridor,” says Captain Pottengal Mukundan, director of
the IMB.

“Between 8 July and 28 December [2009], there were no successful attacks. At the end of that period, there were two vessels taken in quick succession” say Mukundan.

“Piracy in the region follows a cyclical pattern with seasonal variations,” says Jonathan Wood, analyst at UK consultant,
Control Risks.

Improved technology

Currently, there are 20 to 25 international naval vessels patrolling the Gulf of Aden. According to some sources, the minimum required for effective control of the Gulf would be 60 ships.

Pirate attacks are opportunistic. They operate using small skiffs with powerful outboard engines that can be pulled onto the beach. Although fast and manoeuvrable, the skiffs lack range and are now regularly carried on ‘mother ships’.

Key fact - The cost of insuring a vessel with a top speed of 13 knots can be 10 times higher than a vessel sailing at 22 knots

According to the IMB, mother ships are captured fishing trawlers that are used as staging posts for attacks further out to sea.

The pirates’ technical equipment has also improved. Global positioning systems and satellite phones are used, and pirates have access to information from ports in the Gulf, Europe and Asia. They now have a greater ability to find, track and capture targets far beyond the coastline of Somalia.

“The last attack was 1,000 nautical miles from Mogadishu,” says Mukundan.

Sighting vessels and boarding them takes no more than 15 minutes. The pirates will break off an attack if they have not successfully boarded and seized the ship within that time, says Wood. Such a short space of time explains why even with international patrols in the area, ships are still being captured.

Vulnerable vessels

Captain Mohamed Abdel Halim, managing director of the UAE’s Jawar al-Khaleej Shipping, describes the capture of the Blue Star, an Egyptian-owned general cargo vessel, as it sailed east from the Mandab Strait, which connects the Red Sea and the Gulf of Aden in 2009. Although part of a naval convoy, pirates were able to lure the lead vessel into giving chase, leaving the merchant ships behind it exposed. A second vessel then attacked the merchant fleet and about 15 heavily-armed pirates took control of the Blue Star. The vessel was en route from Alexandria, Egypt to Mozambique to deliver its cargo of 6,000 tonnes of fertiliser. The vessel was then sailed to Eyl in northern Somalia, where it was anchored and its 28 crew members held for 63 days. Their eventual release was secured with a payment of $1m, dropped according to Abdel Halim, by helicopter onto the ship by the Egyptian government.

One of the reasons the pirates are willing to take such risks is the legal ambiguity surrounding the vessels’ capture. “Some navies will not detain them. They confiscate any items that might be used for piracy and then send them on their way,” says Wood. “It depends on the navy.”

Some sources estimate more than half of the captured pirates are released, a challenge for establishing a workable system of prosecution.

Slow-moving cargo ships are the easiest to seize. A vessel capable of moving at 22 knots is tricky to get onto

Marcus Baker, director, Marsh

Although the pirates have become more heavily armed and organised, their targets remain largely unchanged.

“Slow-moving cargo ships and tankers are the easiest to seize,” says Baker. “For faster-moving ships, premiums are reducing as a result of the insurers taking a closer look at the speeds and capabilities of the different categories of ship.”

“A container vessel, capable of moving at 22 knots is tricky to get onto. Their rating is about 0.015 per cent [the formula used to calculate the premium],” says Baker.

Slower vessels are only able to reach 14-15 knots and have a much lower freeboard – the height of a ship’s deck above the water level – making it much easier for pirates to board. Their insurance rates are as much as 0.15 per cent of the value of the ship, 10 times that for fast-moving vessels. The most vulnerable and potentially lucrative targets are crude oil tankers, which pass through the Gulf. A Greek-registered supertanker, the Maran Centaurus, carrying crude from the Saudi Red Sea port of Jeddah to the US was captured at the end of November along with its 28 crew, 1,287km from the Somali shore.

At 300,000 deadweight tonnes, the tanker is the second-largest ship taken by pirates. Its cargo – 270,000 tonnes of crude oil – was worth more than $20m at current prices. The vessel is still being held, possibly while a ransom is being negotiated. 

Ransom demands of up to $20m have been reported for other ships, while payments average between $3-5m, according to Baker.

Tanker hijack

The hijacking of the Centaurus is similar to that of Saudi tanker the Sirius Star a little more than a year ago. The Sirius Star was seized 833km off the Kenyan coast, in an area until then thought to be out of reach of pirates. The response from shippers passing through the Gulf of Aden has been varied. Some have begun diverting maritime traffic away from the Suez Canal in response to the escalation in pirate attacks.

In response to declining canal traffic, Egypt announced on 5 January it would indefinitely freeze transit fees for ships passing through the canal. As a result, overall traffic in January 2010 was slightly up on January 2009 figures, according to the Suez Canal Authority. Oil tankers were up just 1.1 per cent, while container traffic was down 5.6 per cent. 

However, the number of warships was up to 27 from 15, an 80 per cent increase.

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