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Issue 524/ 11th - 17th Feb 2012
Somali Pirates Spawn Lucrative Security Trade
Somali pirates collected an estimated $160m in ransoms last year. But they are not the only ones making money. Lawyers and insurers have benefited too. More controversially, the rise in piracy has spawned a valuable, ill-regulated and, critics fear, potentially lethal maritime security industry.
More than a third of the world’s traded goods cross the east African coast, the stretch of sea most vulnerable to Somali pirates. Many ships now employ private security companies as protection and this fledgling industry pulls in $52.2m a month from an estimated 1,500 escorted journeys, according to the Security Association for the Maritime Industry, which represents 120 armed security outfits, more than half of which are British.
“Piracy is a lucrative business not only to Somali pirates but to many profiteers who make more money than the pirates themselves. Some of them are cowboys – they have no proper security, they’re inefficient, incompetent and they want money,” Peter Cook, Sami director, told the Financial Times.
There are signs that efforts by the shipping industry and governments to combat the threat is having an impact.
According to a report released on Wednesday by the Colorado-based One Earth Future Foundation, the number of hijackings attributed to Somali pirates fell 36 per cent last year from 2010.
But that is coming at a significant price. The total cost to the global economy of the piracy off Somalia was between $6.6bn and $6.9bn last year and the $160m shipping companies paid in ransoms was outstripped by the far bigger sums they spent on preventing attacks.
Shipping companies spent $1.1bn on security equipment and armed guards and a further $635m on insurance, according to the new report. Their crews also received an extra $195m in pay for the risks of operating in the highest-risk area.
The UK and others attribute the fall in Somali pirate activity in the past year to increased use of security companies as well as better on-board security and counter-piracy navy patrols.
With trade volumes at sea set to grow and navies stretched, this business will continue to expand, Sami predicts. “There are rich pickings to be had, some of the big maritime security companies have improved their turnover by 350 per cent in the last year,” Mr Cook said. Ships pay roughly $5,000 a day for a four-man armed team, on duty for four to 20 days.
Concerns persist about their regulation and the conflicting rules they operate under. Some countries allow ships that bear their flag to use private security, while many others do not. Some ports and territorial waters bar them outright.
There are also fears that the proliferation of these guards could lead to an escalation in violence.
At any one time, there are an estimated 240 armed security outfits off the east coast of Africa. Some follow scrupulous procedures over weapon procurement and use. But others buy and transport arms illegally and their crews later dump munitions overboard. Already there have been reports of shoot-outs at sea and fishing boats attacked in error, industry officials said. “Everybody in the maritime industry is petrified of a Blackwater-type incident, a shooting that ends up on YouTube,” says Mr Cook.
Sami is formulating a code of conduct for its members and members of the industry say they are keen to see one set of global rules that would apply throughout multiple jurisdictions.
“We need to make sure everyone operates to the same standards,” says Barry Roche, managing director of the UK’s Protection Vessels International, the world’s largest supplier of such guards.
The International Maritime Organization, a UN agency, last year asked flag states to determine their own policy on whether ships bearing their flag could carry private arms.
But this has given rise to what maritime lawyer Stephen Askins, who has dealt with 30 hijacked vessels to date, calls “a patchwork” of rules. “The problem is you’re getting different countries interpreting [the IMO guidance] in different ways . . . and it’s going to cause the security companies some difficulty in sorting it all out,” Mr Askins told the FT. “There are a lot of weapons in circulation in a very sensitive part of the world.”
While some countries such as France, Spain and Israel permit state security detachments on board, others such as Denmark, Germany, Norway and, after a recent policy U-turn, the UK, allow private armed guards.
For now, however, many ports in the region have different rules on weapons storage and transfer, making it harder for maritime guards to operate in volatile areas. Last year, Eritrea detained four British men working for PVI for six months after it alleged they had illegally stashed weapons on its territory and were working as spies. PVI said this was a “misunderstanding”.
Source: The Financial Times