A freighter carrying a cargo of grain to Iran has been seized by Somali pirates in the Gulf of Aden:
Somali pirates struck again yesterday, seizing an Iranian cargo ship holding 30,000 tonnes of grain, as the world’s governments and navies pronounced themselves powerless against this new threat to global trade.
fester at The Newshoggers is correct in that the cost-benefit of measures to curtail piracy needs to be considered in the calculus:
I have seen calls for the formation of merchant convoys to be formed. These calls are mainly on blogs and in comments. The big problem for this strategy is one of cost and benefit. Right now piracy is a front page issue as it is bizarre and unusual. However in the grand scheme of things, it has not been that expensive. The best estimates are under one hundred million dollars in direct costs for this year.
The costs may be going up sharply and soon. According to William Pentland, writing in Forbes insurance costs for shippers through the Gulf of Aden have increased ten-fold recently:
Roughly 11% of the world’s seaborne petroleum passes through the Gulf of Aden. If the incidents continue unabated, shipping vessels may opt to avoid the Gulf of Aden by taking the longer route to Europe and North America round South Africa’s Cape of Good Hope, which would almost certainly drive up commodities prices.
“The Gulf of Aden is a vital international trade route, and it is intolerable for it to be disrupted by pirates in this way,” Pottengal Mukundan, the director of the International Maritime Bureau recently told a Malaysian shipping publication.
While previous attacks have taken place within 200 nautical miles of land, the Sirius Star was hijacked roughly 450 miles southeast of Mogadishu, Somalia, according to the International Maritime Bureau. In addition, the targets have shifted from fairly insignificant to critically strategic resources. The seizure of the Sirius Star is the first hijacking of a very large crude carrier on record.
Foreign navies have begun patrolling the Gulf of Aden to rein in the pirate gangs off the coast of northern Somalia, but they have had only limited success. As a result, ship owners have seen insurance premiums for coverage of passage through the Straits of Aden climb from an average of $900 to $9,000.
The value of the Sirius Star, the oil tanker captured earlier this week, is estimated to be $120 million and that of its cargo over $100 million. We can probably expect the ransom demand to be commensurate with the value of the prize. I’d estimate the value of the cargo of the Iranian ship that’s been captured at something like $3 million and the ship carrying it about that, too. The value of the cargo of the Ukrainian freighter seized in September which, reportedly, included 33 T-72 tanks is almost certainly in the tens of millions.
As the value of prizes taken and the ransoms demanded rise, I wouldn’t be surprised if the $30 million to $40 million in annual direct costs attributable to piracy worldwide seen this year are looked back on as the good old days and that ten-fold insurance increase is just a start.
At this point I doubt that our navy is really constituted properly for convoy duty. As the costs of piracy rise, that could change.
Piracy, like other forms of banditry, tends to flourish in the absence of functioning governments and that’s certainly the case in Somalia, which has been without one since 1991. The country is plagued by warring clans, Islamists, and even, if reports are to be believed, toxic waste dumping. It may well be that piracy in the Gulf of Aden will only increase without a functioning Somali government. It’s hard for me to see what forces would cause one to emerge.
Update
Traffic through the Suez Canal has already been depressed somewhat by the world financial crisis and, if the threat of piracy causes further reductions in use of the Aden/Suez route, the implications for Egypt could be quite serious. The Suez canal provides 4% of annual GDP and 10% of the countries foreign exchange:
There is growing evidence that the current spate of piracy near the Horn of Africa has undermined ship operator confidence in the Red Sea/Suez route and use of the old Cape route is now a considered option despite the associated high costs.
With such a diversion adding around 20 days to the average voyage and day-rates for the largest ships in the $20,000 (Dh73,476) to $30,000 (Dh110,214) ballpark, the fact that such an alternative is being considered is testament to the seriousness of the piracy situation.
A report in the ME Times claims Egypt privately fears a downturn in canal revenues, which is a hefty foreign currency spinner at 10 per cent and provides around 4 per cent of national income. However, the official response to the claims is to deny that piracy is a threat to the canal despite a recent reduction in tariffs that is believed to be due to a combination of the fall in Chinese exports and piracy surge.
Update 2
There are reports that the Indian Navy has sunk a pirate vessel that’s being characterized as one of the “mother ships” responsible for extending the reach of the Somali pirates farther into the open seas:
NEW DELHI — An Indian naval vessel sank a suspected pirate “mother ship” in the Gulf of Aden and chased two attack boats into the night, officials said Wednesday, yet more violence in the lawless seas where brigands are becoming bolder and more violent.
Separate bands of pirates also seized a Thai ship with 16 crew members and an Iranian cargo vessel with a crew of 25 in the Gulf of Aden, where Somalia-based pirates appear to be attacking ships at will, said Noel Choong of the International Maritime Bureau’s piracy reporting center in Malaysia.
“It’s getting out of control,” Choong said.
A multicoalition naval force has increased patrols in the region, and scored a rare success Tuesday when the Indian warship, operating off the coast of Oman, stopped a ship similar to a pirate vessel mentioned in numerous piracy bulletins. The Indian navy said the pirates fired on the INS Tabar after the officers asked it to stop to be searched.
“Pirates were seen roaming on the upper deck of this vessel with guns and rocket propelled grenade launchers,” said a statement from the Indian navy. Indian forces fired back, sparking fires and a series of onboard blasts — possibly due to exploding ammunition — and destroying the ship.
Note the report of the seizing of the Thai ship. That would make three ships seized in as many days.
