No to arms despite piracy

Despite the alarming number of piracy attacks, governments, ship owners and charterers are not keen to arm their crews or allow the use of armed security on board for protection.

National Iranian Tanker Company (NITC), which was earlier in discussions on placing private armed security teams aboard ships passing through the pirate-infested Gulf of Aden, has also stopped proposing for the said measure.

“Our management is of the view that ships should be allowed to carry arms but clients do not agree,” Anwar Lodhi, technical manager, NITC, said. “For 16 times our ships have been attacked …we have been fired by RBGs but there has been no casualty. We don’t send ships in the area unless the ship has good speed. With big ships, we managed to escape. Piracy attack is on the increase but right now there are no weapons in the ships.”

In an interview with this website in 2008, Mohammad Souri, Chairman and Managing Director of the NITC suggested vessels could be escorted by Coalition Naval Forces or establish their own armed security teams at the east and west entrances to the Gulf of Aden. He said some of the crew could also be equipped with armament for self-defence such as machine guns, barbed wire, flares, high-pressure water or long-range acoustic devices. There could also be internationally organised armed security teams, stationed at the two ends of the Gulf of Aden - Salalah and Djibouti - for the security of passing vessels.

At that time, he acknowledged that NITC has found very limited allies for this proposal. "Not many are in favour of this," Souri said. While seamen and marine professionals campaign for armed guards and heavy military response, the International Maritime Bureau (IMB) advises ship owners to adopt measures such as having lookouts or travelling at speeds, which would allow them to outrun the pirates.

This is despite the fact that as per IMB’s data, 53 ships were hijacked worldwide in 2010 (49 of them off Somalia's coast) with a record 1,181 hostages taken. In total, there were 445 pirate attacks in 2010, a 10 per cent  increase  from 2009. In terms of monetary damage, maritime piracy costs the global economy between $7 and $12 billion a year.

According to Oceans Beyond Piracy, ransoms have reached more than $148 million; insurance premiums were estimated at $460 million; rerouting ships cost $2.4 million to $3 billion; security equipment cost $363 million to $2.5 billion; spending on naval forces run as high as $2 billion, prosecutions at $31 million; anti-piracy organisations $19.5 million and the cost to regional economies slated at $1.25 billion.

In addition, while the shipping industry’s muscles to combat piracy remains relatively weak, the pirates are getting stronger, using mother ships - previously kidnapped vessels moored far out at sea - to launch their increasingly audacious attacks.

Waleed Al Dawood, chief operating officer of United Arab Shipping Company said pirates have been speeding up their technology to match shipowner’s security measures. “Certain measures have been taken like increasing the speed but pirates have found ways to deal with it as well.”

Over the past five years, ransoms paid to Somali pirates have increased from an average of $150,000 in 2005 to $5.4 million in 2010, data from to Oceans Beyond Piracy, said.

The largest known ransom payment was for the South Korean oil tanker, the Samho Dream. This vessel was ransomed for a record $9.5 million in November 2010. By the end of 2010, about $238 million was paid in ransoms to Somali pirates in that year alone. Insurance premiums are also sky-rocketing. Shippers purchase four main types of insurance as indemnity against piracy: war risk, kidnap and ransom (K&R), cargo, and hull.

The most significant increase in premiums has been in ‘war risk’ and K&R. The Gulf of Aden was classified as a ‘war risk area’ by Lloyds Market Association (LMA) Joint War Committee in May 2008, and is therefore subject to these specific insurance premiums.

The Cost of Piracy Model calculates the additional cost of insurance to the shipping industry by using a lower bound estimate (10 per cent of ships purchasing these insurance premiums) and an upper bound estimate (70 per cent of ships). From these calculations, Oceans Beyond Piracy estimate that total excess costs of insurance due to Somali piracy are between $460 million and $3.2 billion per year.

Then there’s the secondary (acroeconomic) costs of piracy. Industry studies show that international trade routes are threatened and goods in the region as well as Somalia are becoming more expensive.

Egypt, for example, is estimated to be incurring $642 million loss per year from Suez Canal fees as ships re-route away from the Gulf of Aden.

Piracy in the Gulf of Aden has become a substantial detriment to the shipping industry. Diverting from the passage around the Cape means higher operating cost, extra fuel consumption and extra pollution.

Foreign navies have boosted activities off the Gulf of Aden since 2009 and have operated convoys, as well as setting up a transit corridor across dangerous waters. But their forces have been stretched over the vast area, leaving ships vulnerable.

An estimated 7 per cent of world oil consumption passes through the Gulf of Aden.Ship brokers have said some tankers are travelling as far as Madagascar or even around the Cape of Good Hope to avoid seaborne gangs.

Peter Swift, Managing Director of INTERTANKO, says 40 per cent of ships operating today either have been captured or intercepted . “These ships were subsequently released not just once, twice but sometimes three times – this means same people have been active in these attacks,” he said.

“This problem will not go away tomorrow,” he said. “ This may persist for couple of years and who knows beyond that. What do we need? We need partnerships with the government and industry. We are all reliant on governments to keep international highways open, that is not the job of merchant shipping. As owners and operators, it is our job to be sensible in best practices. When we do our part then we have a legitimate case to make to the UN, governments. We need to have governments do their part.”

Piracy also increases marine insurance cost. The damage to property and more so to seafarers' lives are significant. Tankers need to pass through one or more of three choke point entrances - the Red Sea (Bal Al Mandeb), Arabian Gulf (Strait of Hormuz) and the Malacca Strait (between Indonesia and Malaysia) to transport oil.

The trade impact to Kenya and Yemen is slated at $414 million and $150 million, respectively. Losses to oil and fishing industry in Negeria is about $42 million and losses to fishing and tourism industry is estimated at $6 million.

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