Pirates along African coast send shipping costs soaring

McClatchy NewspapersNovember 20, 2008 

LONDON — When Somali pirates last weekend seized the Sirius Star, a Saudi Arabian supertanker carrying $100 million worth of oil, they jolted a global shipping industry that's long coped with threats on the high seas. Now, in the face of increasingly bold and frequent pirate attacks off the east coast of Africa, the industry is facing spiraling costs and calling for a more forceful and coordinated response from governments that have sent naval vessels to the region.

"I've never experienced anything like this" says Soren Skou, a senior executive at Maersk, who has 25 years in the industry. "Pretty much for everybody, this is bad news." One vessel owned by the Dutch shipping line, one of the world's biggest, had a near miss two weeks ago when pirates attacked it off Yemen, he said, but the buccaneers eventually gave up.

What makes the Sirius Star attack so shocking to industry officials is the size of the tanker and the distance the pirates traveled to reach it, making previously safe routes seem dangerous: The ship was about 450 miles offshore, southeast of Mogadishou.

"That's the farthest out we've ever seen," said Cyrus Mody, an official at the International Maritime Bureau in London, which runs an international piracy-reporting center.

"The fear is the pirates are increasing their capabilities to sustain themselves at sea for longer periods, and they're able to go farther out." That makes the task of tracking and protecting against pirates much harder, Mody said.

In addition to worrying about their vessels, cargo and crew, shipping officials said that the audacious acts of piracy occurring off the coast of Somalia and in the Gulf of Aden were delaying deliveries and driving up costs, which would be passed on to their customers.

BGN Risk, a London-based firm of corporate risk consultants, has estimated that piracy in the gulf, which ships must traverse to reach the Suez Canal, has increased the insurance risk premium simply for crossing the gulf from $500 per voyage last year to $20,000. The piracy threat could increase shipping insurance and transportation costs by $400 million, BGN estimates.

Underwriters at Lloyd's of London, the insurance giant known for taking on unusual risks, have said that rates are surging for shipping coverage. Increasingly, owners are buying kidnapping and ransom insurance for their crew members in addition to traditional coverage for their ships.

Kidnap settlements for crew members taken hostage by pirates have soared above $1 million. On Thursday, the pirates who seized the Sirius Star reportedly asked for $25 million in ransom.

The repeated seizure of crews for ransom is unprecedented, said Brendan Flood, a marine insurance underwriter with Hiscox. "What we're seeing is a very successful business model" by the pirates.

Jason Alderwick, a specialist in maritime defense issues at the International Institute for Strategic Studies, a London research center, said that the seized supertanker's size and ownership also made this incident "explosively significant." Alderwick noted that more than 15,000 ships pass through the Gulf of Aden every year and there have been about 83 piracy incidents so far this year.

Given the danger in the gulf, a growing number of companies are rerouting ships around Africa.

Maersk issued a statement Thursday saying that several of its tankers that aren't fast or big enough to evade pirates in the gulf would be rerouted south of the Cape of Good Hope — the southern tip of Africa — and east of Madagascar. Rerouting a ship around Africa can add 20 days to its journey from the Middle East, where many oil tankers load, to northern Europe.

Ship owners have taken a variety of measures to protect their vessels and crew from pirates, from trying evasive maneuvers to using electric fences and audio blasts. They balk at the notion of putting armed men on board commercial ships, however, especially those that are carrying hazardous cargo, for fear of escalating the violence.

Shipping experts are growing vocal about seeking a more forceful military response.

"Traditionally, every navy in the world was set up to protect its own trade routes," Mody said. "Why is it not happening?" "Why has it taken so long" for navies to respond to the increasing attacks.

Alderwick said that "getting international cooperation has been very slow and it's terribly complex" to form a coordinated response. Although foreign naval vessels have been active off east Africa for several years, they've gotten more involved in anti-piracy maneuvers only recently.

While the United Nations recently passed a resolution that allows "more robust military intervention" by foreign navies in the region, each government must decide on its own rules of engagement and consider its own legal position. Alderwick noted that a Danish warship that seized some pirates in September had to free them because it didn't have permission to hold them.

"It makes a bit of a mockery of why you're there," he said. In contrast, Britain has a judicial agreement with Kenya that allows it to drop off captured pirates for seizure in that country.

Only when naval ships are fired on by the pirates, as occurred with an Indian frigate off Aden on Tuesday, is it clear that the warships can fire, however.

The string of high-profile pirate attacks this week, though, seems to have increased pressure on governments to act assertively. "The worm is turning," Alderwick said.

Authorities in Somalia's Puntland region, which maintains its own small security force, said they'd arrested 97 pirates, 28 of whom had been sentenced to death or to life in prison.

Muse Gale Yusuf, the governor of Puntland's Bari region, said that the huge ransoms had turned coastal towns such as Eyl, where several hijacked ships were docked, into prosperous "pirate dens" where the privateers spent their money lavishly on food, cars and khat, a narcotic plant.

"The local people strongly oppose piracy, but there are also supporters who facilitate access to whatever the pirates want," Yusuf said.

(Sell is a McClatchy special correspondent. Shashank Bengali in Nairobi, Kenya, and special correspondent Hamsa Omar in Mogadishu, Somalia, contributed to this article.)

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McClatchy Newspapers 2008

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