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| Last Updated: Dec 14, 2011 - 11:39:16 AM |
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Somalia: Pirates add billions to the cost of world trade
29 Sep 29, 2011 - 12:55:36 AM
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When Somali pirates crept aboard the
Irene SL and took control of the Greek-owned oil tanker at about 7.30
in the morning of February 7, they caused a shock felt far beyond the
vessel’s 25 unfortunate crew and their families.
The Very Large Crude Carrier, with 2m barrels of oil sailing from
Kuwait to the US’s Louisiana Offshore Oil Port, was more than 900
nautical miles off the coast of Somalia and heading south towards the
Cape of Good Hope. Its capture proved that Somalia’s pirates were able
to menace the biggest ships on the world’s most strategically important
maritime oil transport route.
The pirates have provided copious evidence of their new, wider range
since. There have been 33 attacks so far this year, according to the
International Maritime Bureau, which tracks piracy, in the previously
safe southern Red Sea. Pirates, using previously captured vessels as
bases with crews working under duress, are able to strike up to 1,500
nautical miles from their country’s coastline.
Pottengal Mukundan, the IMB’s director, says there have been 192
attacks on merchant vessels around Somalia so far in 2011, with 24
having led to hijackings. The level of attacks is well ahead of the 127
for the same period during the record year of 2010 – although 30 of the
2010 attacks led to successful hijackings.
It is a state of affairs that, even before the Irene SL’s seizure, had
prompted Jack Lang, the French former minister who advises the UN on
legal issues related to Somali piracy, to warn the Security Council
about the outlaws’ growing sophistication, range and violence.
“The pirates are progressively becoming the masters of the Indian Ocean,” he said in January.
The question is how far the pirates will scare trade away from areas of
the Red Sea, Gulf of Aden and Indian Ocean, and how high the attacks
will push up the costs of world trade.
“The cost of trade is going to grow,” says Mohamed Sharaf, chief
executive of Dubai’s DP World, which has a series of terminals in the
region. “The risks to human life and the costs of doing business will
grow unless something drastic is done.”
The difficulty is to know how to make any significant impact, short of
resolving Somalia’s intractable problems. For oil tanker operators such
as Greece’s Lemos family, owners of the Irene SL, there are few obvious
alternative routes to export oil from the Gulf.
VLCCs have never been able to use the Suez Canal while fully laden. No
route through the Arabian Sea, no matter how close vessels sail to
India, appears safe.
Container ships that are not entering the Gulf can avoid the area on
the Asia to Europe route by sailing round the Cape of Good Hope. But
that adds time, fuel consumption and cost when most operators are
losing money. It also potentially takes ships away from ports such as
Salalah on Oman’s south coast and the Suez Canal ports further north.
Besides, container ships have mostly proved too fast and too high to
board – although there is speculation that pirates are seeking new,
longer ladders in the hope of scaling the vessels’ high, sheer sides.
Hans-Ole Madsen, head of business development for the Middle East and
Africa for APM Terminals, says container lines will continue to use the
Red Sea and Suez Canal unless there is a “significant escalation” in
attacks or tactics. “You will probably see an escalation of safety
measures – convoys, armed guards, whatever it may be,” he says. “All
add to the cost of transport.”
Capt Mukundan says owners that have no pressing reason to transit the
Gulf of Aden are seeking alternative routes. A report last year by One
Earth Future, a Colorado-based governance foundation, estimated that
piracy cost the maritime industry $3.2bn a year in extra insurance and
$2.95bn to reroute ships round the Cape of Good Hope. It put piracy’s
total annual cost to the world economy at $7bn to $12bn.
Yet there are hopeful signs among the gloom. A list published weekly by
EU Navfor, the European Union’s anti-piracy operation, gives details of
every incident reported and shows how vessels’ increasing preparedness
has reduced the number of attacks that end in hijacking. The list
provides examples of attacks averted through the use of force, a result
of shipowners’ increasing willingness to employ armed guards.
Others use “best management practices”, the range of anti-boarding and
vigilance measures recommended in the pirate-risk area – to explain how
an attack failed.
There have only been four hijackings this year in the Gulf of Aden –
between Somalia and Yemen, once known as Pirate Alley – due to a heavy
naval presence and use of best management practices, Capt Mukundan says.
“The Gulf of Aden has been a relative success story,” he says.
The root cause, nevertheless, remains largely unaddressed, says Mr
Sharaf, who attended an international conference in April in Dubai
intended to address the problem.
“Everybody identified the root cause as Somalia and the people there,”
he says. “Their standard of living needs to be looked into. There needs
to be job creation on the ground there, school education.”
Source: Financial Times
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