Underwriters and shippers are as concerned about what the United States and other powers won’t do against Somali pirates, as they are about what the pirates will do against ships they insure, own and operate.
While the Gulf of Aden is a relatively safe passage for the deployment of warships through a narrow corridor in a vast gulf, some Somali pirates have retaken the initiative in the waters of the Indian Ocean off East Africa.
Continuing to treat Somali pirates as a homogenous, if not a monolithic threat, is not working.
The current approach is showing diminishing returns on investments in anti-piracy. The deployment of modern warships costs easily more than a billion dollars a year, if not more, to sustain. Risks to shipping and the costs of underwriting continue to rise in the ocean where 60 percent of global commerce transits.
Meanwhile, the return on investment in piracy, which basically involves arming and supplying a handful of men and sending them out on a mother ship and two skiffs, only continues to rise.
Staying on the present course guarantees that the next generation long-range Somali piracy business model will entrench itself. It is funded not just by record-breaking ransoms and local investors’ money, but also by the flow of capital from foreign criminal gangs. Pirates now threaten sea lanes all the way to India and soon will threaten sea lanes all the way to the Strait of Malacca. This is a model capable of being exported worldwide.
After the deployment of warships in the Gulf of Aden in late 2008, the underwriting and shipping communities were comforted. By the summer of 2009, it had become obvious that the navies of the world were thwarting northern Somalia’s pirates. But by October, that same response inadvertently incited the more professional pirates of the eastern Somali shoreline, some led by former Somali naval officers, to pivot back into the waters of East Africa and expand long-range operations even into the high seas of the western Indian Ocean.
Those pirates are now extending operations to waters rich in prizes such as the Gulf of Aden.
Underwriters and shippers are therefore apprehensive again, given the new and expanding lead that pirates of southern and central Somalia gained over the world’s navies by late 2009.
Deployment of unmanned aircraft by the United States to the Seychelles to patrol local waters and the sending of a small contingent of French marines and Spanish private guards to protect tuna fishing boats off the islands was too little, too late. Somali pirates are operating mother ships and making attacks with impunity a thousand miles from Somali shores.
The latest targets include not just tuna fishing fleets, but long-range high seas traffic.
The Somali pirate gangs operating from southern and eastern ports such as Kismayo, Harardheere and Hobyo are preparing for more activity. Somalis have become adept at forward support: a technique first used in Gulf of Aden raiding, in which pirates relied on makeshift bases in Southern Yemen to resupply and refit, thanks to locals whose cooperation was likely bought with a promised share of the ransom. Evidence of forward support was discovered in the Seychelles early in 2009.
Other credible intelligence indicates that at least one Somali gang has two mother ships lurking off the Maldives with orders not to come home until they hijack a large crude carrier or something similarly big by early 2010. It’s obvious that these mother ships are relying more on local support than on a long “logistical tail” from their homeport.
The ability to operate free from significant homeport support and instead rely primarily on forward support represents the “third generation” of Somali piracy. The first generation consists of largely opportunistic pirating within 50 miles of Somali shores, especially in the Gulf of Aden, which has occurred for centuries. The second generation consists of more premeditated and longer distance raiding into the Somali Basin and around the Seychelles and involves mother ships that juggle dependence on bulky stores on board, with continued logistical support from home ports. The third generation Somali pirates will venture beyond the limits of even traditional Somali fishermen and threaten new sea lanes, including the vital East Asian energy lanes just off India’s western shores.
Underwriters and shippers are justifiably worried about the world’s navies playing catch-up in the central western Indian Ocean. The members of the world’s leading seafarer union have already called for a boycott of the entire Indian Ocean.
It is doubtful that deployment of long-range aerial surveillance in the central western Indian Ocean will make much of a difference if insufficient surface naval assets can engage the pirates and thereby deter and disrupt their operations.
The East Asian sea lanes are as rich in energy and other resources as the lanes that pass through the Gulf of Aden and Suez Canal. It is not a matter of if, but when, the third generation of Somali piracy begins to inflict serious losses on those lanes off India’s shores.
The worst-case scenario could be set in motion by the European Union and NATO by diluting anti-piracy resources in the Gulf of Aden.
As a result of the Somali pirate threat expanding unabated while the temperature rises between India and China, shipping and underwriting could become even riskier and even more expensive. The global economy, a system that relies on cheap and secure long-distance delivery of goods, energy and other resources, would take a major hit just as it is trying to get going again.
While many strategic thinkers write about geopolitics, few write about what can only be called “mare-politics”, or the principles of geopolitics applied to the oceans — despite the fact that the Indian Ocean boasts as many energy resources as Central Asia.
Combining the dearth of ocean-based strategic thinking with the dependence of the global economy on high seas transport creates a dangerous blind spot that denies world leaders the advice and guidance they need. It also lulls them into thinking that the influence nations have on land extends equally to the oceans. That is a dangerous miscalculation. One direct lesson from such strategic thinking is that on the high seas of the Indian Ocean, as any other sea, the brunt of the solution will have to be carried by private ships transiting by themselves, not by governments or by their navies.
All nations also need to work more closely with shippers and insurers to counter pirates, if only because governments and navies can’t and won’t move as fast or effectively as the private players already in place. The major lanes that run on the high seas between India and Africa are in a space where no navy or navies can ever provide real protection.
Private sector players should adopt a combination of measures, including better development and use of public and private intelligence, implementation of “best management practices” to deter and defend against pirate attacks, and improved underwriting solutions to help absorb the costs of attacks.
These three approaches, when smartly integrated, can afford ships the most cost-effective risk management, and in a time period shorter than what any government or navy can make available realistically.
If Somali pirates are allowed to demonstrate new prowess, not only will they earn even more international criminal support, but they also will become the envy of pirates in other parts of the world. This is not idle speculation: a long-range attack against an oil tanker off Benin by Nigerian pirates was attributed to envy-inspired copying.
The biggest impediment to Somali-style piracy going global is having a failed state where pirates can park a stolen crude carrier within sight of shore without fear of being bothered by the local authorities.
Fourth generation Somali pirates may simply kidnap premium, high-value hostages such as the ship’s captain and chief officers, and while negotiating their lucrative release, use them as human shields on mother ships that constantly move all over the Indian Ocean with impunity.
Rather than repatriate hijacked ships all the way back to distant Somalia, or abandon them and their cargo on the high seas at a loss, the Somali long-range raiders may spin valuable ship and cargo off to local insurgent groups or pirate gangs as payment so they are allowed to continue hunting unmolested in their waters.
About the only real threat to Somali pirate expansion these days is from other pirates.
Most pirates of the eastern Indian Ocean and East Asia don’t have much use for crews anyway and may settle for such a division of spoils: some have networks ready not just to liquidate cargo but also ships, which are given new names, paint jobs and papers almost overnight. Those eastern pirates who don’t agree to this arrangement will probably settle for a share of the ransoms Somalis collect.
Fourth generation piracy is sure to appear sooner than later if we keep leaving the initiative to the best Somali gangs. Current counter-piracy approaches make it ironically even easier for them to reap most of the rewards, as their less capable competitors are eliminated, leaving the ocean and its richest prizes for them.
The Somali piracy business model could soon go “viral” and export itself to not just to the rest of the Indian Ocean, but the rest of the world. And there will be nothing to stop it.
Michael G. Frodl is a tax attorney and emerging risks advisor. He is co-founder of the Washington, D.C.-based Forum for Environmental Law, Science, Engineering and Finance (FELSEF). He consults for clients on energy matters.For additional information please visit
http://c-level.us.com