War on Somali Pirates: Big Business and Growing

Ship hijackings by Somali pirates have slowed down considerably so far this year, but they will bounce back, says a retired Navy rear admiral who commanded an anti-piracy multinational alliance known as Combined Task Force 151.
The increased security aboard ships and steady patrolling by navies has made merchant ship travel in the Gulf of Aden and off the eastern coast of Somalia safer than it was two or three years ago, says Terry McKnight, who led Combined Task Force 151 when it was first created in 2009.
McKnight predicts Somali activity will tick back up after the end of monsoon season, but he doubts that pirates will be as successful as they were in 2009 and 2010. “Those were the worst years,” says McKnight, whose upcoming book, “Pirate Alley: Commanding Task Force 151 Off Somalia,” offers a peek into the shadowy world of the war on piracy.
Co-authored with journalist Michael Hirsh, Pirate Alley is scheduled for release in October by the U.S. Naval Institute Press.
If anything comes across loud and clear from McKnight’s insider’s account is thatfighting piracy is a growth industry. Shippers are now spending billions of dollars a year on private armed guards and escort vessels. The surge in security spending paralleled the rise in ransom payments to pirates — from hundreds of thousands of dollars in 2007 to an average approaching $5 million in 2011.
McKnight and Hirsh estimate that at least 196 companies advertise private armed security services for ships passing through the high-risk waters off Somalia. “The number seems to be rising monthly,” they note.
For security contractors, McKnight tells National Defense, “It’s a very profitable business.” Analysts have calculated that piracy costs the global economy as much as $13 billion a year.
Because most shippers can’t afford top-of-the-line security, the counterpiracy business has been turned into a caste-like system of haves and have-nots. The richer companies hire former Navy SEALs while others shop for bargains.
Maersk, the world’s largest shipper with more than 1,300 vessels, is known as the Tiffany of shipping companies, McKnight and Hirsh write. “They only hire security companies that employ former U.S. Navy SEALs. They can afford a $50,000 per transit fee.”
Stephen Carmel, senior vice president of Maersk Line Ltd. — the company’s American division — offers an unexpected take on the economic impact of the war on piracy. He reveals in the book that the company is “less concerned about the economic impact of piracy than it is about any of a dozen regulations imposed by international and U.S. government agencies, including Congress.”
Pirate Alley, by the way, provides a detailed account of SEAL Team 6’s takedown of the pirates who kidnapped Capt. Richard Phillips of the Maersk Alabama.
McKnight believes that the cost of private security and insurance are taking a toll on the shipping industry. On the winning side of the financial equation are both security contractors and insurance companies. “Lloyd’s has made billions of dollars raising insurance rates,” McKnight says.
“It’s very expensive for the industry,” he says. “The shipping industry is avoiding the waters off Somalia and they are routing their ships, hugging the coast of India.” The rerouting means higher fuel costs, but shippers feel safer the closer they are to the Indian coast, says McKnight, because the Indian Navy has proactively combated pirates. “They’ll go after them,” he says. When he led Task Force 151, the U.S. Navy fought pirates, but not like Indians do. “We didn’t have the rules of engagement to go after them. The Indian Navy will not tolerate them.”
McKnight wishes the U.S. Navy committed more resources to counterpiracy, although he recognizes that fighting pirates is not widely accepted as a legitimate Navy mission.
“Some will question if this is in fact a national security matter for the United States,” he writes. With private armed security teams on most merchant ships transiting the Gulf of Aden, the number of hijackings is down and navies might argue that they can reduce their presence in the region, he says. But he contends that would be a mistake. “With more than 90 percent of the goods that fill the shelves of your local Wal-Mart and 50 percent of the globe’s petroleum passing the high-risk area, how could it not be a national security issue?”
McKnight worries that if navies pull back and shippers cut back on armed crews to save money, pirates will see an opening and take advantage of it.
Security alone, however, is not an effective long-term strategy to put Somali pirates out of business, says McKnight. The ransom money is too big a prize for pirates to be deterred, he adds. He goes as far as advocating that the U.S. government ban ransom payments.
“As long as U.S. dollars flow freely to pay ransom, piracy will not end,” McKnight writes. “There is too much ocean for our navies to protect and even the most rigorous justice system will not stop more buccaneers from heading to sea. There will be tremendous pressure from industry but the U.S. government must take all necessary measures to pass legislation and work with the United Nations to stop U.S. dollars from padding the pockets of the Somali pirates.”
McKnight says his suggestion to make ransom payments with U.S. dollars illegal is controversial, but should be considered as part of a broader game plan.
Shippers, security firms and insurance underwriters, meanwhile, continue to speculate on when the pirates’ next offensive might come.
“The surprising drop in Somali pirate activity is spurring a debate on the reasons behind it and the impact of the international efforts to counter pirate attacks,” says Roger L. Phillips, an international criminal law practitioner, in anarticle in Piracy-Law.com. Other factors, he contends, are the strengthening of law enforcement and prosecution against piracy financiers and kingpins. The most significant deterrent, Phillips states, has been an increase in the use of private armed guards and government-provided vessels.
The International Maritime Bureau reports that pirate attacks off the coast of Somalia continued to fall sharply in the first half of 2012, says Piracy-Law. “As of 29 July 2012, Somali pirates are still holding at least 11 vessels and 174 crew members.”
Photo Credit: Navy

Topics: Business Trends, Defense Contracting, Defense Contracting, Homeland Security, MaritimePort Security