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January 2, 2011

Tackling the pirate menace

Long considered outdated, piracy has returned in the twenty-first century to haunt the Indian Ocean. In many ways, little has changed since the times of Henry Every and William Kidd, dreaded pirates who roamed the Indian Ocean in the seventeenth century.

Significant developments of the twenty-first century, such as globalisation, which has led to an increase in global seaborne trade coupled with the lesser manning of ships (due to greater automation) have set the stage for a worsening of the situation. Weakness  and failure of states, and the international community’s inability to address them heightens the potential for piracy. Furthermore, the emergence of the non-state terrorist groups gives rise to the possibility of a nexus evolving between terrorists and pirates. Piracy has thus emerged as an enduring problem of the modern era posing serious challenges to the navies of the world.

Somalian waters
Piracy in the Gulf of Aden is the manifestation the greater Somalian problem—lack of an effective central government since the overthrow of the authoritarian regime of Mohamed Siad Barre in January 1991. This is the longest-running instance of a failed state in post-colonial history. The lack of security ashore has spilled into the maritime domain, where there are no credible indigenous maritime forces. Worse, there is also a lack of regional maritime capacity. As a result, the decade following the collapse of the Somali government saw extensive poaching activities by Asian and European fishing fleets in the Somali Exclusive Economic Zone (EEZ).

According to a little-known study by the United Nations, Somalia was losing $300 million annually to poachers in its EEZ. This led to the emergence of self-styled armed protection groups such as the Somali National Volunteer Coast Guard and the Puntland Coast Guard—aimed at combating poaching and the dumping of toxic waste. These groups took it upon themselves to attack illegal poachers. They soon moved on to attacking private yachts transiting the Somali EEZ.

The Somali pirates made global headlines for the first time in November 2005, when they attempted to hijack the American cruise liner MV Seabourn Spirit around 75 nautical miles off the coast of Somalia. This unsuccessful attack triggered a wave of pirate attacks along the Somali coast. Somali pirates first made headlines in India in February 2006, when they hijacked Bhakti Sagar, a Porbundar-registerdd Indian dhow whilst on passage to Kisamyu. Twenty-five Indian crew members were held hostage until the owners paid a large undisclosed amount as ransom.

In 2006, there were 22 incidents of attacks on ships by Somali pirates. The numbers have since increased rapidly; more than doubling with each passing year; from 51 in 2007 to 111 in 2008 and 217 in 2009. While the number of attacks has not increased—thanks to ships adopting the Best Management Practices (BMP-3) promulgated by the UK Maritime Transportation Office—the range and audacity of attacks by Somali pirates has increased significantly in recent months. The first instance of a long range hijacking was on March 23rd, 2010, when a Turkish owned vessel, MV Frigia, a bulk carrier with a crew of 21 on board, was hijacked 1350 nautical miles from Mogadishu. More recently, on December 5th, 2010, six Somali pirates hijacked the Bangladeshi flagged MV Jahan Moni some 67 nautical miles off India’s Lakshadweep islands.

In mid-2009, with the arrival of the Second Standing NATO Maritime Group 2 (SNMG2), the number of international warships on anti-piracy patrols in the Gulf of Aden reached a record high of about 20-25 ships on patrol. To this day, almost all the G-20 countries are represented in the region including the multi-national Combined Task Force 151 (CTF 151), European Union Naval Force, NATO and several other naval ships from India, China, Russia, Iran, Japan, South Korea on independent patrol. This has not deterred the Somali pirates—in 2009, the number of piracy attacks stood at 217; compared to 111 in 2008.

Pirate economics
The rise in ransom demands has been accompanied by an increase in insurance premiums. The insurance surcharge for ships transiting the Gulf of Aden currently stands at approximately $25 per container (or $5 per tonne). Accordingly, the shipping companies have increased their freight charges to include the insurance surcharge and also additional risk pay for crew. The Shipping Corporation of India recently introduced a piracy risk surcharge of $40 per container on all shipments thorough the Gulf of Aden. The increase is passed on to the exporter by the shipping agent and eventually, to the end consumers.

Over 22,000 ships pass through the Gulf of Aden every year. Of the 45 ships that were hijacked in 2010, around 20 ships have been released on payment of ransom so far. The ransom is paid by the insurance companies through their agents in cash and the sum is generally undisclosed. Considering an average of $4 million per ship, the total ransom paid would be about $80 million. At the current rates, insurance companies earn anything between $500 million to $1 billion in surcharges. Clearly, even a conservative estimate of the total insurance surcharge paid by the shipping companies is much greater than the total ransom paid by insurers. Thus, the systems of ransom has emerged as a lucrative business model with both insurance companies and the pirates making a neat sum at the expense of the end consumer.

Challenges for India
The challenges piracy poses on India in the Indian Ocean Rim (IOR) are multi-faceted and complex. Nearly 95 percent of India’s trade by volume and 77 percent by value is seaborne; 40 percent of world’s seaborne trade transits through the Strait of Malacca and about 50 percent through the Gulf of Aden region. Furthermore India has the seventeenth largest merchant fleet in the world and provides over 7 percent of the manpower (approximately 100,000 seafarers) to the global shipping industry. Therefore, the primary challenge for India is to ensure security of its shipping fleet, seaborne trade and safety of Indian seafarers.

The Indian naval warships deployed in the Gulf of Aden region since October 2008 have safely escorted over a thousand ships and successfully thwarted several piracy attempts. That said, several Indian seafarers continue to be held hostage in Somalia. In March 2010, out of the 178 crew held hostage by Somali pirates, 95 were Indians. Three months later, six vessels (including Indian dhows and foreign ships) with 57 Indian crew members were being held hostage.

The evolution of the shipping industry into fewer and larger co-operative multinational enterprises has led to increasing propensity on part of ship-owners to shoulder the burden of safety and security of the ship and crew. Currently these risks are transferred to the insurance companies. As seen in the Gulf of Aden, ransom money being paid by the insurance companies has evolved a conflict economy that benefits pirates and insurance companies, with the costs being passed on to end consumers.

Such a trend is dangerous in the long term not least because it fails to address the interests of the crew. Consequently, there will be increasing pressure on the world’s navies to provide security.

Policy recommendations
The maritime environment in the IOR is unlikely to change in the near- to mid-term, nor will it be entirely possible to eradicate piracy from the IOR. Therefore the best policy options are those that can minimise the number of attacks on Indian seafarers and ships to a low and acceptable level. There are four main policy options for India to consider.

First, in the Gulf of Aden, India should work with like-minded Gulf States to evolve a regional co-operative mechanism. This could be achieved under the aegis of the Indian Ocean Naval Symposium (IONS) and seek to augment the surveillance efforts of the littoral navies. India should also actively assist the African states involved in the Djibouti Code of Conduct which seeks to establish a mechanism for information sharing, training and capacity building.

Second, India should also enhance the current level of the anti-piracy patrols by deploying additional warships in the Gulf of Aden region and offer to assist Bangladeshi and Sri Lankan seafarers as well.

Third, India should seek to develop affordable on-board ship security devices such as the electrified fencing systems and long range acoustic devices. This could be done on a public-private partnership basis. Further, under the IONS framework, India can conduct workshops on best practices for on-board security and international exhibitions for ship security systems. A training centre for ship security could be also be established in India for the benefit of all regional states.

Finally, India should press for the shipping industry to invest in on-board private security regulated by the International Maritime Organisation (IMO). It should also encourage Indian flagged ships to invest in private security. The high seas aren’t any safer than lonely stretches of highways on land where highway robbers prowl. A certain minimum deterrence could go a long way in reducing the number of successful piracy attacks. However, at the international level, private security on-board ships would require formulation of a new set of regulations pertaining to the carriage of firearms on-board and rules of engagement for private security teams. A system for ensuring a certain minimum ‘hardening’ of ships could be considered on lines of the International Ship and Port Facility Security (ISPS) code of 2004, which mandated ships and ports to adopt certain security guidelines promulgated by the IMO.

It is possible to reduce the impact of piracy on India’s seaborne trade and protect Indian seafarers. Doing so also offers us with an opportunity to promote India’s strategic interests in the IOR. As important as it is to implement the right policy measures, New Delhi should ensure that they are well-articulated. Doing so will invite greater participation from various stakeholders, including the Indian shipping sector and the industry, and thus offset costs. More importantly, it will clarify the misperceptions that might be extant in parts of India’s maritime neighbourhood in combating the non-traditional threats in the IOR.

Photo: Joriel Jimenez, via Flickr


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