Don't Let Shipping Piracy Sink Your International Business.

A special guest post by Global Security Consultant and Political Risk ExpertPaul Crespo.  This is the latest post in the series.

With the dramatic growth of global commerce more businesses rely on maritime shipping to get their goods and raw materials to market.

The release of the Tom Hanks film “Captain Phillips” depicting the 2009 hijacking of the US merchant ship Maersk Alabama by Somali pirates, has reminded us of the threats to that shipping. US Navy SEALS successfully resolved that high-visibility ship hijacking, but how secure are the cargo ships that your international business relies on today?

Global Cost of Piracy

According to a study by Oceans Beyond Piracy, the cost of maritime piracy to the global economy in2012 was between $5.7 and $6.1 billion. This was a drop of 12.6% from about $7 billion in 2011, due mostly to a 70% drop in Somali piracy.  The report notes however, that while overall piracy incidents have declined substantially, the cost “per incident” is now much higher.

Below are just some of the $6 billion annual costs of piracy:

1. Ransoms & Recovery Costs: $63.5 million
2. Military Operations: $1.09 billion
3. Private Security & Guards: $1.65 – $2.06 billion
4. Re-routing Ships Away from High Risk Areas: $290.5 million
5. Increased Speeds and Fuel Costs to Avoid Hijackings: $1.53 billion
6. Increased Insurance Costs: $550.7 million
7. Labor Costs (Added Crew Hazard Pay and Captivity Costs): $471.6 million.

Somali Pirates Down but Not Out

Incidents of Somali piracy in the Gulf of Aden and Indian Ocean (“High Risk Area”) have declined considerably since its peak in 2009. According to a EU military mission report, 176 cargo ships were attacked and 25 pirated in 2011, that number fell to 35 ships attacked and 5 pirated last year. So far this year, only 3 attacks have been reported, with no ships being taken over by pirates.

This decline has been attributed to:

  • Shipboard armed escort teams consisting of former elite commandos from the US and other militaries and law enforcement agencies. Between 30% to 50% of shippers are now using armed guards for transits near Somalia. This may be the single most significant factor reducing the incidence of piracy.
  • International naval activity by US, NATO, Russian, Chinese and others patrolling the High Risk Area, (such as NATO’s 2011 “Operation Ocean Shield”), and stricter enforcement of anti-piracy laws, with more than 1,000 Somali pirates having been jailed.
  • Security precautions taken by shipping companies as set out in BMP4- Best Management Practices for Protection against Somalia Based Piracy, sponsored by the International Maritime Organization (IMO). This includes the most current planning and operational anti-piracy practices for ship operators transiting the High Risk Area.

While significantly reduced, Somali pirates continue to ply the High Risk Area looking for vulnerable targets and still remain a serious threat.

West Africa Piracy Up

Even as the threat of piracy from the Gulf of Aden has diminished, piracy risk has been growing in West African waters, especially off of Nigeria, with its large number of offshore oil platforms. West African pirates are often backed by a sophisticated organized crime networks and are seen as more violent than their Somali counterparts.

  • This month a South African frigate deployed on an anti-piracy cruise along the West Coast of Africa and will stop in Namibia, Angola, Ghana, Nigeria and Senegal to conduct anti-piracy training.

Conclusion

Somali piracy has been reduced due to concerted international efforts and increased security precautions by shipping companies, particularly the use of armed escort teams. Some of this piracy however, has been forced out into the Arabian Sea and beyond, and still remains a continuing danger. Meanwhile, the piracy threat has now increased substantially on Africa’s West Coast. The biggest concern among maritime security experts is complacency. Now is not the time to lower our guard against pirates.

Be sure to read the other posts in this series:

3 Steps to Prepare your International Business for Crisis and Continuity

Cyber Attack – 3rd Biggest Threat to International Business

How Secure are U.S. Businesses in Mexico?

Brazil’s Mega Events: Risks for International Businesses during the World Cup and Olympics.

Surviving a Kidnapping: How Your International Business Should Respond.

11 Ways to Avoid Getting Kidnapped While on Business Overseas.

Political Risk Insurance: Why Your International Business Must Have It.

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paul crespo  international piracy Paul Crespo is a global security and political risk expert. A Senior Consultant with Trident Crisis Management Group, he has appeared on Fox News, CNN and other major TV news venues. He has varied experience in corporate security, kidnap and ransom negotiations, intelligence and diplomacy as well as military operations in hotspots from the Balkans to the Persian Gulf. A former officer in the US Marine Corps he was also assigned to the Defense Intelligence Agency (DIA) as a military attaché and posted to several US embassies overseas. Paul graduated from the Georgetown University School of Foreign Service, and has a Masters degree in War Studies from Kings College, University of London, and a Masters degree in International Relations from Cambridge University in the UK. Paul Crespo can be reached at pcrespo@tridentcmg.com

 

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