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Piracy takes hostage industry

Piracy takes hostage industry
Piracy is becoming a costly business for the world's shipping companies, particularly off the coast of Somalia.

Shipping companies are left to negotiate on their own

Piracy is becoming a costly business for the world's shipping companies, particularly off the coast of Somalia.

Pirates there have hijacked around 30 ships this year and the ransom demands have skyrocketed. When pirates hijacked a freighter off the coast of Somalia last week, they hit the jackpot.

The Ukrainian ship was laden with weaponry, ammunition and 33 Russian tanks. The heavily armed pirates are now holding the ship's 20 crew members hostage and are demanding $US20 million ($25.7 million) in ransom.

Director of the International Maritime Bureau, Captain Pottengal Mukundan, says the "unprecedented and serious" situation is compounded by the lack of strong institutions in Somalia.

"The question is what do ship owners do in this kind of a situation?" he said.

"They have no-one to turn to in Somalia for help. The Government does not function, and there is no other agency which is prepared to help them get their vessels back."

This lack of assistance means that shipping companies are left to negotiate on their own, and this puts the pirates in a strong bargaining position.

"The choice for them [shipping companies] is quite stark; either they abandon their crew members, or they negotiate and pay a ransom," Captain Mukundan said.

"Every vessel that we are aware of that has been released from Somalia has, unfortunately, resulted in the payment of a ransom to get the vessel out."

Somali pirates are now holding 12 ships captive, with 259 crew members being held hostage.

Career path

Roger Middleton from the London based think-tank Chatham House, has just published a report on the cost of piracy off Somalia.

He estimates around $30 million in ransom money has been paid to Somali pirates this year, making piracy a very profitable business.

"A young man who may have no other really realistic opportunities to make a lot of money in their home villages from farming or fishing can make up to 10, 20, 30, 100,000 pounds from each instance of piracy," he said.

"So this is a very lucrative trade, and Somalia lies on some very important trade routes from Asia to Europe, through the Suez Canal."

Maritime officials believe Somalia's factional leaders are using piracy to fund their militia activities.

Captain Mukundan has welcomed a European Union plan to use military force to protect one of the world's key trade routes.

If a solution to the growing problem is not found, shipping companies could be faced with the choice of continuing to run the gauntlet or sending their freight on other maritime routes.

"It will increase the cost of the transportation of goods many fold, because the vessels will then have to go via the Cape of Good Hope and with today's fuel prices and the cost of freight, the transportation costs will go through the roof," he said.

"[This] will affect the commodities which are delivered to the destination countries, at a time when the world economy's very fragile."


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