Piracy off the Coast of Somalia has now become a serious threat for
international security and the global economy. This piracy has endangered
innocent mariners from countries around the world and jeopardized commercial
shipping interests. The attacks by the pirates also pose an environmental
hazard as ships may be damaged or purposely run aground by the pirates, thereby
contaminating the seas, reefs, and coastal areas with dangerous pollutants. The
cause of particular concern is the unhindered growth of this menace as the
pirates have, in recent years, extended their attacks to the Gulf of Aden,
between Yemen and Somalia's north coast. Subsequently, the pirates have been
ranging farther out to sea -- up to 600 miles -- and now affect over 1 million
square miles (2.59 million square kilometers) in the Gulf of Aden, the West
Indian Ocean, and the Red Sea.
Somalia’s volatile economic, social, and political conditions that began
in the mid-1990s are said to be the breeding ground for this menace. With the
collapse of a central government and consequent weakening of country’s naval
forces, some Somali fishermen took it upon themselves to protect Somali waters,
and their economic interests, from over-fishing on one hand and illegal dumping
on the other by foreigners. These vigilante actions led to piracy as a means to
supplement livelihoods. Emboldened by the absence of an effective ruling
authority, the piracy that stems from the coast of Somalia has been transformed
into a highly organized and lucrative criminal business for its leaders and
enablers. It has proved to be an attractive, though risky, alternative for some
impoverished young men who have few if any options to a legal livelihood. That
said, pirates are criminals motivated by a desire for quick money making
Somalia less attractive as a place in which to invest and create employment.
Interestingly,
most of the pirates are former fishermen, whose livelihoods were hurt by
foreign ships illegally fishing in Somali waters. Others joined after seeing the
profitability of piracy, since ransoms are usually paid. The piracy is also
sponsored by the warlords
who split the profits with the pirates. Other cadres recruited for piracy
include ex-militiamen, who previously fought for the local clan warlords, or
ex-military from the former Barre government
used as the muscle and technical experts, who operate equipment such as GPS devices. The pirates
have been adequately trained in weapons, engines and navigation.
The
accumulated wealth of the pirates has generated some economic activity in the
area and the local residents appreciate the rejuvenating effect that the pirates'
on-shore spending and re-stocking has had on their impoverished towns, a presence
which has often provided jobs and opportunity when there were none. Entire
hamlets have in the process been transformed into veritable boomtowns, with local
shop owners and other residents using their gains to purchase items such as generators --
"allowing full days of electricity, once an unimaginable luxury."
The mechanism
of funding of piracy operations is interesting and has now been structured in a stock exchange, with
investors buying and selling shares in upcoming attacks in a bourse. Ransom money is paid in large
denomination US dollar bills.
It is delivered to them in burlap sacks
which are either dropped from helicopters or cased in waterproof suitcases
loaded onto tiny skiffs.
Ransom money has also been delivered to pirates via parachute, as happened
in January 2009 when an orange container with $3 million cash inside was
dropped onto the deck of the supertanker MV Sirius
Star to secure the
release of ship and crew. To
authenticate the banknotes,
pirates use currency-counting machines, the same
technology used at foreign exchange bureaus worldwide. According to one pirate,
these machines are, in turn, purchased from business connections in Dubai, Djibouti, and other
areas. Hostages
seized by the pirates usually have to wait 45 days or more for the ships'
owners to pay the ransom and secure their release.
Somali pirates
allegedly get help from the Somali Diaspora. Somali
expatriates, including reputedly some among the 200,000 Somalis living in
Canada, offer funds, equipment and information. Pirates' income from ransom has
been estimated to be about 39 million euro (about $58 million) in 2009 and $238 million in 2010. However, indirect costs of piracy to
the victims are much higher and estimated to be between $7 to 12 billion as
they also include insurance, naval support, legal proceedings, re-routing of
slower ships, and individual protective steps taken by ship-owners. Further, piracy in Somalia leads to a
decrease of revenue for Egypt as fewer ships use the Suez canal (estimated loss of about $642
million), impedes trade with a number of countries such as Kenya and Yemen, and is
detrimental to tourism and fishing in the Seychelles.
A 2011 report
published by Geopolicity Inc, investigated the causes and consequences of
international piracy, with a particular focus on piracy emanating from Somalia.
The report asserts that piracy is an emerging market in its own right, valued
at between US$4.9-8.3 billion in 2010 alone, and it establishes, for the first
time, an economic model for assessing the costs and benefits of international
piracy. This model provides a comprehensive, independent framework of trend
analysis, whilst also highlighting where the greatest rates of return on
international counter pirate investment and policy are to be found across what
Geopolicity term the ‘Pirate Value Chain.’ The report states that the number of
pirates could double by 2016, increasing by 400 each year. This is being
fuelled by attractive financial incentives with Somali pirates earning up to
US$79,000/year; equating to almost 150 times their country’s national average
wage.
Piracy has
developed into a complex and lucrative enterprise; its second and third-order
impacts extend deep into Somali village structure and life. Piracy does not
simply enrich individuals or pirate groups; it brings wealth to entire
villages. Coastal villages make money by providing food to pirates and hostages
who wait for negotiations to end favorably. Local negotiators make money by
bringing the ship owners to pay the ransom money via a cash drop at sea or on
land. Further, pirate financiers — in many cases, pirates themselves — invest
in pirate crews who venture out to capture vessels on the high seas. The wives
of these pirates receive compensation money before their husbands go out on a
mission.
Pirates are also provided with
the necessary tools of the trade, such as satellite phones, global positioning
systems (GPS) and weapons. Pirate financiers will spend as much as US$30,000 on
a pirate group that “hunts” in the Indian Ocean, and upwards of US$10,000 on
pirates operating in the Gulf of Aden.
And to protect themselves and their operations, pirates pay local
militias (guns for hire) as much as US$10,000 per month to protect them from
sub-clan rivals or external threats.
The booming
business is profitable for all as the coastal villages around Haradheere
receive around 5% of a total ransom payment simply for allowing pirated ships
to anchor there. All ransoms are paid in
cash, and distributed between pirates, financiers, negotiators and local
village elders.According to
ongoing private sector research, the average “take” of pirates following the
payment of a ransom is broken down as follows:
- financiers (and sponsors) receive 50%;
- the pirates, pirate commander, mother ship crew and attack squads split 30%;
- village elders receive 10%; and,
- the security squad (guns for hire to protect hostages and vessels) receives 10%.
Interestingly,
while the individuals who risk their lives on a piracy operation split 30% of
the ransom money, the bankroller(s) ends up with 50% of the take.
To date, there
is limited accessible research that identifies key pirate financiers and their
associated business investments. This
represents a gaping hole in our counter-piracy approach, given that that some
pirate financiers have invested in now thriving global businesses. However, as most
pirate “soldiers” are illiterate, they are happy to receive large amounts of
cash without knowing the true value of their services.
The system of
piracy finance is wide and complex, both in terms of scope and impact. Once the
international community better understands and identifies the “vertebrae” in
this, the proverbial backbone of Somali piracy, the chances of combating it
more effectively will drastically improve. Moreover, we will be better equipped
to assist Somalis in replacing this illegitimate economic system with a more
viable alternative. Doing away completely
with the scourge of piracy off the East African coast is an extremely difficult
proposition. However, there are a number of ways suggested by some research
organizations that can address the problem more effectively than it has been to
date.
According to
these suggestions, it needs to be understood that piracy cannot be stopped at
sea; it needs a comprehensive land-based solution. For this purpose, it is
essential to deprive them of the economic incentives of piracy. The primary
method to combat Somali piracy is to disrupt its economic system. Pressuring
and disrupting the flow of finance to the pirates is essential. The
international community must put a premium on identifying the key (Somali and
non Somali) players that finance piracy, as well as conduct deep research to
isolate and expose their investment patterns.
A number of
governments are currently focusing on monitoring the hawalah systems – a traditional form of transferring funds found
especially in the Middle East and parts of Africa – through which individuals
who receive ransom cash have utilized in order to launder that money into
“legitimate” businesses. With proper research, businesses that are using the hawalah systems for illegal ends (i.e.
profiting from piracy) can be identified and action can be taken to stop their
expansion. This, in turn, will pressure pirate financiers by virtue of removing
their financial security blankets.
The supply
line of the pirates can be choked and disrupted by identifying the areas where
pirates buy their gear like equipment, weapons global positioning devices,
satellite and mobile phones.
The
international community, as part of measures to take away incentives should
also offer alternative incentives. Finally, there must also be sufficient
disincentives, backed by accepted and strengthened social (and political)
authorities, to compel individuals to give up the business of piracy. The very
attitudes, values and beliefs of piracy’s “culture” must be attacked from
within by authoritative Somali voices.
Piracy is
essentially not a military or national security issue; it involves bread and
butter for a large part of Somali population. As it is economic issue in
character, it cannot be addressed through employment of military might alone.
This needs to be addressed through economic measures. Let us, therefore, shift
our focus and fight piracy, not from sea but from land and that too from the
economic front. As the economy of Somalia grows, young population gainfully
employed in legal occupations and the investors and sponsors deprived of the
return on their investment, the problem will be solved to a large extent.
