Piracy: Settling the Bill

The predictable course of events that follows the return of the Maersk Alabama’s crewmembers does not include a solution to the problem – certainly not one that appears to be necessarily affordable to today’s shippers.

As a general rule of thumb, I try to keep my powder relatively dry when presented with current events such as the recent hijacking and subsequent release of the Maersk Alabama and its American officers and crew. I knew as we all did, of course, that the story would change ten times before the drama played itself. In these cases, I prefer to let others speculate while reporting only what I can verify. As we pull the trigger on this week’s MarEx e-newsletter, the Internet versions of the “real story” continue to abound and the proposed solutions to this very serious security dilemma are multiplying exponentially. None of that has us any closer to solving the underlying problems without considerable financial outlay. Here’s why:

In his March 5th 2009 Testimony before the House Armed Services Committee, Vice Admiral William Gortney, Commander, U.S. Naval Forces Central Command said, “Ultimately, piracy is a problem that starts ashore and requires an international solution ashore. We made this clear at the offset of our efforts. We cannot guarantee safety in this vast region.” We can debate the merits of his claims and opinions, but in the end, the top ranking military leader for this area says that the mightiest military machine in the world cannot guarantee safety for merchant traffic off the coast of Somalia. And, in our December 2007 print edition, an article focusing on smaller patrol boats as a weapon in the war against the threat of terrorism further drove home the point that “defending against the small boat threat and / or the possibility of the next “Cole-style” attack will certainly not be the domain of a 500-foot-long platform.” Today, some industry analysts are careful to make clear distinctions in the differences between terrorism and piracy. Nevertheless – and like it or not – the same metrics are in play in both situations.

Enter the maritime security experts: With them come every imaginable solution to the problem of modern piracy. A good number of these strategies, delivered by true security professionals and others (innovative entrepreneurs who promise to deliver high-tech equipment), will probably work. Most come with a hefty price tag, as well. But, if safety truly is “Job 1” at sea, then robust equipment designed to detect and monitor for threats that starts at $600,000 and can then move on up to more than $1.5 million in a menu-driven option list should be worth it. Alternatively, the cost of inserting armed security teams onto merchant ships for specific trade routes (a rough, but reliable estimate for a 5 man security team for 10 days in that area ranges from $50,000 to $100,000, plus expenses, depending on who is doing the work) is another solution that likely wouldn’t be offered at a discount, either.

In the absence of an effective security “fix,” ransom payments are reportedly reaching as much as $3 million per incident. Indeed, Somali pirates have enjoyed a lucrative 18 months, with cumulative ransoms now estimated at over $30 million in 2008 with similar revenues realized in the first half of this year, as well. The net cost in demurrage, down time, lost charter revenues and other related opportunity costs has yet to be quantified, but this tab probably dwarfs the ransom payments by a large margin.

All of this is weighing heavily on the maritime industry as a whole and I honestly don’t care who is paying the bill. Beyond this, the toll on the seamen who toil on these ships in these waters is unknown, but the first manifestation of all of that is now reportedly being felt through a lawsuit (read it HERE) against the operators of the MAERSK ALABAMA by one of its crew members. In a Jones Act world where some robust Admiralty Law practices can exclusively revolve around “slip-and-fall” cases, you had to know that this was coming. I wouldn’t bet a penny that this will be the last of these to emerge.

Today, the International Maritime Bureau reports as many as 111 attacks in the waters off the Horn of Africa in 2008, double the number in 2007 and by the end of April 2009, well over 80 attacks had occurred in this year alone. Reportedly, about 300 crew members on 18 hijacked vessels remain in the hands of these maritime criminals. Not withstanding the feel-good ending to the Maersk Alabama saga, the region’s problems are hardly over. That’s because attacks on merchant ships are taking place in an area of more than 1 million square miles of ocean immediately adjacent to Somalia, where the continued and prolonged absence of a functioning government provides an easy platform for those engaged in piracy there. Four U.N. Security Council-issued resolutions intended to reenergize the international response to piracy off the Horn of Africa have so far had no palpable effect on that metric. Neither will the series of upcoming congressional hearings scheduled here in the United States.

The reestablishment of a viable government in Somalia is the only guarantee that piracy can be eradicated in the region. You can argue with me on that point, but in the short term, I also see no real hope of that happening. The bitter U.S. experience on the ground there makes most other governments leery of trying again. As for redeploying American assets, there is little stomach for that – especially in the face of numerous other developing crises (take your pick: North Korea, Iran, naval confrontations off the coast of China, etc.) around the globe and a U.S. military force that is said to already be stretched to the breaking point. And even if we did try, the solution ashore would take three to five years to get done.

It is time for security on board these merchant ships. I haven’t always been in that camp and I certainly am not advocating the arming of merchant mariners themselves. Beyond my qualifications as a licensed deck officer, I’m also probably not the best person to tell shippers how to get to the Promised Land. That having been said, the cost of the offshore security fix is going to be staggering – whatever form(s) it may eventually take – and that cost will hit the bottom line at the worst possible moment in a sagging global supply chain. And, the simpler alternative of avoiding the area altogether just isn’t viable for everyone.

Those in the international shipping community who are waiting for the United States to step in to solve the problem of regional piracy are going to be sorely disappointed. The U.S. Navy will, of course, continue to do what it can as will the various other flag state platforms in the area. And those assets, funded by your tax dollars, would have to be somewhere, doing something, I suppose. More than a few attacks will be foiled and a bunch more will succeed, but even the combined effort of every 400-foot naval asset in the Western hemisphere isn’t going to solve the problem. Beyond this reality, it is clear that the much needed solution from ashore isn’t coming.

As we quickly move to the halfway point in 2009 (where did the time go?) I find myself needing to retract at least part of my earlier editorial comments (read my February 5th 2009 on line editorial HERE). We do need to battle the pirates where they work and this has to be done sooner, rather than later. For better or for worse, and very soon, properly packaged and professionally delivered commercial offshore security for merchant vessels operating in areas prone to piracy will be just another cost of doing business. And, you can bank on that. - MarEx

Joseph Keefe is the Editor-in-Chief of THE MARITIME EXECUTIVE. He can be reached with comments on this editorial at jkeefe@maritime-executive.com. Join the Maritime Executive ‘Linked In’ group at by clicking http://www.linkedin.com/e/gis/47685>