Saturday, January 22nd, 2011

The price of piracy

Piracy on the high seas is getting more expensive for shipping companies. The One Earth Future Foundation estimates that ransom payments to pirates rose to $5.5 million in 2010, on average, 60% more than in 2009. The average ransom in 2005 was only $150,000. Considering 44 ships were hi-jacked last year from the Horn of Africa to the Malacca Straight— shipping companies paid $238 million to pirates in 2010 alone.

Why are pirates asking for bigger payouts? The simplest possible answer is because they can. Shipping companies’ eagerness to pay to obtain their ships’ release provides a poor deterrent. Last November, Somali pirates exacted a record ransom of $9.5 million to free the oil tanker Samho Dream. Presumably expecting a similar reward, pirates last week took the chemicals freighter Samho Jewelry.

But shipping companies, insurers and governments are starting to tire of such payments. Hijacked ships released at the end of last year were kept 150 days, on average, almost three times as long as in 2009, as insurers are resisting the higher ransoms. And more shipping companies are putting armed guards on their ships. And on Friday Korean special forces freed the Samho Jewelry in the Indian Ocean, killing 8 pirates and capturing 5.

I thank the FT for the pointer.

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