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Somalian defendants sit next to their lawyers during their trial on January 25, 2012 at a Hamburg court, as they are accused of hijacking a Hamburg-registered ship off the Horn of Africa. (Angelika Warmuth/Getty Images)
The world’s shipping industry was bilked out of as much as $6.9 billion last year by Somali pirates, who have demanded higher ransom payments for foreign nationals they kidnap, according to a report released on Wednesday.
One Earth Future Foundation, the group which commissioned the report, said that the total economic strain put on the world economy in 2011 was $5 billion less than in 2010. It said that around 80 percent “of all costs are borne by the shipping industry, while governments account for [20 percent] of the expenditures associated with countering piracy attacks.”
However, ships are spending an extra $2.7 billion on fuel costs to speed up while traveling through the Indian Ocean and the Gulf of Aden, where the pirates primarily operate, because no vessel has been captured while traveling over 18 knots, the Colorado-based nonprofit said in the report.
Another $1.3 billion was spent on military operations to deal with pirates, $1.1 billion was spent on security and armed guards, $635 million for insurance, between $486 million and $680 million to reroute ships to safer areas, and $195 million in increased labor costs, the report found.
About half of all ships sailing through pirate waters now carry armed guards, which is up some 25 percent compared to last year. Around 20 percent of the world’s trade goes through the Gulf of Aden between Yemen and Somalia, which is used to get through the Suez Canal that connects the Indian Ocean to the Mediterranean.
In 2011, pirates demanded higher ransoms than in the past, but captured fewer ships. This is attributed to the fact that improved security—both on board guards and increased naval surveillance—made it harder for pirates to hijack ships in the first place.
Thus, while ransoms only accounted for less than 2 percent of total financial losses, or about $160 million, almost 99 percent of all losses were linked to recurring costs such as the protection of vessels. In contrast, only $38 million was spent on imprisonment, prosecution, and building up regional infrastructure to fight piracy.
“The human cost of piracy cannot be defined in economic terms,” Anna Bowden, the author of the report, said in a statement. “We do note with great concern that there were a significant number of piracy-related deaths, hostages taken, and seafarers subject to traumatic armed attacks in 2011.”
One Earth said that attacks off the coast of Somalia last year resulted in 1,118 people being taken hostage, with 24 killed. Thirty-one ransoms were paid and the average amount increased to $5 million, a 25 percent increase over the previous year.