Somalia – The fall of piracy or a change of strategy?

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For many months, Somali pirates haven’t attacked ships in the Gulf of Aden and the Indian Ocean. The most recent seizures date back to the first six months of 2012, a year that marked a decline in Somali piracy.

For the mercantile business in the Indian Ocean and in the Mediterranean Sea – roughly a third of global sea trade – 2011 was the last year in which the Somali pirates represented a serious threat, with 237 attacks and 22 ship seizures. Could its apparent disappearance hide a transformation and adaptation to new conditions?
pir2Somali piracy boomed in 2008 and reached its peak between 2009 and 2010, with 255 attacks and almost 100 seizures. In the five years from 2008 to 2012 ‘ordinary’ piracy – mostly off the Somali coast – turned into a sophisticated transnational criminal phenomenon, with financial aspects. In those years Somali piracy became ‘professional’ and posed a more serious challenge to the economic and financial global system. In a few years the average ransom for each freed ship rose from one million dollars in 2008 to more than 5 million in 2012. This just happens to be the maximum amount that most insurance companies pay ship owners. Ten years earlier, seized ships were freed with a few hundred thousand dollars. Pirates couldn’t negotiate ransoms in proportion to the actual value of the cargo, nor could they afford long-lasting seizures.
pir3How could a few hundred badly armed groups of Somali pirates become a serious threat to the most dynamic route for world trade, one of the jugular veins of globalization, whose interruption could have disastrous consequences for Europe’s economic independence and interests? The answer lies in the pirates’ talent in exploiting globalization, bypassing State controls, and directly confronting big private stakeholders’ interests – the main international insurance markets.
In the last five years, criminal groups linked to piracy acquired a very accurate ability to survey shipped goods, in some cases before the ship’s seizure. They also had a deep knowledge of insurance mechanisms: they could rely on a network of trusted negotiators and mediators who dealt with the main British law firms and with insurance companies. Above all, they managed to gain a place in international illicit financial networks, both as a source of financing and for money laundering. Piracy’s adaptability made the international economic and financial system underestimate its danger: they used an economic strategy to avoid it, dealing with it as if it were just an additional cost in global transportation.
In 2005, Somali pirates seized almost 0,1 percent of the 30,000 ships that sailed in the Gulf of Aden, freeing them after an average of 6 months of negotiations. This risk could be addressed independently from a reconstruction of the entire Somali State. Through ‘harm reduction’ strategies, accepting it as another cost to cover with insurance policies. Once Somali pirates and their sponsors became aware of this mechanism and of the value of the goods shipped in the Gulf of Aden, they realised that the ransoms they demanded could be increased tenfold. Investing new capital or reinvesting the money earned through ransom to improve military capabilities and economic intelligence networks, and employing professionals able to maximize ransoms during negotiations was enough to achieve this aim.
pir5This creates a parallel, legal economy to deal with pirates and negotiations. It includes insurance brokers, private security firms, law firms, mediators, intermediaries, interpreters, etc. This economy is worth almost as much as the pirates’ own profits. These mechanisms let ship owners avoid the dangers and costs of direct negotiations in Somalia. They also guard against legislation – such as can be found in Italy – forbidding and punishing the payment of ransoms or – as is the case with some international dispositions – assimilating these payments to financing international terrorist groups. This ‘private barrier’, built over the territorial waters of the most famous failed State in the world, played a great role in the rise of direct and indirect costs of piracy.
A criminal industry rose from what was a local and limited phenomenon: according to some estimates its costs amount to about 5 billion dollars a year. They include deterrent measures, contrast measures, other expenses for ship protection, an increase in insurance premiums, negotiation costs, international naval missions, public and private security guards, lawsuits, economic damages to neighbouring countries, etc. Pirates’ profits never went beyond 2 percent of this figure.
pir4The fall of piracy in 2012-2013 is caused by many factors. On the one hand, the widespread use of onboard public and private security guards and the international military missions have increased the resistance of ships facing attacks. At the same time, the private international financial system was put under pressure since its taking part in the payment of ransoms contributed to the rise of piracy and its professionalization.
These initiatives were bolstered when the international community decided to expel the al-Qaeda linked movement al-Shabaab from Somalia. They had implemented mechanisms to profit from Somali piracy, even if they weren’t directly involved in the attacks. It is interesting to note that piracy booms in Somalia when al-Shabaab takes power, and recedes when some countries, particularly attentive to the Somali situation, decide to eradicate al-Shabaab. This has been the case from 2011 on.
Piracy and jihadist terrorism – the two main elements of Somali history in the last five years – have some major links. It is not fully understood whether in Somalia’s new context – with the rebuilding of a central government, al-Shabaab’s military defeat and disbanding – the military, organizational, and financial capabilities of Somali pirates’ networks will play a new role in the struggle for power which has lasted for 20 years on the ashes of Somalia. (P.Q.)


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