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Economics of Piracy. LT Matthew Myers NS3041. Overview. Nature and Scope of Problem Definition Why Areas affected Costs Significance Piracy Trends and Tactics Current Responses and the Way Ahead Current Responses Cooperation in Gulf of Aden Lessons Learned.

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economics of piracy

Economics of Piracy

LT Matthew Myers

NS3041

overview
Overview
  • Nature and Scope of Problem
    • Definition
    • Why
    • Areas affected
    • Costs
    • Significance
  • Piracy Trends and Tactics
  • Current Responses and the Way Ahead
    • Current Responses
    • Cooperation in Gulf of Aden
    • Lessons Learned
what is piracy
What is Piracy?
  • Various definitions exist
  • Under and over reporting occurs due to definitional problems and legal vagueness
why piracy happens
Why Piracy happens
  • Seven main enablers
    • Legal and jurisdictional issues
    • Geography
    • Conflict and Disorder
    • Under-Funded, poorly trained security forces
    • Permissive political environment
    • Culturally acceptable
    • Reward
areas affected
Areas Affected
  • Piracy Prone Areas
    • Bangladesh
    • Indonesia
    • Strait of Malacca
    • Malaysia
    • Philippines
    • Gulf of Aden
    • Coast of Somalia
    • Nigeria

2009 Incidents of Piracy (IMB’s Live Piracy Report)

gulf of aden
Gulf Of Aden
  • Somali Pirates responsible for majority of piracy attacks
  • All seven enablers present
  • Major intersection for arms and human smuggling, and commercial routes intersect in region
  • However….
    • Odds of attack at .3% due to high volume of merchant traffic

2008 Piracy in Gulf of Aden (IMB)

gulf of aden cont
Gulf of Aden (Cont)
  • Piracy evolved from dissolution of Somali government in 1991
  • Piracy declined in 2006 when Islamic Courts Union took over
  • International private security efforts ineffective
strait of malacca
Strait of Malacca
  • Natural Choke Point
    • 1.5NM at narrowest point
    • 1/3 of Global Trade
    • Route for all Chinese and Japanese oil imports
  • Tradition of piracy since 5th century BC

2008 Piracy in Strait of Malacca (IMB)

strait of malacca cont
Strait of Malacca (Cont)
  • Seven enablers of piracy present but in different degrees
  • Several factors have reduced piracy in region
    • Regional Cooperation
    • 2004 Tsunami
costs
Costs
  • Direct Costs
    • Ransom
      • Range from $500,000 to $2 million
      • 30 million for piracy
    • Insurance
      • Insurance industry effect is negligible (Industry wide surplus of $505 billion)
      • Total cost of war zone and hull risk premiums is $350 million (2008)
      • Cargo premiums $833 million (2007)
      • Insurance costs of Piracy areas about $9,000/ship
    • Shipping Delays
      • Especially commodity carriers
      • Delays can result in cancellation of shipping contract
    • Damage to ship and/or cargo
    • Loss of Life

Managing Countries whose ships were attacked in 2008 (Source: IMB)

costs cont
Costs (cont)
  • Indirect Costs
    • Shipping Costs passed on to consumers
      • Shipping industry already reeling from global financial crisis
      • Margins increasingly small
    • Security Forces on Merchant Vessel
      • $60,000 per trip
    • Route Changes
    • Military Patrols
      • Example EU: $129 million for anti-piracy operations (varies by optempo)
    • Instability
  • Future Costs
    • Destabilize regions
    • Terrorism
significance
Significance
  • Currently piracy costs are insignificant, but…
    • Potential terrorism nexis of concern
overview1
Overview
  • Nature and Scope of Problem
    • Definition
    • Why
    • Areas affected
    • Costs
    • Significance
  • Piracy Trends and Tactics
  • Current Responses and the Way Ahead
    • Current Responses
    • Cooperation in Gulf of Aden
    • Conclusion
piracy reporting
Piracy Reporting

Criminal Levels:

  • Low-Level Armed Robbery (LLAR)
  • Medium Level Armed Assault and Robbery (MLAAR)
  • Major Criminal Highjack (MCHJ)

Location of Attack:

  • Pier
  • Anchorage
  • Underway
perpetrators
Perpetrators
  • Common/Petty Criminals
    • Objectives: money & equipment
  • Organized Crime
    • Objectives: cargo theft, ship

theft & ransom

  • Terrorist Organizations
    • Objectives: money, phantom ships, casualties, port disruption, trade disruption, environmental damage
preferred targets
Preferred Targets
  • Smaller Craft and Ships
    • Low freeboards
    • No visible anti-piracy measures
  • Larger Cargo ships
    • Older vessels
    • Fully loaded
    • More complex target
    • Steal-to-order

Fishing Dhow

Petro Ranger

Targets of Opportunity

tactics llar mlaar
Tactics – LLAR/MLAAR
  • Stick to known area (local control)
    • At pier – Tanzania
    • At Anchorage – Singapore, Philippines
    • While anchoring – Bangladesh, Ghana
  • Differing Levels of Violence
    • Weapons differ regionally
    • Increase use of guns in 2008 (72 to 139)
  • Neutralize crew
    • Kidnap, toss overboard, set adrift
  • Loot ship, cargo, personal goods, & equipment

Pirates in the Littorals

Weapons

tactics mchj
Tactics – MCHJ
  • Within 200 nm of shore*
  • Stick to known area (local control)
  • Shipping routes/choke points
  • SE Asia –night / Somalia – day
  • High seas in winter
  • ~15 knots
  • Board via ladder & grappling hooks
    • Conduct “control” of vessel
  • Differing Levels of Violence
    • Dependent on Objectives/Region

Remains of RPG round

Ladder to board

*evolving tactic

tactics mchj1
Tactics - MCHJ
  • Deception
    • Impersonate Customs Officials
    • Acting as local Coast Guard
  • Scare Tactics
    • Threaten with violence
    • Shoot weapons at bridge

–Force vessel to stop

- Force crew to lower ladder

  • Swarm Attack
    • Groups of three
      • 5 people per boat
    • Overwhelm defenses
    • Distract bridge

Approach via blind spot

Firing RPG at vessel

evolving tactics
Evolving Tactics
  • Fake Distress calls
    • Distract crew
  • Dummy Attacks
    • Distract forces in area
  • ‘Motherships’
    • Extended Reach
  • Improving technology
    • Satellite phones, GPS, Night Vision Devices (NVD)
  • False Registration
    • Flags of Convenience
    • Phantom Ships

Increasingly Sophisticated Communications

Fishing Dhow at Night

case study sirius star
Case Study - Sirius Star

Airdrop of Ransom

  • Hijacked Nov 15– Jan 9
  • Farthest out ever captured
    • 450NM SE Kenya
  • Largest ship ever captured
    • Crew of 25
  • Ship - $150 million
  • Cargo - $100 million
    • Low freeboard (30ft)
    • 24% SA produces in 1 day
  • Anchored off coast
  • Ransom paid via parachute drop
case study mv faina
Case Study - MV FAINA
  • Hijacked 25 Sept 2008 – 05 Feb 2009
  • 50 pirates
    • -Central Regional Coast Guard
  • 25 hostages
  • High Value Cargo
    • T-72 tanks, weapons & ammunition
  • Vessel traveling Ukraine to Kenya
    • Actually destine for Southern Sudan?
  • Military vessels surrounding
    • Medical inspections and resupply
    • 147 hostages on other vessels
  • Ransom: $35 million-$5 million
    • $3.2 million paid

Pirates patrolling decks

UNSC Resolutions

USN boarding party

overview2
Overview
  • Nature and Scope of Problem
    • Definition
    • Why
    • Areas affected
    • Costs
    • Significance
  • Piracy Trends and Tactics
  • Current Responses and the Way Ahead
    • Current Responses
    • Cooperation in Gulf of Aden
    • Conclusion
counterpiracy tactics ship s own
Counterpiracy TacticsShip's Own
  • Recommended Measures:
    • Maintain SA – piracy watch
    • Avoid warning areas/times
    • Maintain VHF comms
    • Speed up - 15 knots
    • Heavy wheel movements
    • Fire hoses - primed
    • Parachute Flares
    • Smoke Bombs
    • Sound Cannons
    • Secure locks on doors
    • Spotlights

“This isn’t rocket science” SecDef Gates

Firing water cannons to repel pirates

counterpiracy tactics ship s own1
Counterpiracy TacticsShip's Own
  • Protector

Protector

Long –Range Audio Device (LRAD)

Private Security

Armed/Unarmed

Electric Fences

current response
Current Response
  • Anti-piracy Coalition
    • Currently 14 Countries
    • Push for Regional Counter-Piracy Coordination Center (CPCC)
  • U.S Response—CTF-151
    • 4 Ships currently
    • Not a ”Fix Somalia" Task Force
    • Mission Focus:
      • Prevent
      • Disrupt and Deter
      • Punish
  • RDML Terry McKnight
  • Commander, Combined Task Force 151
improved international coordination
Improved International Coordination
  • New UN Resolutions 1846, 1851
  • Defining Patrol Areas “turf control”
  • Improved Communications/Coordination
    • Maritime Security Center HOA
    • International Maritime Bureau
      • Piracy Reporting Centre
    • Maritime Liaison Office (Bahrain)
  • Kenyan Judicial Cooperation
    • Pirate transfer from USNS Lewis & Clark soon?
gulf of aden security lanes
Gulf of Aden Security Lanes
  • IMB designated Maritime Security Patrol Areas updated as of 1 Feb with 2 5-mile east/west bound lanes
  • Security Assistance:
  • UK Maritime Security Center (MSC HOA) for Security Assistance & Escort Support
  • US Maritime Liaison Office (Bahrain)
conclusion
Conclusion
  • Various factors contribute to piracy
  • Overall economic costs not huge
  • Tactics are cyclic and evolving
  • Has potential to contribute to other international problems
  • Global economic ties force coalition solutions to piracy
  • Comprehensive solution necessary else cost/benefit ratio will drive disinterest in solution
    • Sub-Question: At what point do serious actions become necessary?