The hijacking of ships off the coast of Somalia has become a mini-industry, with another seized on Thursday. The ransoms are always paid - but how? Simon Cox goes on the money trail and finds all roads lead to one destination: London.
Thursday, January 29, 2009
Piracy off the coast of Somalia is big business. Last year alone pirate gangs were paid an estimated £35m from holding scores of ships and hundreds of crew members to ransom.
But securing their release is the responsibility of a hidden mini-industry of lawyers, negotiators and security teams based nearly 7,000km (4,200 miles) away, in London, UK, the business capital of the world's maritime industry.
The key players in this sector like to keep their activities as discreet as possible but in my investigation I gained access to people involved in every part of the ransom chain.
When a ship's owner discovers one of their fleet has been hijacked, the first port of call for them is normally to a lawyer like Stephen Askins, whose firm is one of the few that deals with kidnaps and ransoms at sea.
"We would expect to be called early," says Mr Askins. "And how you then deal with the negotiations will be a team decision.
There's no official "how to pay a ransom" rulebook - and the uncertainty leads "lots of sensitivity".
"People will do it in different ways," says Mr Askins, "but at the end of the day it's somebody from the owner's side talking to someone from the pirate's side, negotiating their way to a final settlement."
No two kidnaps are the same but the proliferation of attacks off the coast of Somalia in the past year means a pattern has been established where the pirates see it as a business. They may be armed and dangerous but, Mr Askins says, money is their chief motivation.
"They are negotiating for money, therefore anybody who has been on holiday and has tried to bargain with an Egyptian [market trader] for a carpet will understand how difficult it is to negotiate a conclusion. But we don't have the option of walking away, we have got to keep negotiating."
It's a radical departure from the airline hijackings of previous decades. Then, hijackers, who tended to be politically motivated, knew it was only a matter of time before special forces would be called in and try to kill them. Ransoms were often not paid.
But Somali piracy is different. Paying a ransom is not illegal under British law, unless it's to terrorists. And while governments have failed to clamp down to hijackings, a precedent of paying up has been established. So, as soon as pirates set foot on a ship they know pay day is only a matter of time.
The next link in the chain is a specialist negotiator, whose job is to try to reach a reasonable price.
Negotiations tend to begin with astronomical demands from the hijackers before the price is bargained downwards.
James Wilkes, who runs specialist maritime risk company Gray Page, which has been involved in negotiations in several hijackings in Somalia, says it can mean daily contact with pirates for several months. The average hijack lasts two months before a ransom is paid.
The going ransom rate is $1m-$2m, but getting to a final figure is like a "tense boardroom negotiation" he says.
"A commercial transaction is probably a good way to describe it. They have hijacked the ship, the crew and its cargo and they want a certain amount of money for its release.
"It's about finding the right way to get the ship released and on the right terms, although human lives are involved and the consequences of something going wrong are quite significant."
But agreeing a ransom leads to an even bigger headache - getting the money to the pirates.
It's fraught with difficulties. The ransom for the Sirius Star oil tanker, hijacked in November, appeared to have been dropped from the air. But normally it means delivering a huge wodge of cash by sea to the hijackers, who will have anchored off the coast of northern Somalia.
Once a drop-off boat and crew have been hired and the weather negotiated, there's another big hurdle, according to risk consultant Darren Dickson: more pirates.
Navigating the high seas with a stash of money is not for the fainthearted.
"Some of these people who have done these drop offs by boat actually have to fend off pirates as they are delivering the ransom themselves," says Mr Dickson. His firm has delivered ransoms to several pirate gangs.
Dodging the pirates is only one difficulty - another is to make sure the good guys know what you're up to as well. According to Mr Dickson, of Drum Cussac, it's vital that "you're not going to be looked at as a pirate vessel... then you might get taken out by a naval vessel."
All these specialist services don't come cheap in the UK. Factor in the cost of lawyers, risk consultants, security advisers, as well as the fixed overheads, and delivering the money to the pirates "can lead to doubling the ransom amount," says Simon Beale, a marine underwriter.
Last year Somali pirates pocketed an estimated $50m. Not all of this is going to British lawyers, negotiators and security teams but a fair chunk of it will be. It has led to some criticism, particularly in Spain, that London is profiting from crime.
"I don't think people are trying to exploit the situation," says maritime lawyer Mr Askins. "We are very much trying to do the job we have always done at the rates we would charge in any other case."
And what happens to the tens of millions of pounds that the pirates make?
More than 100 attacks in 2008
40 successful hijackings
14 ships currently held, including the MV Faina carrying tanks
About 200 crew held hostage
Source: International Maritime Bureau, 2008
All the kidnap specialists who deal with the Somali pirates say it's a purely criminal enterprise. But Bruno Schiemsky, a Kenyan arms analyst, believes there is an even darker link - between the pirates and the radical Islamist group al-Shabab.
He says the pirates will pay a percentage of the ransom to al-Shabab - as much as 50 per cent in areas where the group is in control.
"It's an alliance of convenience, which makes it fragile," says Mr Schiemsky, "but for the moment both parties - pirates and al-Shabab - see the value of working together since they have a common enemy, the international community, and this relationship is only getting stronger through time. "
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Trying to verify this is difficult. When I ask the Serious Organised Crime Agency if it has any suspicions about where the money was going, I get a firm "no comment".
But the American diplomat chairing a new international group of 24 nations which is looking at tackling Somali piracy said US counter piracy officials wanted to find out more about how pirate operations were paid for and which "outside sources" were involved.
If a link was established between the pirates and terrorists it could create serious problems for all parties involved. As one underwriter summed it up, "we'd all be going to jail".
Can we have another article on how they actually board the ships? I'm sure it is more difficult than this but can't they just pull the ladder up?
What, 2009 and we still have pirates? Shiver me timbers. They should make a film called pirates of the Indian Ocean.
How is this allowed to continue? With the "might" of the UK navy, how are these pirates not caught and put to justice? What happened to the "war against terror"? How is this NOT terrorism? I might think about quitting my IT job, and going into piracy... sounds like it's a much more profitable venture!
Paul Goodman, Gloucester, UK
"So, as soon as pirates set foot on a ship they know pay day is only a matter of time."
They should not be paying a single cent for the hijacked ships. Paying ransom has only encouraged more hijackings and made it more like a business than the criminal activity that it is. I find it utterly unacceptable that our navies and law enforcement are not aggressively going after the pirates. Instead, they pass the buck onto the ship owners who would rather pay the ransom and chock it up as a business expense than go after the criminals.
Daniel Zogaib, Orange, California, United States
I wonder what percentage of ships get through without being held? I say put the pirates to work maintaining the area, and institute a toll for passage.
Mike, York, PA USA
Great article. The Magazine should publish more like this. Looking forward to hearing the show about it later.
Ben Hunter, Sheffield
Why don't these shipping companies hire soldiers of fortune or mercenaries, both of who are allowed to carry guns. Then they would have protection on board these ships. It seems that in the long run this would stop the pirating and maybe even put an end to it. Instead, they just pay the pirates the ransom amount. Can someone answer this for me?
Charlotte Hall, Timberlake, Ohio
Isn't it time to arrange protected convoys. Ships could convene at a safe rendez-vous and travel through the Gulf with escorts.
Gavin Kelly, Lancaster, England, UK