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Piracy: Special report on threats to Middle East

Despite international efforts shipping oil and gas is a risky business

Although naval patrols in the Indian Ocean and north Arabian Sea have seen some succes, it is impossible to cover the entire area say experts.
Although naval patrols in the Indian Ocean and north Arabian Sea have seen some succes, it is impossible to cover the entire area say experts.

Maritime pirates in the Arabian Sea and Indian Ocean are getting bolder and are able to operate in all weather conditions through the use of large stolen vessels. Emran Hussain asks what can be done to combat this threat and explores the impact on offshore vessel operators and owners.

As Middle Eastern and North African governments experience major social and political upheavals on the land, out on the seas, the battle against piracy in the region has been an ongoing one and if anything it has escalated in over the past year.

Experts from the defence and security sector, shipping and legal industries are all in agreement that more can always be done. In a way they are all in the same boat, so to speak.

Vessel seizures by Somali pirates in the last 12 months have seen an exponential rise in hijackings with some 711 hostages currently being held on 33 seized vessels according to latest official International Maritime Bureau statistics.

Given that to date total worldwide pirate attacks this year alone stand at 87 with 61 of those attributed to Somali pirates there is no doubt that the region in and around the Horn of Africa is dangerous for any vessel passing through.

Around 35 warships from various international coalition forces are estimated to be patrolling the Arabian Sea and Indian Ocean – a huge area spanning 4 million square Kilometres – at any given time.

Given the scope of the sheer size of the geographic area to be covered and that the pirates operating in these waters number in the dozens, it would be an understatement to say that hunting for pirates is like looking for a needle in a very big haystack.

Shifting tactics

Wing Commander, Paddy O’Kennedy who is the spokesman for the European Naval contingent in the region known as EUNAVFOR, says that the Somali pirates operating in the region seem to be winning this increasingly large game of chicken.

“The northeast monsoons normally kick in at the beginning of January and lays some pretty big surfs and swells on to the coast of Somalia, normally or historically that has been a problem for pirates because the way they operated was with a couple of Boston whalers (small high speed boats) and some attack skiffs,” he explains.

“It was difficult for them to get off the beach and if they did get off the beach it was pretty uncomfortable for them to operate in those kinds of conditions.”

“What we have seen them do recently is that they have changed their MO (modus operandi) to using mother-ships, what that means is that they will take a vessel, and then they will use that vessel to go on and take other vessels.”

Under such circumstances, he says, the weather has had much less affect on the pirates this year than it has done in the past. They are now able to operate in conditions that have, until now been impossible for them to operate in.

“What has happened is that the pirates have started to operate away from their historical areas of interest into particularly now the North Arabian Sea.”

The coast of Oman has been a particularly treacherous area of vessels going in and out of the Arabian Gulf in recent months and the threat is unlikely to subside anytime soon given the instability in Somalia and the lure of the financial return to be gained from a hijack mission.

“Because we’ve secured the Gulf of Aden to a certain extent, between Djibouti and the Horn of Africa, I say that guardedly because there are still attacks going on there but the number of attacks there has dramatically lowered,” he reveals.

Jonathan Wood, Global Issues analyst for Control Risks echoes O’Kennedy’s sentiments: “In 2007/2008 nearly all Somali pirate attacks were confined to the Gulf of Aden and in about 100 nautical miles of the Somali coastline.

By this year [2011] we also have attacks within 100 nautical miles but of India, within 20 nautical miles of Iran and 20 nautical miles of Mozambique and so what we’ve seen is a dramatic expansion in the size of the area that has been impacted by piracy.”

“We’ve also seen Somali pirates attempt ways of subverting some of the key counter-measures that have been deployed. Once the international community instituted an escorted naval corridor in the Gulf of Aden, we immediately saw activity move into the north Arabian Sea further into the Indian Ocean, the lower Red Sea,” he adds.

“These tactical shifts by and large encompass an increase in the risks to crew, cargo and vessel, we’ve seen escalations in terms of the number of armed engagements between both pirates and on-board security teams, pirates and naval forces,” Wood explains.

The impact of piracy has become much more significant, the average duration of a pirate incident has gone from 50 days in 2008 to about 150 days last year, according to Wood. The average ransom demand has increased quite dramatically from US$1-2 million in 2008 to $5-7 million last year.

The eventual resolution and insurance costs have increased rapidly. The expansion of piracy into the Arabian Sea even almost up to the Strait of Hormuz, is beginning to pose a significant threat to some of the major oil supply routes.

“We’ve had over a hundred attacks on tanker vessels in the Indian Ocean and Gulf of Aden since 2008 and many of these have been against VLCCs and other very large crude carriers,” Wood says.

For Abu Dhabi based offshore Support Vessel (OSV) investment company, Waha Maritime (a subsidiary of Waha Capital), the issue of piracy is an ever-present one. “It bothers us,” says director of maritime investments, Mustapha Boussaid who is a strong advocate for wider regional discussions on the piracy threat.

“We discuss this topic every time we meet as part of the United Arab Emirates Ship-owners Association or with our peers and other industry players either here or in Asia.

“Piracy is a concern to us just like any other ship owner, unfortunately there’s very little we can do at our level to protect ourselves aside from creating awareness and making the topic present every single time,” concedes Boussaid.

Boussaid says that Waha Capital’s OSV fleet is somewhat shielded from the threat of piracy as it is due to their relative low value as well as the localised nature of its operations but he says there is still enough cause for concern.

When asked about practical contingency plans, Boussaid explains: “What can you do? Buy insurance? Nobody gives you that type of insurance without being cost-prohibitive, buy guns and put them on ships?, no, we’re not going to do that.”

Christer Sjodoff, Group vice president of logistics and shipping provider GAC’s anti-piracy arm, GAC Solutions believes strongly in non-lethal ship structural defences and vessel hardening measures.

“These measures are non-lethal and do not involve the use of firearms. This is a crucial aspect of GAC Protective Solutions and it offers a safe, practical and tested option to vessel operators unsure about choosing the controversial route of placing armed guards on board their vessels. It is also an extremely inexpensive option when compared to the alternatives,” he explains.

What the insurers say

The maritime insurance industry which is perhaps the next most sensitive entity to piracy after the vessels themselves is witnessing some retraction in the marketplace, at least according to Paul Agate of Swinglehurst International Insurance & Reinsurance brokers in London.

“We’re seeing withdrawal from the market from some insurers who have basically had too many hijackings and have paid too many claims and with a restricting market the price is going up.

The owners have to weigh whether or not they’re prepared to send their ships through these infested waters rather than totally circumnavigate them,” he says.

“Could I imagine putting myself onboard a ship right now sailing those sort of waters? I’d find it very difficult to come to terms with it,” Agate, an ex-merchant sailor adds.

In addition to the widely accepted counter-piracy Best Management Practices (BMP), underwriters have become more proactive and are detailing and dictating specific routes which hug coastlines instead of sailing through the much vulnerable route of the middle of the Arabian Sea or the Indian Ocean, according to Agate.

Because insurance premiums related to piracy track the overall costs associated with resolving an act of piracy, it is the prudent ship owner who signs up to more comprehensive and holistic maritime insurance policies.

Dr. Sven Gerhard, Global Product leader Hull & Marine Liabilities, Allianz Global Corporate & Specialty AG, sees the marine insurance market trending towards providing more specialised packages to meet this relatively new threat.

“There are no clients as far as I am aware, who have piracy [insurance] still as part of the standard Hull & Machinery coverage and this is simply a reaction due to the rise in piracy attacks in the Gulf of Aden and in the Indian Ocean,” he says.

“If there is a higher [ransom] demand, then the rates will follow to cover these demands and that’s actually what is happening on very short notice in the Gulf region, the Gulf of Aden and all the territories restricted by piracy.”

Allianz insures about 20% of the world’s tanker fleet in concert with other insurers. For LNG vessels the insurer takes on as much as 50% of the shared risk of the asset.

“The standard War coverage should be in place for each serious [ship] owner, at least each owner who is operating internationally,” Dr. Gerhard explains.

“If the vessels are financed by banks or other ship-financing institutions, one of the requirements for granting loans, is that the vessels are properly insured, not only one the Hull & Machinery side but also on the War [insurance] side,” he says.

He advises that the shipping industry should take the piracy prevention element extremely seriously by implementing BMPs. “It’s not a game, it is proven that these measures do not prevent us from an attack but reduce these and the probability of such an attack significantly,” he stresses.

The legal angle

“A few years ago, there was a general feeling perhaps that the problem was containable. We’re seeing now that increasingly that the attacks are taking place further and further afield off the horn of Africa,” Brian Boahene of the Dubai branch of the international law firm, Ince & Co., weighs in.

He says that now that the pirates’ operational area and capability has expanded and their ransom demands have increased, this is likely to cause ship operators, charterers and insurance providers alike a lot of headache.

“The problem now is that it is becoming a bit more widespread, especially with the use of motherships, and this is also driving up the ransom demands. This is becoming a big problem now, so much so that for certain policies, there’s a question mark as to whether there is sufficient cover under the insurance policy to cover the ransom that’s being demanded.”

“If one were to be affected by a piracy incident, the first thing one needs to do is contact their insurers and also flag state and let them know what’s happening, the government also wish to be apprised of current developments,” he advises.

Ince & Co. stresses that ship owners should be fully aware of the terms and conditions of their insurance cover and charterparties, to avoid complications if a hijacking occurs.

Protection: The basics
Tudor Ellis, a consultant of UK based security firm Drum Cussac says that when it comes to ship hardening, it is important to just make sure basic counter-piracy measures are implemented.

“If the basics are done properly and effectively, then that significantly lowers the chance of something untoward happening to the vessel in the first place,” he explains. “The best form of defence is not being attacked in the initial instance which requires good intelligence, preparation and understanding.”

GAC’s Christer Sjodoff suggests that there “is no single measure that will protect a ship from being hijacked. Instead, we recommend a large number of small measures, which combined amount up to create a strong deterrent.

“Crew training, preparation, briefings and awareness ensure that those on board a vessel are better able to spot an approaching pirate attack and quickly take appropriate action without panicking, and also enable them to muster in safe areas so they are out of harm’s way in the event that firearms are used in an attempt to intimidate them,” he adds.

Conclusion

In the early days of the Somali piracy problem, the pirates had perhaps more honourable grievances against foreign fishing vessels practically fishing them out of business. Greed has now overtaken such seemingly innocent sentiments helping the problem grow ever larger.

The issue of piracy today mostly conjures up images of RPG-toting Somalis in small high speed boats chasing after large cargo vessels. However it is important to remember that this particular manifestation of piracy is a symptom of a much bigger economic problem.

Whilst foreign navies can only hope to slightly curb piracy out at sea, the real source of the piracy lies on land in Somalia where a dysfunctional central government is at best seen to be providing tacit approval of the pirates’ operations.

The coastal areas of Somalia where the pirates operate out of are now fundamentally much better off economically due to investments by the pirates from their ill-gotten gains.

Until people in these areas are given an alternative and legal means of wealth generation and an internationally-backed investment and development drive is set in motion, the maritime community may win the many battles against piracy but not the war.

Hijacking – the first 48 hours

The first 48 hours of any hijacking are an extremely stressful period for an owner. The key considerations at this stage are to organise the crisis management team, liaise with insurers and P&I Club and open lines of communication with key responders.

Key people to inform following a hijacking in the region are:
- United Kingdom Maritime Operations (UKMTO) office in Dubai, UAE,
- Maritime Liaison Office in Bahrain or Maritime Security Centre (Horn of Africa) in London, UK
- Insurers: war and hull
- P&I Club
- Flag
- Lawyers to coordinate response and advise on responders
- Crewing agents – clear lines of communication with families are vital

Much of what needs to be done in these early hours relates to managing expectations. The average time for a hijacking resolution is now around 100-125 days.

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