In the past two decades, maritime piracy off the coast of Somalia has grown from a small militia effort against corporate fisheries to a source of international concern raking in well over fifty million dollars a year. This review of literature seeks to examine the causes of Somali piracy as well as the market forces that keep it thriving. It finds that this particular criminal enterprise uses an effective pyramid scheme model and also that it is more fiscally prudent for world shipping to pay ransoms than to combat the pirates themselves. Unless altered, these two forces will ensure the continuation of piracy in Somalia indefinitely, regardless of shipowners' ability to bear the brunt of the costs.
As of the end of April, 173 incidents of piracy worldwide have occurred so far in 2011. The vast majority of these (117) occurred in the waters off the coast of Somalia (Huang, 2011). The most notorious Somali pirates in recent years have been those that hijack ships to ransom them along with their cargoes and crews. Alongside them, there are also those pirates that rob ships for money, valuable materials, and the personal effects of the crew (Payne, 2010). A third group hijacks ships in order to use them as bases of operations to launch attacks. (Herbert, 2009). The difference usually lies with the circumstance and not the pirate, but there are those who make their entire pirate careers on their ability to negotiate ransoms.
The threat of piracy in all its forms off the coast of Somali waters is not a new one, but it has hit the international spotlight only recently. One reason why attention has been called to Somalia only recently is that high profile targets have only begun to come under attack. In 2008, a Ukranian freighter laden with Russian-made arms destined for either Somalia or Kenya was captured along with a Saudi freighter destined for the United States. Both ships were safely ransomed off with no loss of life, but they brought a great deal of attention to the issue. (Gettleman, 2008; “Pirates Capture Saudi Oil Tanker”, 2008). Another possible reason for the interest is the exponential increase in pirate activity in recent years. Four years ago in 2007, fifteen vessels were hijacked. In the first five months of this year alone, twenty vessels were successfully hijacked. (“Pirates increase attacks”, 2007; Huang, 2011). Though murder is less common in pirate attacks, incidents of pirates killing sailors off of Somalia's coast has also risen from seven last year to eight in the past five months (“Pirates Seized”, 2011; Piracy News”, 2011). A final possibility is the steady increase in ransoms demanded. In 2005, a captured vessel usually ransomed for between $100,000 and $200,000. This year, the estimate is closer to five million (Huang, 2011).
The increases in ransom demands, incidents of attack, and the range that pirates prowl all result from market forces from both within Somali pirate clans and from the world shipping community. Left unchecked, these forces can only serve to continue to increase the threat of piracy both off the coast of Somalia and around the world, but in order to understand the forces that fuel piracy off the Somali coast, it is important to study Somalia's recent history.
Somalia achieved its independence from Britian and Italy in June of 1960. Nine years later, the president was assassinated and the military seized control. The new government under Mohamad Siad Barre was harsh; the constitution was suspended, opposition leaders were jailed (or killed), and political parties were banned. Barre enforced the state ideology of Scientific Socialism and outlawed clan loyalties. Despite the austerity of Barre and his government, the state was stable and the literacy rate of Somalia increased (“Somalia-The Fall of Siad Barre”).
In July of 1977, Barre declared war on Ethiopia over the Ogaden region. The USSR, which had previously supported Somalia, decided to back Ethiopia instead leading the United States to switch allegiances from Ethiopia to Somalia. The war ended disastrously and Barre's power began to wane. One of his own commanders, Colonel Mahammad Shaykh Usmaan, attempted a coup against him and in response, Barre all but decimated his clan.
Barre was injured in an automobile accident in 1986 and many of the clans that his regime had oppressed began to openly revolt against him. In a series of running conflicts, Barre's zone of control began to steadily shrink. As the pressure increased, Barre's tactics became more and more vicious. In 1989, Barre's regime was left with Mogadishu and torture and murder was the norm. The US withdrew its support and Barre lost the capitol block by block (“Somali Civil War”, 2008; “Somalia-The Fall of Siad Barre”).
In January, 1991, Siad Barre fled Mogadishu, leading the alliances between the factions that overthrew him to crumble. Almost immediately, a counter-revolution to reinstate Siad Barre took place, and the fighting began in earnest with many clans, warlords, and political organizations vying for power. Before Spring was over, the Somali National Movement had declared the northwest region of the country, Somaliland, an autonomous and independent state.
In December of the following year, the UN unanimously decided to get involved in the country. The move was unpopular in the US as it was believed that the Bush Administration's sole interest in Somalia lay in the possible oil reserves off its coast. During the next three years, the Somali Civil War raged on heedless of the peacekeepers. In 1995, the UN decided to cut its losses and withdraw from Somalia.
From 1991 to 2004, thirteen separate attempts were waged to establish a central government (“Somali Pirates” 2009). In 1998, Puntland in northeastern Somalia declared its own autonomy, though it stated its intention to rejoin the country if it came under a unified government. Many movements followed suit with varying degrees of success (“Somali Civil War”).
In 2006, the Islamic Courts Union took control of Mogidishu, becoming the first organization to control the entire capitol since the fall of Barre's regime. The US, believing the ICU to be in league with Al-Quaeda, financed Ethiopian mercenaries to aid a coalition of warlords in ousting the ICU (“Somalia: 20 Years”, 2011).
Today, the conflict in Somalia is showing no sign of letting up. The two northern territories of Somaliland and Puntland have remained relatively stable since their declarations of independence. The current national government under President Sheikh Sharif Sheikh Ahmed has the support of the United Nations as well as the United States (“Somalia: 20 Years”, 2011). Ahmed, the former commander-in-chief of the ICU, has the backing of the West because Washington hopes he will keep forces loyal to al-Quaeda at bay (“German Military Security”, 2010). However, he and his government only control a few blocks of Mogidishu and his Western backing is a double-edged sword.
Controlling the entire southern portion of the country along with half of the capitol is al-Shabib, an Islamic group with known ties to al-Quaeda. Tribal warlords continue to squabble over the rest of the country (“Somalia: 20 Years”, 2011).
Shortly after the fall of Barre's regime in 1991, international commercial fishing operations began to ply Somali waters. Local fishermen were unable to compete with the large trawlers which they believed to be an illegal incursion upon their livelihood (“Somali Pirates”, 2009). Left with no legal recourse, the fishermen formed armed militias and forced their way aboard the commercial vessels to demand a tax (Gettleman, 2008). “From there, they got greedy,” stated Somali diplomat Mohammad Osman Aden to the UN in 2008, “They started attacking everyone,” (Somali Pirates, 2009).
Even today, many pirates see themselves as a force for good off of Somalia's coast. Sugule Ali, spokesman for the bold marauders that captured a Ukranian freighter laden with Russian armaments, defended the actions of his colleagues. “We don’t consider ourselves sea bandits. We consider sea bandits those who illegally fish in our seas and dump waste in our seas and carry weapons in our seas. We are simply patrolling our seas. Think of us like a coast guard,” (Gettleman, 2008).
Piracy is not only the domain of fishermen. People from all walks of life are welcome into the fold, so long as they have the proper connections and belong to the right clan. Indeed, with Somalia's war-torn climate, the skill set of a successful pirate can be found in many young Somali men, even as the industry becomes more technologically oriented (Huang, 2011). Still, these men are far from career criminals. Abdiraham Ali was a secondary school student in Mogadishu until his family decided to flee the capitol. "First I decided to leave the country and migrate, but then I remembered my late colleagues who died at sea while trying to migrate to Italy, so I [joined the pirates], instead of dying in the desert or from mortars in Mogadishu,” (Ahmed, 2009). Ali is an average representative of the face of Somali piracy: a young man trying to survive in a region long declared by the UN as being in the midst of a humanitarian crisis.
Ahmed Mohammed Adan is another such casualty of the conflict. A former truck driver, he now resides at a prison in Hargesia in a seperate unit with fifty other inmates convicted of piracy. Adan was able to explain the structure of a pirate organization. According to Adan, the average pirate team consists of mostly fresh recruits with a veteran leader. (At least one of the crew is an ex-fisherman and one is a tech, with the remainder being militia) A group of about five investors puts up the $3,000 to send the crew out to sea.. If the pirates fail to capture a vessel in around two weeks, they return to port to re-stock on fuel and provisions and head back out. If a group of pirates is successful, the investor(s) usually receive 50%, the negotiator receives 25%, and the crew splits the remainder (Huang, 2011). From there, the money continues to spread. New York Times journalist Jeffrey Gettleman states, “Entire clans and coastal villages now survive off piracy, with women baking bread for pirates, men and boys guarding hostages, and others serving as scouts, gunmen, mechanics, accountants and skiff builders. Traders make a nice cut off the water, fuel and cigarettes needed to sustain such oceangoing voyages.” (2008).
Although the pirates themselves end up with only a small cut of their earnings, after only a few operations, the crew can afford to become investors themselves. As Adan claimed, “Once they get some money, they don't want to take chances - they send another crew to go," (Huang, 2011). Successful investors have even better options available to them as they can earn enough money to escape Somalia altogether. Between 2005 and 2010, housing prices in Kenya's capitol Nairobi saw two and threefold increases. There is little doubt that the booming real estate market in this capitol and throughout the stable African and Southwest Asian nations results from piracy. Kenya, as well as most of Africa, lacks stringent laws against money laundering. Although the country is working on a bill to make the practice more difficult, it is still regarded by the Bureau of International Narcotics and Law Enforcement Affairs as a major money laundering country. An overwhelming majority of these retired pirates use their ill-gotten earnings to support legitimate investments. One pirate, Abdulle, explains, “I have invested through my brother, who is representing me, in Nairobi. He's got a big shop that sells clothes and general merchandise, so my future lies there, not in the piracy industry,” (Veneziani, 2010).
A recent result of Somalia's new national trade allows every Somalian to become a shareholder. The first pirate stock exchange was established in Haradheere, Puntland in August of 2009. The small fishing village rapidly became a bustling town as its ports were utilized by pirate crews. The exchange allows Somalis to contribute money, weapons, and other items to individual outfits in exchange for a portion of their profits. It is open is open twenty four hours a day and also functions as a focal point amd gathering place for the people of Haradheere. The investors aren't the only winners, either. According to Mohamed Adam, deputy security officer of the town, “The district gets a percentage of every ransom from ships that have been released, and that goes on public infrastructure, including our hospital and our public schools,”(Ahmed, 2009).
Since May of 2008, insurance companies have been charging shipowners heavy premiums (at a minimum of $20k) for sailing through the Arabian Sea. J. Peter Pham, the director of the Nelson Institute for International and Public Affairs at James Madison University, estimates that on average, the London based insurance firms receive around $400 million every year while only paying out around $100 million. Even as pirate attacks increase, insurers need only raise their premiums to keep profit margins high (Herbert, 2009).
These profits come at the expense of shipowners, who have already been dealing with higher operating costs resulting in razor thin profit margins since the turn of the millennium (“Shipping Profitibility”). Shipowners, unlike the insurance firms, are eager to combat piracy, but how?
Armed guards posted on ships have several times been proven to be an effective deterrent to pirates. Usually, as in the case of the Italian cruse liner MSC Melody and its Israeli guards, all it takes is a few warning shots before the pirates change course in search of easier prey. Guards come with a hefty price tag, however, costing shipowners between $40k and $60k per transit in addition to the premiums already demanded by insurance firms. Also, guards present potential legal liabilities. "You would end up with some cowboys ... shooting some poor fisherman," claimed Per Gullestrup, of Copenhagen's Clipper Projects after negotiating the release of his ship CEC Future and its thirteen crew members (Herbert, 2009). This concern is soundly justified considering Blackwater Worldwide's notorious exploits in Iraq. In fact, in recent years Blackwater has even distanced itself from its own name, now going under the name “Xe” (“Blackwater Ditches”, 2009). Peter Leeson, economics professor at George Mason University sums up the overall sentiment on hiring guards in his book, The Invisible Hook: The Hidden Economics of Pirates: “The idea of arming crews or hiring guards has failed the market test. The fact that [shipowners] are not doing it means its not the cheapest thing to do,” (Herbert, 2009). Shipowners, unable and/or unwilling to pay for guards and without the support of insurance firms, are left to plead with national governments to go after piracy themselves.
Unfortunately, international law is incredibly hazy on the subject of pirates. Since the Barbary Wars, it has been US policy to take action against pirates that attack American vessels (which only account for less than 5% of traffic in pirate infested areas). US ships are allowed to respond to the distress calls of ships from other nations, but they may not apprehend the pirates that accost them. The US isn't the only country hindered by its laws. In the Fall of 2008, the Dutch frigate Absalon apprehended the crew of a camouflaged skiff laden with weapons. The crew admitted to being pirates and they were taken into custody. Days later, the Dutch government ordered the pirates released on the grounds that as the pirates had not yet committed a crime, the Dutch had no jurisdiction over them. The Absalon's captain, Frank Trojahn, complained, "It's frustrating. We catch them, confiscate their weapons, and then we let them go." (“Somali Pirates, 2009).
Furthermore, as far as the US Navy is concerned, combating piracy is once again an economically unsound option. At a Senate Armed Services Committee hearing in 2009, Vice Admiral James Winnefeld testified that while an increased military presence would help disrupt and deter pirate activity, using the Navy to combat piracy would “put a large dent” in its capacity to conduct counterrterrorism operations as well as the wars in both Iraq and Afghanistan. Winnefeld also put forth the problem of the cost of such operations (Herbert, 2009).
The Crime (Is That This Part Should Be More Developed)
The course of action that is most fiscally responsible for Somalis, insurance firms, and the governments of the world is to let piracy continue unchecked. As incidents of piracy increase alongside ransom payments, leaving the issue of piracy in Somalia alone is an unacceptable solution. World shipping simply will not be able to take the strain. Still, piracy creates the only stable economy in Somalia, and any plan to end piracy must also include a plan to establish a government capable of supporting the population.
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