Somali pirates’ return exacerbates the crisis for global shipping companies

Recent pirate raids are increasing costs for shippers as pirates take advantage of security vacuum left by Houthi strikes; the raids are piling the risks and costs on to shipping companies

Updated - March 22, 2024 12:01 pm IST

Published - March 22, 2024 10:41 am IST - MOGADISHU

Insurance premia are more expensive for voyages via Gulf of Aden and Red Sea. 

Insurance premia are more expensive for voyages via Gulf of Aden and Red Sea.  | Photo Credit: REUTERS

As a speed boat carrying more than a dozen Somali pirates bore down on their position in the western Indian Ocean, the crew of a Bangladeshi-owned bulk carrier sent out a distress signal and called an emergency hotline.

No one reached them in time. The pirates clambered aboard the Abdullah, firing warning shots and taking the captain and second officer hostage, Chief Officer Atiq Ullah Khan said in an audio message to the ship’s owners.

“By the grace of Allah no one has been harmed so far,” Mr. Khan said in the message, recorded before the pirates took the crew’s phones.

A week later, the Abdullah is anchored off the coast of Somalia, the latest victim of a resurgence of piracy that international navies thought they had brought under control.

The raids are piling risks and costs onto shipping firms also contending with repeated drone and missile strikes by Yemen’s Houthi militia in the Red Sea and other nearby waters.

More than 20 attempted hijackings since November have driven up prices for armed security guards and insurance coverage and raised the spectre of possible ransom payments, according to five industry representatives.

Two Somali gang members told Reuters they were taking advantage of the distraction provided by Houthi strikes several hundred nautical miles to the north to get back into piracy after lying dormant for nearly a decade.

“They took this chance because the international naval forces that operate off the coast of Somalia reduced their operations,” said a pirate financier who goes by the alias Ismail Isse and said he helped fund the hijacking of another bulk carrier in December.

He spoke to Reuters by phone from Hul Anod, a coastal area in Somalia’s semi-autonomous northeastern region of Puntland where the ship, the Ruen, was held for weeks.

Problem may escalate

While the threat is not as serious as it was in 2008-2014, regional officials and industry sources are concerned the problem could escalate. “If we do not stop it while it’s still in its infancy, it can become the same as it was,” Somali President Hassan Sheikh Mohamud told Reuters last month.

Over the weekend, the Indian Navy intercepted and freed the Ruen, which was sailing under Malta’s flag, after it ventured back out to sea. The European Union’s anti-piracy mission, EUNAVFOR Atalanta, said the pirates may have used the ship as a launchpad to attack the Abdullah.

The Indian Navy said all 35 pirates aboard surrendered, and the 17 hostages rescued without injuries.

Cyrus Mody, deputy director of the International Chamber of Commerce’s anti-crime arm, said the intervention of the Indian Navy, which has deployed at least a dozen warships east of the Red Sea, could have an important deterrent effect.

“This intervention does show that the risk/reward is very much against the pirates, and hopefully that will make them think a few times over,” he said.

A Bangladeshi Foreign Ministry official, however, told Reuters the government was “not in favour of any kind of military action” to free the Abdullah. The official, who asked not to be named, cited the pirates’ advantages when operating close to the Somali coast.

Rising costs

The waterways off Somalia include some of the world’s busiest shipping lanes. Each year, about 20,000 vessels, carrying everything from furniture and apparel to grains and fuel, pass through the Gulf of Aden on way to and from the Red Sea and Suez Canal, the shortest maritime route between Europe and Asia.

At their peak in 2011, Somali pirates launched 237 attacks and held hundreds of hostages, the International Maritime Bureau reported. That year, the Oceans Beyond Piracy monitoring group estimated their activities cost the global economy $7 billion, including hundreds of millions of dollars in ransoms.

The current rate of attacks is significantly less, with the pirates primarily targeting smaller vessels in less-patrolled waters, maritime risk managers and insurers said. Since November, they have successfully seized at least two cargo ships and 12 fishing vessels, as per EUNAVFOR data.

But the mission — which as of February had identified up to five so-called pirate action groups active in the eastern Gulf of Aden and Somali Basin — has warned the end of monsoon season this month could see them push further south and east.

Their raids have extended the area in which insurers impose additional war risk premiums on ships. Those premiums are getting more expensive for voyages through the Gulf of Aden and Red Sea, adding hundreds of thousands of dollars to the price tag for a typical seven-day voyage, insurance officials said.

Growing demand for private armed guards is also driving up prices. The cost to hire a team for three days jumped around 50% in February month-on-month, to between $4,000 and $15,000, maritime security sources said.

No ransom payments have been reported, but pirate financier, Mr. Isse, and a source said negotiations had taken place about a pay-off in millions of dollars to release the Ruen.

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