Piracy costs $7bn, mostly to benefit of security firms

Published on Thursday 9 February 2012 01:32

Somali piracy in the Indian Ocean costs the global economy around $7 billion (£4.4bn) a year, a new study has said, with ships forced to travel faster over longer routes and hire armed guards.

“The question for the shipping industry is how long this is sustainable,” said Anna Bowden, research programme manager for the US-based One Earth Future foundation.

In the past five years, hundreds of pirates sailing from towns in the Somali enclave of Puntland have roamed further into the Indian Ocean, defying international warships sent to deter them.

The study showed at least $1.3bn had been spent by world governments trying to control the problem, a figure dwarfed by shipping industry costs estimated at up to $5.5bn.

The biggest single item was the $2.7bn it costs for lone container ships to hurry through at much higher, and much less economic, speeds. Non-container ships with less flexibility to increase speed were adopting other costly strategies.

Ship owners also spent more than $1bn on private guards, often armed, a figure that was rising sharply, the study showed. Half of all ships were carrying guards by the end of last year, against a quarter for the whole of the year.

As a result, private security companies, many based in Britain and northern Europe, were earning much more than the pirates, the study found.

The report estimated the total paid in ransoms at $160 million although the average ransom for a ship paid in 2011 rose from $4m to $5m.

Fewer ships were seized last year, but the length of seizure increased as did the level of violence used by the pirates.