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Norway, concerned about growing the growing economic costs of piracy to its third-largest industry, has proposed arming its merchant ships for the first time since the Second World War. The comments by Trond Giske, Norway's Minister of Commerce, come on the heels of a report by the International Chamber of Shipping (ICS) that said oceangoing pirates inflicted between $7-billion (U.S.) and $12-billion in damage on the global economy in 2010.

They also followed a recent attack on a slow-moving Danish cargo carrier in the Arabian Sea's Gulf of Aden, which was beaten off by hired guns. The ship's registry state, Singapore, permits the arming of ships in pirate-infested waters.

"There might be alternatives like going in convoy," Mr. Giske said. "Everyone wishes for the least weapons use, but this is a dramatic state of emergency."

About 80 per cent of ships running pirate gauntlets around the world have no means of self-defence, the ICS says. It is estimated that up to 300 attacks go unreported each year.

When attacked, the Danish vessel was about 40 kilometres off the coast of Yemen. Yet, it's the lawlessness along Somalia's 5,000-km "pirate paradise" coastline which is responsible for half of pirate attacks worldwide.

A larger armed naval presence has cut the number of attacks in the Gulf of Aden, but economic losses in the area continue to dwarf all former hotspots. In Malaysia's once dreaded Malacca Strait, neighbour nations have joined forces to stop pirates.

In the ship-owner supported report, Costs of Piracy by the One Earth Future Foundation, economic hits include $31-million to prosecute pirates (750 of them in 11 countries); $2-billion borne by ship owners who hire security services, and the purchase of passive defences like barbed wire, flood lights, piracy mapping software and other protective kit. Ransoms worth $240-million were quietly paid out in 2010 for safe crew returns and ships that spent an average of 150 days in captivity.

Lloyds Market Association puts excess insurance costs due to Somali piracy at up to $3.2-billion per year, while re-routing "slow and low" ships costs upwards of $3-billion.

Cargoes stolen and diverted from Kenya and Yemen, Suez Canal fees lost by Egypt as vessels reroute, lost fishing and tourism to Mauritius, The Maldives and Seychelles add up to $1.25-billion a year, the report says.

Somali pirates now hold 700 hostages and 30 vessels.

Haakon Svane, head of contingency planning for the Norwegian Ship Owners' Association, says his members log 1,000 voyages through the hair-raising Gulf every year. The crews of three Norwegian-owned ships brave pirates every day.

"It's a huge burden," Mr. Svane said, adding that the types of ships attacked range from petro-product carriers to those carrying raw materials or cars.

Apart from shoot-outs and arrests at sea, 55 states are funding projects in Somali separatist regions Somaliland and Puntland, where leaders aim to set themselves apart from "lawless" Somalia proper. Denmark is building two "pirate jails" in Somaliland with $30-million in aid, according to news wire NTB. Nearly one 100 convicted pirates are locked up in the first of two unfinished buildings that opens at the end of March.