The cost of Somali Piracy to the world economy has been increased to around $7 billion in 2011 due to the increasing threats to shipments of goods by Somali pirates. Approximately 80 per cent of all costs are borne by the shipping industry, while governments account for 20 per cent of the expenditures associated with countering piracy attacks. The estimated economic cost of piracy was between $6.6 and $6.9 billion in 2011.
According to a report of Oceans Beyond Piracy released on Wednesday, in 2011, 31 ransoms were paid to Somali pirates, totaling around $160 million. The average ransom was approximately $5 million, up from around $4 million in 2010. While 2011 saw a lower success rate for Somali pirates, the increased price of ransoms meant that pirates received greater revenue for fewer hijackings. According to the report, MV Suez crew, in which many captives from both Pakistan and India were held hostage by Somali pirates, was released after the payment of $2.1 million in 13 June 2011. The sailors who were captured on board of MV Suez were released by the pirates after paying a huge ransom by Pakistani human rights activist, Ansar Burney.
In 2011, Somali pirates attacked 237 ships, and successfully hijacked 281. Piracy impacts multiple stakeholders, none more so than the seafarers attacked, held hostage, or killed. Specifically analysing the economic impact of Somali piracy, the fresh report of Oceans Beyond Piracy assesses nine different direct cost factors specifically focused on the economic impact of Somali piracy. Anna Bowden, the report’s author explained that “Over the past year we have had substantial cooperation from maritime stakeholders which has helped to ensure that the figures are as reliable as possible.”
The breakdown of the most notable costs includes $2.7 billion in fuel costs associated with increased speeds of vessels transiting through high risk areas, $1.3 billion for military operations, and $1.1 billion for security equipment and armed guards. Additionally, $635 million is attributed to insurance, $486 to $680 million is spent on re-routing vessels along the western coast of India, and $195 million is the estimated cost for increased labor costs and danger pay for seafarers.
The vast majority (99 per cent) of the billions spent are attached to recurring costs associated with the protection of vessels – costs which must be repeated each year. This figure is in sharp contrast to the $38 million spent for prosecution, imprisonment, and building regional and Somali capacity to fight piracy.
