In your interest.
Online Personal Finance Magazine
No beating about the bush.
Away from the public eye, the modern business of ship piracy is rapidly acquiring professional attributes
Your fuel prices are about to go up some more, partly also because a bunch of ragtag bandits and pirates in and around Somalia along with their highly-qualified "negotiators" in respectable cities across the Western Europe and Central Asian world, are making a fine business out of one of the oldest professions known to humanity.
And while we are fed with images of rabble pointing guns at television cameras, the real "business" of modern ship piracy and ransoms is rapidly acquiring professional attributes, as always, done so very quietly away from the public eye.
However, to understand this article, you may want to first of all take out an atlas or a world map, and see how a very large ship carrying crude oil would typically go from the Persian Gulf to the East Coast of the USA. The ship, which would be anywhere in size from 300 through 500 thousand tonnes in carrying capacity, would exit the Persian Gulf, hug the coast of Africa, and then after rounding the Cape, strike out across the Atlantic towards its destination on the East Coast.
To understand this article even better, you have to comprehend what is a very large tanker ship of this size, in relation to other tankers ashore. The typical single-axle tanker truck with "Highly Inflammable" written across its rear would carry about 10 tonnes of cargo, so just imagine 30 to 50 thousand such trucks. A tanker train would typically carry about 1,500 tonnes of fuel as cargo, so just imagine about 200 to 333 such trains.
Now imagine all this plodding across the globe at 12 to 15 knots, which would be about 20 to 27 km/h, round the clock. The tanker would be about 330 to 400 metres long, 60 to 75 metres wide, and about 20 to 25 metres deep in the water. Much bigger than an average-sized mall.
So big, these tankers can be seen from outer space with the naked eye. So big, in fact, that the effect of the Earth's rotation around its own axis impacts the direction these ships take, the only manmade items that are impacted by this phenomenon, also known as the 'coriolis effect’. These ships have about 15-25 men onboard.
All of which can be taken over and hijacked by a few men in high-speed boats, carrying less weapons than seen outside the average 5-star hotel lately, and then held for ransom. Or as in the case of some other ships, the cargo can be unloaded, and the ship itself used as a ‘mother vessel’ to range further deep into the sea. As is so common now, at the entrance of the Red Sea, between Somalia and Yemen.
Look at that map again, closer to the Indian coast. Recent hijacks and piracy incidents have been reported very close to the Indian coast, as well as deep inside the Indian Ocean, over 1,500-1,750 km away from Somalia's coast. The result, however, is always the same—the vessel is commandeered, and a few days later, it anchors off some small port in the Horn of Africa, while "negotiations" commence through well-defined channels in Europe and Central Asia.
Of late, seafarers, in their attempt to get away from the piracy menace, are exiting the Persian Gulf in an easterly direction, then hugging the Indian coast till almost 75 degrees East, and only then setting course heading due South to turn in towards South Africa well after going below 20 degrees South, well below Mauritius.
And despite all this, the 320,000-tonne, Korean-controlled, Marshall Island-flagged, American-chartered, Iraqi cargo-carrying and Filipino-crewed motor tanker Samho Dream was hijacked a few days ago, and then taken to the coast off Somalia, where it now awaits negotiations, with a South Korean destroyer following at a safe distance.
To give perspective, a ship of this size is worth anything between $20 million-$100 million. The cargo would be worth between $150 million and $200 million. The refined fuel from this crude would keep all of USA's automobiles going for a bit under a day. In standalone terms, therefore, this is really not all that much of a game changer.
But as a catalyst, this has the portents of a radical change in the way costs will impact the final product, and in only one direction—upwards. Here are a few reasons why:
a) The increased attraction this piracy and ransom "business" has worldwide. Already, ships have been hijacked from the North Sea, Mediterranean Sea, West African/Nigerian Atlantic coasts, and increased piracy activity reports are surfacing from the South China Sea and Malacca Straits. Somali area piracy now accounts for just about 50% of world sea piracy incidents.
b) The increased cost of a potential environmental disaster. If a ship like the Samho Dream was to be blown up, then the environmental impact would cost anything from $8 billion and $20 billion, by a variety of estimates. That cost would be loaded on to future customers.
c) As it is, wages on such ships are amongst the highest in the business. Add to this the cost of providing security and higher wages, and you have a scenario which impacts prices by multiples. Plus, people simply don't want to work on piracy-prone routes anymore.
d) And finally, there is the automatic hoarding mentality that has rapidly taken over, as worried energy companies and refineries stockpile additional amounts of crude oil worldwide—fearing a major breakdown in this supply chain. This ties up ships as offshore storage, as well as onshore storage areas, and further notches up the charter rates for such large ships.
All this, happening on a coastline where traditional trade from the west coast of India has carried on for centuries. And now, these huge super tankers, in the category of ‘very large’ and ‘ultra large’, are sailing within Indian waters, to avoid piracy attacks further west.
There is a major issue brewing. For those who have seen the wreck of the ship lying outside Otter's Club in Bandra (a Mumbai suburb), or the one off Aguada in Goa, the Samho Dream would be about 20-30 times as big. And loaded with crude oil.
And what is governance in India doing about this, then?
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