Finance

Finance

Somali Piracy Costs Governments, Shipping Industry $7 Billion In 2011

09 February 2012 09:45 (UTC +04:00)

Baku - APA-Economics. Though many first think of Johnny Depp when pirating come up, avoiding the real-life bandits of the sea is multi-billion dollar problem for the shipping industry.

Somali pirates cost various governments and the shipping industry up to $6.9 billion last year, according to the One Earth Future Foundation, a non-profit advocacy group. Piracy off the coast of Somalia is both lucrative and common due to its location near the Gulf of Aden, an oil shipping lane that sees about 20 percent of global trade, according to Bloomberg. As a result, the cost to the shipping industry of Somali piracy alone accounts for over half of the total $9 billion in extra costs each year, according to recent figures from the Indian National Ship-owners Organization.

In 2011, Somali hijackings actually fell 36 percent from the year before, the Financial Times reports. Still, Somali pirates cost the shipping industry billions. Shipping companies pay about $2.7 billion in additional fuel costs to speed up ships in particularly high-danger areas. One Earth Future Foundation reports that no vessel has been hijacked when traveling 18 knots -- or about 20 miles per hour -- or faster.

There may be have been fewer hijackings last year, but piracy in the poverty-stricken west-African nation are still making headlines. Somali pirates have recently shifted tactics to kidnapping people on land, such as travel and surfing journalist Michael Scott Moore, who was kidnapped in northern Somalia last month.

However, the tactic may be ill-advised. At about the same time as Moore’s capture, Navy SEAL team 6, the same squad responsible for the Osama Bin Laden’s death, rescued an American woman and Dutch man during a raid that resulted in deaths of eight of their captors.

Still, employees working on oil tankers and cargo ships remain at substantial risk, so much so that employers pay an additional $195 million each year to compensate them for taking on the danger.

Shipping industry workers also endure a variety of other dangers on the job. In addition to the risk of running aground -- a danger that the workers on the New Zealand cargo ship Rena know all too well -- workers also face the possibility of exploding shipping containers.