Pirates hold Middle East supply chains to ransom
With limited alternatives to by-pass the dangerous waters zone, Middle East supply chains are facing increased risk from piracy. A joint GPCA and AT Kearney report, Managing Supply Chain Risk: Understanding Piracy Threat, launched at the Fourth GPCA Supply Chain Conference in Dubai this month, presented three potential outcomes over the next decade: a new piracy wave, lethal force escalation and a permanent solution.
This year marks a turning point in piracy activities. The number of vessels captured in 2011 compared to 2010 reduced by over 50% and further reductions are expected in the coming years. However, as the success rate for capturing ships decreases, ransom requests are getting higher and Somali pirates are becoming more aggressive and strategic. Pirates are acting further off the coast of Somalia, and are now in the Gulf of Oman, positioning themselves closer to traffic lanes in search of vessels of opportunity. This prompts industry stakeholders to identify how best to prevent and mitigate piracy impact. Understanding piracy in a wider context enables industry stakeholders to interpret the impact on their supply chains, assisting supply chain managers to better prepare flexible, long-term plans.
“In the short term, Gulf petrochemical companies and the international shipping community are advised to protect their investments through proper planning, adopt preventative measures, and engage with prudent ship-owners supporting governmental actions,” said Dr. Abdulwahab Al-Sadoun Secretary General, GPCA.
In the new piracy wave scenario, piracy attack intensity doubles over the next ten years, driven by a void of growing, alternative income sources in Somalia—new recruits continue to pursue to a career in piracy and the circle of participating actors continues to widen, drawing on new recruits for the trade.
In the containment scenario, international counter-piracy measures, including current on-going efforts of over 30 nations, contain piracy at 30% to 50% of current intensity, predominantly with the use of lethal force. As a result, the successful capture of vessels by pirates continues to decrease, leading to further decreases in the number of actual hijackings and pirate takeover of targeted ships. However, in parallel, in response to increased risk, pirates deploy new, more violent tactics and weaponry resulting in conflict escalation and an arms race between pirates and on-board armed guards manning the ships. This potential scenario could lead to collateral damage—inevitable sailor and innocent civilian deaths—and eventually international pressure created through wide publicity of these actions, limiting the effectiveness of lethal force solutions.
In the permanent solution scenario, piracy is eradicated in the region over the next decade through a combination of initiatives at sea and onshore with lasting, sustainable impact against the threat of piracy. This includes improved economic opportunities in Somalia to effectively stem the tide of willing piracy recruits.
“A combined international effort, including active involvement by GCC countries, is critical to the realisation of a permanent solution scenario,” said Dr. Abdulwahab Al-Sadoun.
Even in the “best-case” scenario, when all measures are successfully implemented, and root-causes are fixed, the real piracy threat is expected to remain for at least the next 10 years. Regardless of which scenario ultimately plays out, the report says the solution requires a combination of both short and long-term measures, including plans for the economic development of the Somali nation.
“Given an approximated USD 3 billion to USD 6.5 billion of estimated worldwide piracy costs are attributed to shipping costs around the Horn of Africa and scenario outcomes suggest continued impact on transport, business executives need to consider the situation could get worse before it gets better,” advised Dan Starta, managing director, AT Kearney.
Piracy is symptomatic of the socio-economic predicament of the Somali nation and eradicating it depends on the economic future of Eastern Africa. Ultimately, the long-term solution must include rebuilding the country and providing alternative economic opportunities to “would-be” pirates addressing the root causes of piracy: the impoverished circumstances of many of the actors. The real problem of piracy will only be resolved with international community support on multiple levels. This includes governments considering actively engaging and financially supporting industry stakeholders involved in rebuilding Somalia because only a combined effort will eliminate piracy long term.