The Effect of Maritime Piracy on Greek Shipping
George Samiotisa , Vasileia Psarroub, Michael Pazarzisc, and Vasilis Tselentisd,
a
Assistant Professor, Dept. Maritime Studies, University of Piraeus, Piraeus - Greece
Maritime Economist, Dept. Maritime Studies, University of Piraeus, Piraeus - Greece
c
Professor, Dept. Maritime Studies, University of Piraeus, Piraeus - Greece
d
Professor Dept. Maritime Studies, University of Piraeus, Piraeus - Greece
b
Abstract
Maritime piracy has developed into a modern and organized form of highly profitable criminal
"business" activity worldwide with increasing main and collateral costs. The most common areas
where pirate attacks occur are Indonesia and the Philippines, the West Coasts of Africa and Southwest
America. The seas neighboring Somalia are by far the most important since the majority of piracy
incidents occur in these waters. As of 29 July 2012, Somali pirates are still holding at least 11 vessels
and 174 crew members. Figures for piracy and armed robbery incidents for Somalia, as reported to the
IMB Piracy Reporting Centre, in 2012 include 71 total incidents, 13 total hijackings and 212 total
hostages (updated on 27 Oct 2012). Moreover, about 25 military vessels - from the EU and NATO
countries, the US, China, Russia, India and Japan - patrol approximately 8.3m sq. km (3.2m sq. miles)
of ocean ranging from as far south as Madagascar, covering the coast of Somalia and extending to
Oman and the Gulf of Aden. The phenomenon is a serious threat to maritime transport affecting both
shipping companies as well as the crews manning this industry.
The paper analyzes available statistics, highlighting the type of vessels and flags, which are more
vulnerable to being approached, attacked and/or highjacked. In addition, it discusses the effectiveness
of measures introduced such as the use of Private Maritime Security Companies, rerouting, etc. The
paper also attempts to link these issues relating to the cost incurred to shipping companies in their
attempt to effectively increase safety at sea by integrating anti - piracy measures. In this respect several
Greek maritime companies have been interviewed in order to further clarify indirect costs, as well as
estimate the burden placed on the shipping industry in attempting to overcome piracy and its
consequences.
Keywords: Maritime piracy, Shipping companies, Awareness, Safety, Costs.
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1. Introduction
1.1 Piracy
International maritime piracy is considered an international crime, which is persecuted and suppressed
by any (regardless of flag) warship or ship being on government service and authorized to that effect
(universal jurisdiction to prosecute crimes against humanity, Article 107 of the UNCLOS).
The resurgence of pirate attacks in African waters is now a subject of serious concern to African states
and indeed the international community. e Piracy constitutes the most modern and organized form of
highly growing profitable criminal "business" activity.
Piracy has a direct impact on the lives and welfare of mariners as well as cargoes and ships f. In addition
indirect impacts and costs such as, decline in the local fishing sector, reduced foreign revenue as well
as food price inflation, ultimately undermining the interests of countries active in seaborne trade.
The most common areas, in which pirate attacks occur include the seas surrounding Somalia,
Indonesia, the Philippines, the West Coasts of Africa and Southwest America.
1.2 Piracy in the Gulf of Guinea
Nigeria has one of the highest numbers of piracy incidents. The Gulf of Guinea accounted for 427 of
the 1434 attacks in African waters between 2003 and 2011.The frequency of attacks in the Gulf of
Guinea, while not as high as those of the Somali coast, is however on the rise. The traditional modus
operandi of pirates active in the region had largely involved the use of speedboats to attack and steal
cargo, valuables and cash from the crew, when the vessel is at anchor or in harbor, but mostly close to
shore.g Pirates are, however, increasingly modifying their tactics by hijacking fishing vessels,
particularly within Nigerian waters, and using them to attack other vessels operating off the coasts of
neighboring countries like Benin and Cameroun. Recent attacks have extended further out at sea and
have focused largely on oil-transport vessels aiming at stealing the petroleum products carried. As
noted by Malaquais (2012), “the Gulf of Guinea piracy is the organized, sometimes highly
sophisticated, illicit taking of oil. They steal the oil, make a couple of black market circles of the stuff,
and then deposit it back into the global supply”. h
1.3 Piracy in Somalia
The number of ships signaling attacks by Somali pirates has fallen this year to its lowest since 2009,
according to a report from the International Chamber of Commerce International Maritime Bureau
(IMB). IMB however, warns seafarers to remain vigilant in the high-risk waters around Somalia, the
Gulf of Aden and the Red Sea, as this decrease may only be a short lived phenomenon. A the same
time, violent attacks and hijackings are spreading in the Gulf of Guinea (see above) indicating that the
phenomenon has hardly been addressed at its root.
Worldwide this year, pirates have killed at least six crews and taken 448 seafarers hostage. The IMB
Piracy Reporting Centre recorded that 125 vessels were boarded, 24 hijacked and 26 fired upon. In
addition, 58 attempted attacks were reported.
The drop in Somali piracy has brought global figures for piracy and armed robbery at sea down to 233
incidents this year – the lowest third quarter total since 2008. In 2012, there were 89 Somali attacksi
compared with 199 for the corresponding period in 2011 (See Figure 1) and from July to September,
just one ship reported an attempted attack by Somali pirates, compared with 36 incidents in the same
three months last year.
IMB states that policing and interventions by international navies are deterring pirates, along with ships
employing Best Management Practices (IMO), including the use of armed guards and other onboard
security measures.j
1.4 Statistical presentation of global maritime piracy
Details published by the International Maritime Bureau (IMB) disclose that hijackings and
unsuccessful attacks attributed to Somali pirates rose from 22 in 2006 to 51 in 2007, 111 in 2008, 217
in 2009, 219 in 2010, 237 in 2011 and 89 in 2012.k
Reports have indicated a reduction in piracy and robbery incidents at sea recently (see above),
however, according to OCEANUSLive records, data for May 2012 show that 31 incidents took place
during this month, comparing favourably with data for April 2012, although there is a reduction
compared to the same period in 2011 (see Figure 2).l
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2. Economic Costs of Piracy
2.2. Direct costs
Efforts to estimate the global cost of piracy. within the current economic environment, have reached
the following conclusions.m
Firstly, the most spectacular increases in the cost of piracy in recent years have been brought about by
the increased ransom price (see Figure 3) demanded by pirates in order to free the ship.n Secondly,
insurance costs are difficult to quantify as many ships avoid purchasing the increased insurance
premiums. In addition, the cost of deploying deterrent security equipment varies considerably as ship
owners choose to protect their property and crew from pirate attacks by different ways which may vary
greatly as far as the cost incurred is concerned. Lastly, the cost of Re-Routing, is also difficult to
estimate, since it depends on the type of ship, the speed and the miles covered. o These costs encumber
Greek shipping companies in their attempt to avoid the impending danger of maritime piracy,
especially since 16,3% of world tonnage is owned by Greek shipping companies.
2.1 Secondary (Macroeconomic) Costs p
To date, calculations of the cost of piracy have generally focused on the first order (direct costs) to the
shipping industry or governments. q There are several accounts estimating some secondary
(macroeconomic) costs to regional countries surrounding piracy zones.
The most common seems to be the cost to regional trade. Piracy affects the cost of trade not merely
because particular ships are intercepted when delivering goods. A number of nations have, also
indicated that their fishing sector has declined in response to the threat of piracy. Another cost is the
cost to Food Price Inflation. Approximately 40% of piracy attacks have been on bulk carriers and
general cargo vessels.r Together, these vessels carry the majority of the world’s food staples (such as
rice and grain). Pirate attacks on these vessels have direct consequences on the price of food, as
deliveries of food cargo are delayed, or in the case of perishable goods, lost. Finally, there is the cost of
reduced foreign revenue, as the instability and volatility of regions affected by piracy, forces foreign
investors to look for alternative regions to spend or invest their money.
3. Maritime piracy and Greek shipping companies
As stated previously Greek shipping companies manage over 16% of world tonnage, and invariably
face many and serious problems regarding piracy through increased running costs, affecting
competitiveness by increasing freight rates. These include increased insurance premiums covering the
welfare of seafarers, cargo and the vessel, costs associated with complying with ISPS Code and Best
Management Practice (BMP4) introduced by IMO, as well as the use of armed guards and other
onboard security measures. The costs most commonly encountered by the majority of maritime
enterprises are insurance costs and deterrent security equipment costs including the use of armed
guards.
A number of personal interviews based on structured questionnaires were performed with Greek
maritime companies over a period of 2 months, seeking information on piracy incidents and costs
incurred from precautionary measures and actual ransom costs. From the preliminary analysis, our data
coincide with recent studies indicating that the majority of firms implement Best Management
Practices (BMP4) as proposed by IMO, as well as armed guards and other onboard security measures.
All observe the exclusion zone and introduce re-routing of their ships, also increasing speed in
dangerous areas. The major costs incurred as stated by the Greek firms interviewed, include insurance
premiums and employing Private Maritime Security Companies (PMSC) for armed guards and
introducing onboard security equipment. Comments and opinions expressed as to the significance of
the recent decrease in piracy incidents in Somalia varied, as many managers were skeptical as to the
long term trend in piracy attacks.
4. Conclusions
It is clear that piracy attacks constitute an imminent danger to the lives and welfare of mariners as well
as cargoes and ships. Piracy in addition, has a direct economic impact in terms of fraud, theft of cargo
and travel delays, and definitely undermines the interests of countries active in seaborne trade.
It is obvious that piracy has decreased in the seas neighboring Somalia and the Gulf of Aden, as recent
4
figures indicate a significant decrease in piracy attacks in the Somalia area, especially for the year
2012. This reduction of piracy incidents is mainly due to:
 Naval forces [US Navy (MARLV) and a European naval force (EU NAVFOR)], which take part in
the elimination of piracy, have destroyed several bases of supply, pirate ships and mother ships.
The increased number of armed guards aboard ships.
Ships that do not employ armed guards adopt BMP4.s
It is clear that actions on land are also important in the fight against piracy and its expansion. In
northern Somalia, action has been taken in order to decrease pirate freedom of movement along the
Somalian coast. Also political changes in the country ensured that the new government, succeeded in
freeing areas such as Kismayo from Al-Shabab and pirate influence. This in turn has led coastal
communities to renounce the economic benefits from piracy, since political and social interventions
ensure that local inhabitants now enjoy far greater benefits than what piracy in general could offer.t
Nevertheless, analysts are debating whether the continuous patrolling of naval forces as well as the
private contract armed guards abroad ships, have been successful in weakening pirate capabilities,
since pirates in the area still continue to create incidents. According to this reasoning it is believed that
movement of goods by sea inevitably increases piracy incidents, especially when cargoes, ships and
human life are valuable commodities. In addition, it is believed that pirates have acquired enough
capital from ransoms that they can afford to curb their activities short term, restructure and invest in
new technology and heavier weapons and strike again when the international community is off guard.
From the above analysis, it is obvious that piracy is a complex issue and no simplistic explanations and
analysis will give the maritime community a clear indication and forecast as to how this international
problem will develop. The maritime community is eagerly waiting for reduced number of piracy
incidents in 2012, to be verified in 2013.
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Figures
Figure 1: The obvious drop of Maritime Piracyu
500
400
300
Global attacks
without Somalis
200
Somali attacks
100
0
2006
2008
2010
2012
Figure2: Maritime piracy and robbery - May 2012
HoA = Horn of Africa & IOR = Indian Ocean Region
Figure 3: Ransoms paid out to Somali pirates over the period 2007 – 2011.v
e
http://studies.aljazeera.net/ResourceGallery/media/Documents/2012/6/12/201261294647291734Piracy
%20and%20Maritime%20Security%20in%20the%20Gulf%20of%20Guinea.pdf
f
http://www.marinews.gr/pub/category.asp?lang=gr&contentid=11154
g
The attacks in the GG and off the coast of Nigeria occur in territorial or coastal waters, and therefore
do not technically and legally qualify as “acts of piracy” as defined in Article 101 of United Nations
Convention on the Law of the Sea (1982).
h
http://studies.aljazeera.net/ResourceGallery/media/Documents/2012/6/12/201261294647291734Piracy
%20and%20Maritime%20Security%20in%20the%20Gulf%20of%20Guinea.pdf
i
The International Chamber of Commerce’s International Maritime Bureau (IMB)
j
http://www.icc-ccs.org/ Monday, 22 October 2012
k
http://www.fulcrum-maritime.com/ Holman Fenwick Willan, July 2012
l
http://www.oceanuslive.org/main/viewnews.aspx?uid=00000483
m
The Economic Cost of Piracy Full Report
n
http://oneearthfuture.org/images/imagefiles/Cost%20of%20Piracy%20Final%20Report.pdf
o
The Economic Cost of Piracy Full Report
p
The Economic Cost of Piracy Full Report
q
The Contact group has spent $2,437,372 of its $3,662,271 budget, endowed on 27 January 2010. See:
Online at:
http://www.imo.org/OurWork/Security/PIU/Pages?DCCMeeting.aspxhttp://www.imo.org/OurWork/Se
curity/PIU/Pages?DCCMeeting.aspx
6
Meija, Maximo Q., Pierre Cariou and Francois-Charles Wolff, “Is maritime piracy random?”, Applied
Economics Letters, Vol. 16 pp:891-895, 2009
s
Interview with Karlis George
t
http: //www.bbc.co.uk/news/world-africa-16534293
t
http://www.safety4sea.com/analysis/90/143/measures-for-safety-at-seaThe International Chamber of Commerce’s International Maritime Bureau (IMB)
http://www.icc-ccs.org.uk/piracy-reporting-centre/piracynewsafigures
t
Source: 2007-July 2011 figures from the FCO, see Ev 70; December 2011 figures from NATO at
Northwood
r
References
Reference to a journal publication:
The Economic Cost of Piracy Full Report, One Earth Future Working Paper, 2010
Meija, Maximo Q., Pierre Cariou and Francois-Charles Wolff, “Is maritime piracy random?”, Applied
Economics Letters, Vol. 16 pp:891-895, 2009
Article 101 of United Nations Convention on the Law of the Sea (1982)
Reference to a speaker of Forum:
Panos G Moraitis, Managing Director, Aspida Maritime Security, Safety4Sea Forum,
Reference to a web source:
Piracy and Maritime Security in the Gulf of Guinea: Nigeria as a Microcosm, Freedom C. Onuoha, 12
June 2012,
http://studies.aljazeera.net/ResourceGallery/media/Documents/2012/6/12/201261294647291734Piracy
%20and%20Maritime%20Security%20in%20the%20Gulf%20of%20Guinea.pdf
ICC International Maritime Bureau, http://www.icc-ccs.org/piracy-reporting-centre/live-piracy-map
ICC International Maritime Bureau, Monday, 22 October 2012,
http://www.icc-ccs.org/
http://www.marinews.gr/pub/category.asp?lang=gr&contentid=11154
Holman Fenwick Willan, July 2012, http://www.fulcrum-maritime.com/
Submitted by Team@oceanuslive.org,
http://www.oceanuslive.org/main/viewnews.aspx?uid=00000483
2007-July 2011 figures from the FCO, see Ev 70; December 2011 figures from NATO at Northwood
Neptune Maritime Security,
http://neptunemaritimesecurity.posterous.com/piracy-off-the-coast-of-somalia-foreign-affai
http://www.imo.org/OurWork/Security/PIU/Pages?DCCMeeting.aspxhttp://www.imo.org/OurWork/Se
curity/PIU/Pages?DCCMeeting.aspx
http://www.imo.org
http://mpckr.blogspot.gr/2010/12/armed-guards-used-to-combat-piracy-on.html
http://shipmanagementinternational.com
http: //www.bbc.co.uk/news/world-africa-16534293
http://studies.aljazeera.net/ResourceGallery/media/Documents/2012/6/12/201261294647291734Piracy
%20and%20Maritime%20Security%20in%20the%20Gulf%20of%20Guinea.pdf
Diaplous Maritime Services, Manual of Diaplous Maritime Services, Karlis George,
Diaplous Maritime Services, http://www.diaplous-ms.com/index.php/19-sample-data-articles/joomla/8beginners
http://www.safety4sea.com/analysis/90/143/measures-for-safety-at-seaThe International Chamber of Commerce’s International Maritime Bureau (IMB)
http://www.icc-ccs.org.uk/piracy-reporting-centre/piracynewsafigures
Source: 2007-July 2011 figures from the FCO, see Ev 70; December 2011 figures from NATO at
Northwood
7