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Lloyd’s List MONDAY SEPTEMBER 29, 2008

Analysis: Piracy ransoms

‘This is a siege situation... what else is an owner going to do?’
It is a shipowner’s worst fear — one of its ships has been hijacked and pirates are demanding a ransom. But what are the mechanics of getting money to shadowy gangs and what moral, legal and practical dilemmas that must be overcome. Brian Reyes looks at previous cases and finds that there are some voices that say handing over cash to pirates is compounding a worsening situation

T

HE pirate gangs that hijack ships off war-torn Somalia are only the tip of a shadowy business that stretches from the treacherous waters of the Gulf of Aden to capitals in Africa, the Middle East and Europe. While the focus of media reports on the piracy crisis has been on the action at sea and on calls for military intervention, there is scant public information about the practicalities of how this nefarious activity actually works. Analysis of ransom negotiations casts new light on the complex issues facing western governments already under mounting pressure to tackle a piracy crisis that is threatening the smooth flow of global trade. Experts speak of a well-oiled, yet unpredictable system established to bring shipowners into contact with pirate gangs and their representatives in the Somali diaspora. There is a general reluctance to comment in any detail on the mechanics of paying a ransom, reflecting the extensive reach of the Somali pirates and the fear that the information might prejudice future negotiations. “There is always a lot of speculation around any incident and there are times when it is tempting to want to put the record straight,” said James Wilkes, managing director of Gray Page, a maritime investigation and consultancy group and specialist in this field. “However, it is imperative to keep operational security as tight as possible.” “These guys [pirates] have sources and observers in the wider world and they are looking for any insight into how companies manage these situations in order to leverage their own negotiation strategy.” Lloyd’s List spoke to eight sources with close knowledge of piracy and ransom negotiations for this article, and consulted extensive documentary evidence going back several years. The sources included industry executives, security experts, diplomats and intelligence officials, and most spoke on condition of anonymity because of the sensitive nature of the subject. Through these interviews, Lloyd’s List has established that ransoms for pirated ships have been negotiated and paid via Somali intermediaries in third countries.

“The payment of ransoms should be condemned, and if governments are involved or condone the practice, it would be tantamount to recognising their impotence. It would also represent a complete victory for the criminal and his activity”
Gustavo de Arístegui, Spain’s Popular Party foreign affairs spokesman

There is no hard evidence to demonstrate this, but several sources concurred that in the past, such handovers have taken place in cities including Dubai, Nairobi and, according to one source, even London. Sometimes, the exchange has involved the transfer of significant sums of money into a law firm’s client account, then on to private accounts in African countries. But on most occasions, the mechanisms are cruder, shrouded in cloak-and-dagger secrecy and involving the physical transfer of cash. The close-knit, tribal nature of Somali society makes cash payments hard to trace as they disappear into unofficial hawala banking networks. Until recently, this has been the methodology preferred by the hijackers. But now there are signs of change in this web of barter and haggling over the lives of men. These days, Somali pirates are just as likely to demand that the money be handed directly to them in Somalia. As well as the many other difficulties of dealing with a situation like this, shipowners are now faced with finding ways of safely delivering large amounts of cash to this war torn part of the world. In 2000, a Spanish trawler called Albacora 4 was hijacked by pirates off Somalia. The trawler was fishing for tuna and had followed the shoals on their eastbound migration to rich hunting grounds in the Indian Ocean. With the boat and its crew in the hands of brigands, the vessel’s owner embarked on a difficult and delicate process which unfolded many miles from the Somali coastline. “The situation was resolved by negotiating the payment of a ransom in London,” said Iñaki Latxaga, who heads the Albacora Group, which owned the vessel. “There are some law firms that specialise in this and the kidnappers have contacts there.” Mr Latxaga, who said the negotiations w e re m a r k e d b y d i s p ro p o r t i o n a t e demands for cash, was clearly unimpressed by the situation. “I think anyone can judge for themselves the actions of these firms, because sometimes you have to ask yourself whether the pirates are in Somalia or in London,” he said. Mr Latxaga was cited in an interview with the Basque newspaper Deia in April this year and declined to add any further detail when contacted by Lloyd’s List. The Deia interview was published at a time when Spain was closely following the plight of the crew on board another tuna trawler, the Playa de Bakio, which had suffered a similar fate to the Albacora 4. The trawler was released after a ransom — said by one Somali official cited by Reuters to be in the region of $1.2m — was paid in cash. In this case, the money was reportedly delivered to the pirates by sea by a small team of Spanish intelligence officers, although nothing has ever been confirmed by the authorities. As in all these cases, there are many grey areas and much disinformation in the public domain. Some of it is put out by the

Gotzon Klemos, master of hijacked vessel Playa de Bakio, speaks to reporters after his release. pirates themselves, while some of it is laid down as a smokescreen to disguise the negotiating tactics used to free the ships. The two cases illustrate the sense among many that, where a ransom is negotiated, and how the money is subsequently delivered to the pirates, is ultimately largely irrelevant. For the shipowner, the important thing is that a deal is struck. “Basically, there’s only so many ways you can do this,” said one industry executive with direct experience of a piracy incident. When it comes to negotiating a ransom, the process is complex and filled with potential pitfalls. The first point of contact between a shipowner and the pirates normally comes in the form of a phone call from the ship. Unsurprisingly, the common language of barter is English. One of the first things that negotiators have to establish is that they are talking to the right group of people. Experience from past incidents suggests that there are two types of pirates. The first are those who physically attack the ship, boarding the vessel at sea in small, well-armed and often aggressive groups. The second type of pirates act as watchmen. Such is the organisation of the gangs that as many as 60 men can be responsible for guarding a hijacked vessel, rotating in shifts until a ransom is paid and the ship released. Recent cases suggest that the Somali

“This is not about politics and political ideals. This is about extorting the most amount of money they think they can get in the quickest time possible”
Gray Page managing director James Wilkes

coastal town of Eyl has emerged as a modern-day Tortuga, a pirate base where the gangs appear to enjoy logistical support and where most hijacked vessels end up. Establishing contact with those who have power over the ship is vital in such circumstances, as talking to the wrong person can waste valuable time and frustrate the objective of getting the crew and ship released unharmed. Seasoned negotiators said that each incident is different and the tone of negotiations can fluctuate between co-operative to threatening. “The aim is to reach an agreement which we believe the pirates will stick to,” said Mr Wilkes. “However, there are no guarantees and you’re dealing with pirates who, by virtue of what they do, are unpredictable.” At some point in any negotiation, a point will be reached where an agreement is settled on that is both acceptable to the pirates and feasible for the shipowner. Often the pirates want the process to work faster than is physically possible, or change their demands after an agreement has been reached. “But ultimately they are after their money and they’re not going to want to do anything to jeopardise that,” Mr Wilkes said. “This is not about politics and political ideals. This is about extorting the most amount of money they think they can get in the quickest time possible.” Delivering the ransom presents a different challenge altogether, be it in a third country or in Somalia itself. “The point is that you want to settle on a place where it can be executed discreetly, and by that I mean reducing as far as possible the number of factors that could impinge on a smooth exchange,” Mr Wilkes said. “That goes for all the parties concerned. We want the exchange to go as smoothly as possible because we want the crew and the ship to be released as quickly and as safely as possible. Nevertheless, there is no such thing as a no-risk scenario.” Many observers in the maritime industry believe that paying ransoms exacerbates the piracy problem. As one senior insurance executive put it, shipowners who pay ransoms are effectively rewarding the pirates and encouraging them to do more of the same. By paying for the release of one crew, they are putting others at risk, or so the argument goes. And it is not just industry people who think this, but politicians too. After the Playa de Bakio was released, Spanish government ministers appeared before parliament in Madrid to answer questions. The Popular Party opposition was keen to establish whether the government had been involved in any way in the ransom payment, which it said had “grave consequences” The government ducked the . question with a vague reply about close cooperation between the shipowner, government officials and international diplomacy. But for the Spanish opposition, there were critical underlying issues at stake. “Paying a ransom stimulates and

encourages new crimes and finances criminal organisations, be they mafias or terrorist groups,” PP foreign affairs spokesman Gustavo de Arístegui said at the time. “Nobody should confuse the figure of a negotiator in a heist involving hostages with one negotiating with the criminal groups. The first is used to buy time and save lives, while the second finances and legitimises the criminal. The payment of ransoms should be condemned, and if governments are involved or condone the practice, it would be tantamount to recognising their impotence. It would also represent a complete victory for the criminal and his activity.” Part of the problem is that, despite mounting awareness of piracy and the risk to both seafarers and trade, there has so far been little commitment from governments to tackle the problem head on. Military officials believe that UN resolutions on the issue are not sufficiently clear to allow for a tougher response at sea. The upshot is that most governments have a policy of “look but don’t touch” , according to one intelligence source. “The way things are, governments don’t want to get involved until there is a clear mandate,” the source said. “There is a broad UN position, but they haven’t followed through on the detail.” Neither is there any evidence of a crossover between piracy and terrorism, though the risk is plainly there. “Right now, there’s nothing to suggest that this is anything other than business,” the intelligence source said. For shipowners whose vessels are trading through the Gulf of Aden, short of rerouting their vessels, there is little else they can do other than pay their insurance premiums, tighten their on-board security measures and hope for the best. And the risk is evidently there. Working on the basis that since last July, a ship has been hijacked every five or six days, Gray Page calculates that one out of every 330 transits through the Gulf of Aden would end up with a hijacked ship. Put another way, over the past nine weeks, ships sailing through that area were 17 times more likely to be hijacked than a US soldier on combat operations in Iraq was to be killed, according to the company’s calculations. For the unlucky owners, there is only one clear way out. “It is intellectually easy to say that shipowners should not negotiate with pirates and not pay ransoms,” Mr Wilkes said. “But the fact is shipowners didn’t start this, the pirates did.” “In practice, shipowners have one route to get their crew and ship released: by negotiation and payment of a ransom.” “No one has yet come up with a viable alternative. There aren’t intervention measures that an owner can rely on from naval forces or law enforcement.” “This is a siege situation in a very hostile zone with zero effective internal law enforcement support. What else is the shipowner going to do?”


				
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