COMM 340 (03) Team #6

PIRACY: AVOIDING ATTACKS AND MINIMIZING THE IMPACTS

Brock Josuttes 11094753 Nathan Keck 11123768 Josh MacGowan 11108277 Brittany Saunders 11099828 Brenley Schaan 11142699

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TABLE OF CONTENTS
Introduction .......................................................................................................................3 Anticipation .......................................................................................................................3 Location Risk ....................................................................................................................4 Northern and Western Indian Ocean.............................................................................4 Southeast Asia ..............................................................................................................4 Gulf of Guinea ...............................................................................................................4 Economic Risk ..................................................................................................................5 Prevention of Piracy (Currently Used Methods) ...............................................................5 Security .........................................................................................................................6 Strategic Route Selection ..............................................................................................6 Humanitarian .................................................................................................................6 Managing Attacks ..........................................................................................................7 Alternatives and Suggestions ...........................................................................................7 Conclusion ........................................................................................................................8 Appendices .......................................................................................................................9 Appendix 1A (Commercial Crime Services, 2014) ........................................................9 Appendix 1B (Allianz Global Corporate & Specialty , 2014)..........................................9 Appendix 1C (Sakmar , 2013) .....................................................................................10 Works Cited ....................................................................................................................10

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INTRODUCTION
Today, countries are heavily reliant upon one another due to the current trend of globalization. This is the process of countries exporting and importing ideas, goods and services amongst each other. Though, exporting products provide multiple opportunities for companies to expand to different markets, with risk of obtaining more could result in serious consequences and negative publicity. Piracy is an ongoing issue for companies that are shipping their commodities overseas. Numerous goods are lost, damaged or stolen due to attacks leading to further implications. According to the United Nations Convention on the Law of the Sea, piracy is defined as any illegal acts of violence or detention, or any act of depredation, committed for private ends by the crew or the passengers of a private ship or a private aircraft, and directed: i. on the high seas, against another ship or aircraft, or against persons or property on board such a ship or aircraft, against another ship or aircraft, or against persons outside the jurisdiction of any state. (United Nations, 1982) People living in poverty, somewhat lawless and politically unstable countries are more likely to be involved with pirate activities than others. The term “piracy” is linked to two main offences: robbery/hijacking and kidnapping. The target of a seaboard attack is to capture a marine vessel, steal the cargo aboard and take for an end result of a profit. A recent joint study by the International Criminal Police Organization, United Nations Office on Drugs and Crime and the World Bank says that from 2005 until the end of 2012, 179 ships were successfully hijacked off the Horn of Africa, primarily off the coast of Somalia. (Poulton, 2013) With the number of attacks rising, companies that are offering security positions to protect their goods and services travelling overseas are increasing in a parallel motion. The objective of this document is to provide further details regarding the factors of anticipating pirate attacks including location and economic risks of shipping overseas in highly active geographic regions, strategies to prevent the damages and losses, alternative ideas other than researched facts and our recommendations involving all topics above.

ANTICIPATION
In order to anticipate the risk of piracy attacks, companies must take a multi-faceted research based approach. The keys to effectively anticipating a piracy attack include variables such as: 1. The type of goods being transported and 2. The location risk of the shipments. A major key factor that companies must evaluate is the location risk, as certain locations account for nearly all of the piracy attacks that occur globally. For example, Somalian piracy is unique in many regards. Traditionally, Somalian pirates operate from small, fast skiffs, waiting up to 50 nautical miles off the coast for a suitable vessel to attack. Since overseas security has become stronger, these ships are transforming into bigger
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fishing trawlers considered “mother ships” sitting further out from the coast. (Balaji, Unknown)

LOCATION RISK
The world as a whole is a safe environment for companies wanting to ship. It is only super risky in several regions across the high seas. “Nearly 59% of goods in terms of value are transported by sea.” (Reuchlin, 2012) Piracy is continuously a growing threat, especially in the transportation industry, with incidents occurring in three main regions. These three regions, listed in order of number of recorded attacks are: Northern and Western Indian Ocean, Southeast Asia and Gulf of Guinea. (See Appendix 1A)

NORTHERN AND WESTERN INDIAN OCEAN
In the Northern and Western Indian Ocean region, not only are pirate attacks the most frequently occurring in the world but also the impact of each attack is relatively high. Shipping Vessels are often hijacked, and the crew kept hostage for nearly several months during these attacks. This is problematic for the companies and terrifying for family members and friends of the victims.

SOUTHEAST ASIA
In Southeast Asia, most of the trade is between countries located within the Europe cotenant. Billions of tons of goods are shipped through this trade route every year, in addition to an abundance of oil being transported from the Middle East to Asia. (Reuchlin, 2012) Majority of the goods that go through this trade route are destined to or do depart from China. Although, only 0.1% of the total amount of cargo transported through this route is lost to piracy, the pirate attacks that have occurred consequently, increasing insurance premiums that in turn raises the cost of security. In this region, most of the attacks reported are break-ins well the ship is docked. Hijackings are rare but have occurred.

GULF OF GUINEA
The Gulf of Guinea contains an enormous amount of natural resources including plenty of oil and natural gas reserves. With these natural resources also comes a rich marine ecosystem. “Nigeria accounts for more than 65% of the total seaboard traffic.” (Reuchlin, 2012) Most of the population in Nigeria is living in poverty. This makes any form of employment desirable. Many individuals turn to piracy in order to survive. These attacks are dangerously violent and the vast majority of ships attacked are cargo vessels. Pirates choose their ships strategically while already knowing the items carried on board.

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ECONOMIC RISK
The economic impacts of piracy are broad in scope. There are many costs that companies incur due to piracy. Seven of the main costs include: 1. Increased insurance premiums, 2. Security costs, 3. Uninsured product loss, 4. Vessel damages, 5. Re-routing, 6. Increased travel speeds and 7. Anti-piracy companies. Modern costs of insuring product and personnel against piracy attacks are very high compared to past years. Companies are paying increased insurance premiums to the insurance companies to cover and prevent losses. One of the major costs that companies are incurring in terms of insurance is ransom insurance in the event of a kidnapping. In the last five years, Insurance companies have received $250 million from companies shipping goods through the Northern and Western Indian Ocean (mostly due to Somalia) for ransom insurance alone. (Neligan & Saul, 2012) Somalian Piracy, alone, is estimated to have cost the shipping industry and governments approximately $7 billion dollars in 2011. Of this $7 billion, $1.27 billion was spent on security measures through military and naval vehicles, as well as administrative costs associated with these. Other security measures in addition to hired protection are also being utilized. For example, some ship owners have invested in security measures such as razor wires and sonic deterrent equipment. (gCaptain, 2014) In addition to security and insurance costs, ships are “increasing their speed of travel and being re-routed, as a result, they burn more fuel. For container vessels alone, the additional costs have been estimated at $2.7 Billion for 2011 globally”. (Reuchlin, 2012) Some of the costs that impact the South East Asia region are similar to those in the North Western Indian Ocean. Companies feel that the risk and the danger of piracy is higher than statistics show therefore, high-risk anti piracy security companies are hired to provide guards on board vessels and to protect the goods. In total, Somalian piracy alone has been estimated to incur $18 billion dollars of expense on the global economy annually. (Kermeliotis, 2013)

PREVENTION OF PIRACY (CURRENTLY USED METHODS)
The first and best line of defense any company can take against piracy is arranging shipping routes and security measures to prevent an attack from taking place in the first
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place. Avoiding the previously listed routes (Northern and Western Indian Ocean, Gulf of Guinea, and Southeast Asia) would be an ideal and obvious solution however, with societies dependence on markets such as China, Europe, and Africa, avoiding these spots is not always feasible. Considering that the majority of pirates are those who live in poverty, one objective would be to develop the economy of these nations, to prevent piracy.

SECURITY
Since avoiding these locations is not entirely possible, upgrading currently practiced security actions is one of the best preventative measures a company can take. For example, companies that are facing issues with Somalian pirates are countering this issue by implementing “The Combined Task Force 151” in the Horn of Africa region. (Combined Maritime Forces, Unknown) Beyond Naval measures, companies can enlist private security companies to travel with or onboard the vessels. They can also join the trend of enforcing new defense measures such as electrical fences and high-pressure hoses. Safe patrol areas have been created through the UN to help assist travellers through safe waters. Since this creation of anti-piracy patrol areas, the EU and NATO have also joined. (Balaji, Unknown)

STRATEGIC ROUTE SELECTION
When shipping cargo through high-risk regions, statistics show that certain routes are more likely to be attacked than others. Although rerouting ships may increase costs associated with travel, preventing the attacks is of paramount importance to these companies. Off the Somalian Coast, in the Gulf of Eden, shipping companies like Norway’s Frontline LTD. are responsible for transporting a large percentage of the Middle East’s global oil supply. They have decided to direct their vessels around South Africa instead of through the Gulf of Aden. This route doubles the length of shipping time, increasing freight rates for the companies but saves product in the end.

HUMANITARIAN
Aside from security measures: fighting violence and piracy by intimidating pirates through increased security and making their attacks unlikely to succeed if they do take place, companies are focusing their resources on preventing attacks by addressing the route causes of piracy in these locations. For example, the Department of International Development’s has given $250 million over the past four years towards programs that will play a crucial role in sustainable peace and counter-terrorism and counter-piracy. (Gov.Uk, 2012) (CBC, 2008)

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MANAGING ATTACKS
Although companies are currently following the above strategies to prevent piracy, even with the best methods in place piracy is currently still a very real and imminent problem. Companies must undertake methods to minimize damages and losses to the company when these attacks do occur. The best way that any company can better manage its losses incurred due to piracy if an attack does occur, is through a comprehensive insurance policy. A thorough plan covers product lost and damages, ransoms for kidnapped individuals and damage to shipping vessels.

ALTERNATIVES AND SUGGESTIONS
The research used for this report has indirectly provided some alternatives and suggestions. The following consist of new ideas from our point of view: 1. Route alternative 2. Onboard private security 3. Other means of transportation 4. Sustainable employment for locals Adjusting the route that companies sail would be an ideal strategy to separate from high-pirate active regions. A large number of companies involved in the shipping industries travel similar routes through the Northern and Western Indian Ocean, Southeast Asia and Gulf of Guinea regions. Since the activities of exporting and importing are components that create a profit for companies, the captains steering the cargo ships, with help, should find an alternative route to travel. This will minimize a vast majority of attacks. For example, Somalian pirates are causing a serious issue deep in the Indian Ocean. Though, the expense of gas would enlarge, the ships and goods would avoid direct encounters if the route was farther away from the coast. (See Appendix 1B) It is not how much security is on board but that methods they are using to protect their ships. New strategies are a necessity to help their guards stop the attacks. Unfortunately, the companies that depend on earning a profit from exporting to companies located in these high-risk regions; need to provide their security with different methods for their actions during the attacks to continue their business. For example, Cunard Liner Queen Mary 2, when voyaging through the Red Sea and Indian Ocean took a leap and knew it could be very risky. The Queen Mary 2 had contractors aboard carrying M-16 type assault rifles and belt-fed machine guns. This separated Cunard from the cost of the Navy without losing the security they needed. (Apps, 2013) If organizations begin to use other means of transportation, this may eliminate the piracy over seas. Perhaps, a company having trouble in Northern Western Indian Ocean, Southeast Asia, and Gulf of Guinea could move their products in different ways
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such as by rail or air. For example an alternative route does exist to help avoid the problem. Ships travelling through seas around the European and North American countries have the option to sail around The Cape of Good Hope of South Africa. By far, this optional route is tremendously safer with a slight downfall. Unfortunately, since the route is almost twice in length, the cost of shipping will increase as well in a parallel motion. The difference in distances is11600 kilometers compared to The Cape of Good Hopes route that is 19800 kilometer. (See Appendix 1C) (United Nations Office on Drugs and Crime, 2010) Thinking outside the box, companies could begin investing to help find sustainable employment for those in the public that are forced to reside to piracy in order to stay alive. “An average pirate makes about $25,000 to $30,000 a year.” If a job has the opportunity of being more fruitful, the possibility of the pirate taking the job is quite strong. Considering this alternative, all aspects of the piracy issue are solved. Pirates will now have solid employment and shipping companies will no longer have to deal with losses and damages. (The Economist Newspaper Limited, 2013)

CONCLUSION
In today's heavily globalized world, companies and consumers are reaping the benefits of importing and exporting different products and materials in order to cost effectively and efficiently produce and supply quality products to the world. With this reliance on global trade, efficiently transporting goods across the world is a necessity. Shipping cargo by sea has become one of the largest methods of shipping across the world. With this reliance on shipping overseas, cargo vessels are spending days in the open seas exposed to attack and putting crewmembers at risk and large amounts of products vulnerable to theft or damage. Pirates in different regions of the world have been capitalizing on globalization that has resulted in a growing trend and has emerged of attacking cargo vessels as a way of earning a profit. In particular, the Northern and Western Indian Ocean, the Southeast Asian Ocean, and the Gulf of Guinea are the top three regions that have a high risk for piracy attacks. These attacks are often violent and carry negative impact to captains and companies. Because of these attacks, companies have been forced to take out large insurance policies to protect both goods and ransoms, hire private security companies, travel at faster speeds and therefore burn more fuel, reroute ships, and hire anti piracy companies to prevent attacks from occurring. Recommendations that are suggested to avoid and minimize the impacts of these attacks that are from our point of view include hiring security firms, choosing the safest routes possible even if the duration of the trip is longer, a continuous and frequent research about the sea area trends before sending ships out with numerous expensive products and taking into consideration a comprehensive insurance policy in place for if an attack does occur.
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APPENDICES
APPENDIX 1A (COMMERCIAL CRIME SERVICES, 2014)

APPENDIX 1B (ALLIANZ GLOBAL CORPORATE & SPECIALTY , 2014)

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APPENDIX 1C (SAKMAR , 2013)

WORKS CITED Allianz Global Corporate & Specialty . (2014). Safety and Shipping Review 2014. Retrieved from Allianz Global Corporate & Specialty: www.agcs.allianz.com/assets/PDFs/Reports/Shipping-Review-2014.pdf Apps, P. (2013). Have hired guns finally scuppered Somali pirates? Retrieved from Reuters: http://www.reuters.com/article/2013/02/12/us-somalia-piracyidUSBRE91B19Y20130212 Balaji, A. (Unknown). Measures to Prevent Piracy on the High Seas. Retrieved from Measures to Prevent Piracy on the High Seas: http://www.unodc.org/documents/data-andanalysis/tocta/TOCTA_Report_2010_low_res.pdf CBC. (2008). Pirate attacks forcing shipping companies to change routes . Retrieved from CBC News: http://www.cbc.ca/news/world/pirate-attacks-forcingshipping-companies-to-change-routes-1.761531 Combined Maritime Forces. (Unknown). CTF-151: Counter-piracy. Retrieved from Combined Maritime Forces: http://combinedmaritimeforces.com/ctf-151counter-piracy/ Commercial Crime Services. (2014). IMB Piracy & Armed Robbery Map 2014. Retrieved from International Chamber of Commerce: http://www.icc-ccs.org/piracyreporting-centre/live-piracy-map
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gCaptain. (2014). By the Numbers: How Much Does Somali Piracy Cost? Retrieved from gCaptain: http://gcaptain.com/somali-piracy-cost-report/ Gov.Uk. (2012). Preventing and reducing piracy off the coast of Somalia. Retrieved from Gov.Uk: https://www.gov.uk/government/policies/preventing-andreducing-piracy-off-the-coast-of-somalia) Kermeliotis, T. (2013). Somali pirates cost global economy '$18 billion a year. "Retrieved from CNN: http://edition.cnn.com/2013/04/12/business/piracy-economyworld-bank/ Neligan, M., & Saul, J. (2012). Insurers face tougher times as Somali piracy drops. Retrieved from Reuters: http://www.reuters.com/article/2012/09/21/us-insurancepirates-idUSBRE88K0IG20120921 Poulton, G. (2013). The Changing Face of Piracy. Retrieved from Open Knowledge: http://knowledge.allianz.com/mobility/transportation_safety/?2509/The-changing-faceof-piracy Reuchlin, J. (2012). The Economic Impacts of Piracy on the Commercial Shipping Industry. Retrieved from Piracy: http://dmpp.management.dal.ca/wpcontent/uploads/DMPP_Economic.pdf Sakmar , S. L. (2013). Egypt Unrest: What it Means for LNG Trade. Retrieved from Natural Gas Europe: http://www.naturalgaseurope.com/egypt-unrestwhat-it-means-for-lng-trade The Economist Newspaper Limited. (2013). Somalia Piracy - More sophisticated than you thought. Retrieved from The Economist: http://www.economist.com/news/middle-east-andafrica/21588942-new-study-reveals-how-somali-piracy-financed-more-sophisticatedyou) United Nations Office on Drugs and Crime. (2010). The Globalization of Crime - A Transnational Organized Crime Threat Assessment. Retrieved from United Nations Office on Drugs and Crime: http://www.unodc.org/documents/data-andanalysis/tocta/TOCTA_Report_2010_low_res.pdf United Nations. (1982). United Nations Convention on the Law of the Sea. Retrieved from United Nations Oceans and Law of the Sea: http://www.un.org/depts/los/convention_agreements/texts/unclos/unclos_e.pdf

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