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Security Concerns: Piracy at Sea and the Carriage of Essential Commodities by Merchant Shipping – The impact on commodity pricing and availability

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  • Stephanie Jones

    (Associate Professor, Organizational Behaviour, Maastricht School of Management, the Netherlands and Tilburg University, the Netherlands)

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    Abstract

    With the focus of this conference on resource scarcity and resource constraints, it seemed to me that a key aspect of ensuring resource availability is distribution. But distribution depends on the perception of risk, which therefore determines price and availability. When can distribution be risky? Surely it’s just a matter of moving goods from A to B? But what if A to B is on the high seas, in pirate-infested waters? The overall cost of global piracy – ultimately borne by consumers of commodities – has been estimated at reaching up to $15 billion per year by 2015. This year already, a huge increase was observed in the first quarter, when pirates attacked 142 vessels, seized 18, including three tankers over 100k deadweight, murdered seven crew members and injured 34 – an all-time high in only three months. The war-zone is predominantly the 2.5m square nautical miles off Somalia, which has increased from 1.5m two years ago (Feldman, 2011, also quoted by Leach, 2011). My interest in shipping, trading and seafaring – now reinforced by owning my own 40 foot sailing boat – started as a teenager and was the subject of my doctoral research. With the MSM focus on emerging markets, we are increasingly concerned with fair economic development for all, sustainable world commodity flows, and poverty reduction... and maritime piracy is arguably standing in the way of these goals. Ironically, one of the findings of this paper is an observation that many maritime pirates are ‘biting the hand that feeds them’ – they are attacking ships that bring food aid from the developed, so-called ‘rich countries’ designed to alleviate poverty and starvation in their own backyard – deterring future aid deliveries due to increased insurance costs and high personal risk. The pirates may be getting rich, but their compatriots are poorer than ever. Meanwhile, countries desperate for international aid are corruptly laundering pirate ransom income and continuing to support pirate warlords and tribal leaders. They may also be living in ritzy apartments in London, New York and Geneva, whilst global inequalities are perpetuated. We are not just looking at increased prices of commodities carried by sea – we are looking at matters of life and death for seafarers, as maritime pirates become more aggressive and violent. The further they venture out, the more desperate they become to successfully attack and hijack ships. Even ‘suicide bombers’ are now taking to the seas, navigating small craft packed with explosives directly alongside their targets. Now, over the last year, I have a partner who is an ex-navy captain and who now commands a superyacht. He has helped me with the research for this paper and it has occurred to me more than once that he might be in danger... Let us start with two short definitions of piracy. The International Marine Board [IMB] talks about “an act of boarding any vessel with the intent to commit theft or any other crime and with the intent or capability to use force in the furtherance thereof”; the International Maritime Organisation [IMO] refers to “armed robbery against ships – any unlawful act of violence or detention or any act of depredation or threat thereof... directed against a ship or persons or property on board such a ship...” quoted in Beckman (2002). This paper firstly attempts to quantify the issues involved – numbers of ships and crew members, ransoms paid – and looks at global trends, all indicative that this problem is becoming greater rather than lesser. Piracy – with swashbuckling cutlasses, pieces of eight, parrots and eye-patches, romanticised in movies and novels – is no longer attractive and exciting, but desperate, corrupt and deadly, and bad for world trade and the future of developing nations. We will also look secondly at the detailed economic implications, the background to how it began and what happens in an attack. We will suggest a) some practical ideas for tackling the problem and b) finally, we will reflect on the lack of concerted international action to date to deal with the issues, considering the reasons for the failure to respond and therefore the continuing deterioration of the situation.

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    File URL: http://web2.msm.nl/RePEc/msm/wpaper/MSM-WP2011-19.pdf
    File Function: First version, 2011
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    Bibliographic Info

    Paper provided by Maastricht School of Management in its series Working Papers with number 2011/19.

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    Length: 32 pages
    Date of creation: Nov 2011
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    Handle: RePEc:msm:wpaper:2011/19

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