The true cost of piracy

The average ransom paid to pirates last year jumped almost 60% on 2009, with the highest ransom on record coming in at US$9.5 million.


According to the Economic Costs of Maritime Piracy report, produced by the One Earth Future Foundation, in 2005 the average ransom paid to pirates was US$150,000, by 2009, it had reached $3.4 million, but last year it jumped by 58.8% to reach $5.4 million.

The report says: “Problematically, increasing ransom payments appear to be lengthening negotiations, and therefore the duration seafarers are held hostage.

“The average length of negotiations has more than doubled over the past year, as pirates seek, and receive, larger ransom payments. Ships were held for an average of 106 days between April and June of 2010, up from just 55 days in 2009, and the last four ships released in November 2010 were held for an average of 150 days. Seafarers now face the likelihood of three to four months of captivity.”

The report also found that the cost of a ship being held hostage did not end with the ransom payment. “The total cost of ransom is estimated to be around double the value actually paid to pirates. The cost is duplicated by a number of factors: the cost of negotiations, psychological trauma counselling, repair to ship damage and the physical delivery of the ransom money, often done by helicopter or private aircraft.

“Finally, large costs result from ships being out of service. For instance, it costs around $3 million for a cargoship to be held for two months at a charter hire rate of $50,000 a day.”

The report puts the total cost of piracy at between $7 to $12 billion a year.

This figure takes into account ransoms, insurance, re-routing of ships, security equipment, naval forces, prosecution, piracy deterrent organisations and the costs to regional economies.


Source IFW