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April 2011

News Letter - 20th April 2011

This is our first newsletter since relocating to our UK base and we’ll start once more with a review of the latest developments on piracy in the Indian Ocean. We close this issue with some news from DP (Dubai) World.

First quarter 2011 the worst ever for piracy

Pirate attacks have reached an all-time high in the first quarter of the year, with 142 attacks reported worldwide, according to a new report from The International Maritime Bureau which has motored piracy worldwide since 1991.  Their global piracy report attributes the sharp rise to a surge in incidents off the coast of Somalia (quell surprise although as we have pointed out repeatedly these affect and have affected pretty much the entire Indian Ocean for months now. The IMB claim 97 attacks were recorded in the first three months of 2011, compared with 35 in the same period last year.

Worldwide, during this period, pirates have murdered seven crew members and injured 34. Eighteen vessels were hijacked and 344 crew members taken hostage, with a further 45 vessels boarded and 45 more fired upon. The east coast of Somalia, in and around the Arabian Sea and the Gulf of Aden are the areas with the most reported hijackings and hostages taken, says the report.  In these areas, 299 people were taken hostage with their vessels and a further six were kidnapped and taken from their ships. On March 31st IMB believe Somali pirates to be holding captive 596 crew members and 28 ships and acknowledge that the use of violence by pirates against crew is increasing.

The IMB claim the figures for piracy and armed robberies at sea in the first three months of 2011 are higher than they’ve ever recorded in the first quarter of any year. The IMB points out that the overwhelming number hijacking off Somalia have taken place east and north east of the Gulf of Aden using mother ships and that the positions of some of the attackers’ motherships are known and therefore should be targeted to prevent further hijackings.

In a recent show of force, the Indian Navy captured 61 Somali pirates on a hijacked ship off India’s west coast while Somali pirate Jama Ibrahim was sentenced to 25 years in federal court in Washington DC for his art in a pirate attack against the merchant vessel, M/V CEC Future, which began in November 2008 (he was previously sentenced in the Eastern District of Virginia to a 30-year prison term for acts of piracy against a U.S. Navy vessel). 

So assuming he does the full term and the sentences run concurrently he gets to spend the next thirty years in relative comfort for his efforts. He’s reportedly 39 now so that carries him through to retirement age assuming he lives.

As of April 6th the Dutch managed to successfully kill two pirates and capture 16 others during an operation to free a hijacked Iranian fishing vessel. Marines from the HMS Tromp used rigid inflatable speedboats to approach the fishing boat for investigation. As the Marines moved closer, pirate opened fire on them and the Marines returned fire. Ten pirates were captured as they fled the fishing boat on a skiff and the remaining six were arrested on the fishing boat. The raid is the first time that the Dutch forces have killed pirates during their joint task force patrols of pirate-infested waters. The bodies of the two pirates killed during the shoot-out were taken to the HMS Tromp for examination before being disposed at sea. Officials said the injured pirates were being treated onboard the frigate, however, there is no word on whether or not the pirates will be taken somewhere for trial. It seems to us much simpler all round to just kill them in action at sea. Frankly we don't care some are actually captured but we think it would be preferable when reporting to just say all were KIA as that appears to make it less burdensome for the fine fighting men involved.

It seems some senior industry figures share our attitude. On April 17th Mr. Jacob Stolt-Nielsen,  the founder of the Stolt-Nielsen shipping group said history shows that fighting piracy requires a gloves-off approach and has suggested that pirates captured off the Horn of Africa should be sunk with their skiffs or executed on the spot. Mr. Nielsen is 79 years old now but perhaps it is time the industry and indeed the world started listening to people of his generation.

Mr. Nielsen echoes several points we have made ourselves but which bear reiterating:

1. Make the risk of being caught and killed great enough and piracy will disappear. A pirate won't be frightened by being placed before a civilian court.
2. Pirates captured in international waters have historically been punished by death, often on the spot. We need to take the approach of Roman pirate hunter Pompey from more than 2,000 years ago.
3. Arrest pirates, confiscating weapons and giving them a stern rebuke before releasing them accomplishes nothing. Sink their boats with all hands.

Needless to say Mr. Nielsen has come is for some severe criticism from the do-gooders of the world including the President of the Norwegian Seafarers Union, who has allegedly described his views as "barbaric" and said killing pirates could endanger the 700 seafarers now held as hostages in Somalia. We would say “realistic” and “effective” are more appropriate adjectives to describe his position and when it comes to endangering seafarers refer you to the paragraph below. And what are the terrorists if not barbaric. If you are going to take on these terrorists you must fight them with similar or even greater barbarity as they use otherwise these criminals will not disappear. Note I do not call them pirates as that word has romantic commutations to some people. They are terrorists as the Russian forces have proved and everyone has known for years despite the refusal of so called “civilized” governments to acknowledge the same.

A day after Mr. Nielsen spoke out on April 18th 2011 the Indian managers of a Panama-flagged ship criticized pirates for failing to release all of the Indian crew with the vessel after an agreed upon ransom was paid. Really: you mean you can't trust pirates to keep their word! Mumbai-based OMCI Ship Management paid an undisclosed ransom to free the MT Asphalt Venture (hijacked on September 28th last year) and her crew. The management company says that eight crewmembers were released with the vessel, but pirates are still holding seven.

OMCI are apparently deeply disappointment the pirates have reneged on their word despite their meeting all demands of the negotiated settlement and paying the mutually agreed ransom. They have appealed to the pirates to honor their word and immediately release the 6 officers and 1 crew member as otherwise they feel other owners of hijacked ships still captive in Somali waters will lose faith in the negotiation process. Sorry but when you negotiate with terrorists – never a good idea – you should expect them to break their word.

DP World sells control of P&O Trans-Australia

DP World has sold its stake in logistics firm P&O Trans-Australia (POTA) to fellow shareholder Qube logistics, for around A$106 million (US$111m). The deal means Qube has increased its shareholding in POTA to around 94.5%, with the remaining stake owned by management. As well as the shares, the price tag also sees Qube inherit DP World’s loans related to POTA. POTA becomes Qube’s landside logistics division with a range of logistics solutions in Australia focused on the import/export supply chain for containers.

The amount Qube paid for DP World’s interest in POTA was based on multiplying earnings before interest, tax, depreciation and amortisation for 2010 by seven. The transaction is expected to be completed by the end of the month and even after funding the purchase, Qube will still have around A$70 million for further investments. In December, DP World sold the controlling stake in its Australian container terminal business to Citi Infrastructure Investors (CII) in order to reduce its debt. The deal saw CII take a 75% stake in DP World Australia for around US$1.5 billion.

From what we can tell Dubai World is still in dire straits and a large injection of cash will certainly help. This is the latest in a series of asset sales that we expect to continue for some time to come as the company desperately tries to restructure and become viable again.