The United States government does not negotiate with criminals or terrorists. They, the European governments, practice a similar discipline. Then how are the pirates not out of business yet? Here is the answer – insurance companies step in and clean up the mess.
Time magazine revealed the process. When a vessel is about to be hijacked by the Somali pirates, its crew notifies their company headquarters. Then the executives of the company contacts insurance companies. From there, insurance companies contract a “response company” such as Control Risks in London or ASI Global in Houston, TX. It is not legal for the insurance companies to pay the ransom, but there is no law against the response companies to negotiate and deliver cash. Pirates are not considered as “terrorists,” but as maritime “criminals.”
This ironic transaction of piracy has increased the demand for the maritime insurance. Although it may seem like a loss at first, it will eventually lead to a bigger “pie.” If you encourage piracy in Somali water, everyone would want to have a piracy insurance. Why would you not want more piracy in Somali water?
Dr. J. Peter Pham, director of the Nelson Institute for International and Public Affairs at James Madison University, also made a point in an interview with VOA.
"The ransoms being paid by the shipping companies are also part of the problem. On one hand, from a purely economic point of view, it makes a great deal of sense if you have a cargo ship that is worth at least $20 to $30 million, it stands to reason that paying them a million dollars to get it back is an economically rational decision. Unfortunately, what might be in the selfish, self-interest of a single shipping company contributes to a general climate where the price of ransoms are bid up and there's incentive for more people to get involved in this lawlessness."
A package which observers believed to contain a payment drops over the Sirius Star supertanker, January 9, 2009.
David B. Hudson / US Navy / Reuters
Due to the supply delivered to the pirates, pirates are now equipped with more advanced technologies and more weapons, according to a BBC reporting. The piracy in Somalia will flourish unless the “economics of ransom” is abolished. Money is, indubitably, the root of all evil.
Sources:
BBC. "Q&A: Somali Piracy." BBC News. 2 Nov. 2009. Web. 05 Mar. 2011. .
"Somali Piracy - Causes and Consequences." VOAnews.com. 10 Apr. 2010. Web. 05 Mar. 2011. .
Walt, Vivienne. "Why the Somali Pirates Keep Getting Their Ransoms." TIME. 20 Apr. 2009. Web. 05 Mar. 2011. .
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