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Somalia: The hunt for pirate treasure

Posted on Monday, 29 November 2010 15:50

Somali pirates have negotiated some $100m in ransom payments over the past two years, though where and how the cash transits is opaque. While this pirate loot is substantial, ?it is just one part of the puzzle of Somali money flows in the region.

Read more on Somalia from Parselelo Kantai on Garissa Lodge, Nairobi’s Somali trading hub and Somalia’s plundered fish stocks.

The Kaskazi south-easterly monsoon winds gusting down from the Gulf of Aden in October heralded a new season of piracy. In 2010, pirates secured their biggest ransom to date – about $9m – for a South Korean supertanker hijacked in the Gulf of Aden in April. Captured and taken to the Somali port of Hobyo, South Korea’s Samho Dream was one of 25 tankers anchored off Somalia’s coast. There are also, says environmental lobby Ecoterra, about 440 people held captive by pirates.

Over the past two years, pirates off the Somali coast have negotiated at least $100m in ransom payments. What is less clear is who gets the money and how. Many of the ‘investors’ in piracy are said to have financial bases in Dubai and Nairobi, both known centres of money laundering.

Most of the pirates hail from Puntland, the quasi-independent province in north-western Somalia. Accordingly, many point to Puntland politicians – both the former regime of Muhamud Muse Hersi and that of current President Abdirahman Mohamud Farole – as beneficiaries of piracy.

The current Puntland administration angrily denies this. “The claim that the Puntland economy has gained from piracy is baseless. The money from ransom payments is miniscule. You can’t run a government on pirate money. Puntland’s official position is not to pay ransom,” says Abdulhakim Ahmed Guled, the minister of information. “Our position is not to fight the pirates offshore but to fight them inland.” UN statistics do not entirely support his contentions. Pirates earned ransoms of some $30m in 2008 alone; Puntland’s state budget in 2010 was about $39m. A UN report in 2008 claimed that piracy receipts amounted to three times Puntland’s official income.

The Puntland government is moving on the issue. Early in 2010, it arrested more than 300 suspected pirates, including Abshir Boyah, the self-proclaimed leader of the pirates. “Our jails are now overcrowded,” says Guled. “The main population there is the pirates.”

The government is also trying to dissuade Puntland’s impoverished youth, some of whom look admiringly at Boyah’s opulent lifestyle, from joining his men on the high seas. With community elders, the government is cracking down on the use of suspected piracy takings in dowry negotiations and other transactions.

In Eyl, once the centre of piracy operations, people protested at the pirates’ louche lifestyle, replete with heavy drinking sessions and prostitutes. Farole’s administration also launched a programme to rehabilitate pirates. Administered partly by Norwegian Church Aid in Garowe, Puntland’s administrative capital, it has attracted 200 self-proclaimed former pirates.

International ‘hypocrisy’?

The Puntland government is bitter that international donors have not honoured their pledges of support. About $200m has been spent on personnel, arsenal and arms to patrol the Gulf of Aden, but few attacks have been thwarted. “It’s not really piracy that is giving us a bad image, but the hypocrisy of the international community,” claims Guled. “Can you give me one instance where the international community retook three ships, as we did?”?

Outsiders are sceptical. Some experts claim that individuals close to Puntland’s president have been financing or encouraging pirate operations. That is why, they say, some captured ships were moved from Eyl. “Most of the ships are now held between Gara’ad and Haradheere,” says a source who spoke on condition of anonymity. The last known town in which pirates were free to operate was Haradheere. When Al Shabaab seized the town, the pirates fled.

The links between piracy and the Al Shabaab insurgency are murky. Some excitable Western analysts talk about ‘jihadi piracy’ – a notion guaranteed to generate expensive consultancy contracts and ring alarm bells in the Pentagon and the shipping industry.

Then there were press reports that Al Shabaab was taxing the pirates in their strongholds, even working closely with them. On the ground little of this makes sense. Al Shabaab militants seem genuinely angry at the international attention, in terms of North Atlantic Treaty Organisation hardware and international surveillance, that the pirates have drawn to the region.

Secondly, the pirates’ drinking and free-sex lifestyle hardly chimes with Al Shabaab’s abstemious culture. And finally, like most developments in Somalia, the pirate operations are divided between the Darod and Hawiye clans, neither of which would be inclined to make a long-term deal with Al Shabaab.

That, of course, does not mean Al Shabaab will not fight for the pirates’ booty or indeed their hostages. According to a Western intelligence source, grainy images from a keyhole spy satellite showed Al Shabaab fighters trying to take a British couple, Paul and Rachel Chandler, from their pirate captors. After 11 months as hostages, the Chandlers were released and flown to Mogadishu on 13 November.

Asked about the benefits of piracy, a former pirate claimed: “I have no money left. After I had paid my debts and given some to my family, I didn’t have much left. Whatever I did have, I spent on women, alcohol and khat. It gave me a life I had never lived. With all that money, I was able to meet people I would never have met, stay in big hotels and sleep with beautiful women. It gave me urbanisation.”

“It’s hard to see where the money goes,” says Justin Micheni, a consultant who worked in Garowe. “There are some new houses and you see a number of characters driving new cars. But there’s not much more.” The pirates are not the main beneficiaries, taking just a fraction of the ransoms. In between is a shadowy network of brokers, lawyers and financiers.

A European Union report in June 2009 recorded nine separate pirate groups operating in Somalia, with growing levels of sophistication: where previously one pirate rode the skiffs, he now outsources attacks to others, lending capital and equipment. There is also more cooperation between clans.

A go-between involved in ransom negotiations tells The Africa Report about operations organised and financed by a syndicate of eight different groups active between Somalia, Kenya and the United Arab Emirates. They have divided up the Somali coastline into separate operational territories. In the past, they worked from three central points: Eyl and Haradheere, where the captured ships were berthed and the hostages held, and Bosaso, Puntland’s commercial capital, which acted as the operational nerve centre.

Recently, there has been a move to decentralise operations. The port town of Hobyo has become a new centre, as have other coastal towns such as Ras Hamun and, significantly, Ras Kore, which is in Somaliland. Somaliland has not been known to encourage or benefit from piracy in the past.

Ransom negotiations are usually conducted from Puntland, Kenya and Dubai. The syndicates use specially assigned negotiators who are paid commissions. Shipping companies hire professional negotiators and Somali translators, who are paid $100 per day. The shipping companies also enlist security firms to make the drop-offs. These can be as much as $700,000. Typically, the drop-offs are made at different places, presumably to spread the risk. Most of the money is paid in used notes to make detection difficult.

Insurance cover

International insurance companies play an increasing part in the monetary flows. The growth of hostage taking from 2008 onwards has generated new forms of cover, from kidnap to cargo policies, from companies such as the US Aon Corp., International Securities Services, Cooper Gay and Bellwood Prestbury, all of the UK. Ed Watling of Bellwood Prestbury dismissed as “conspiracy theories” the idea that well-insured shipowners are in cahoots with pirate gangs to avoid paying for empty ships during the downturn. “I have not heard of anything like that.”?

What the downturn has done, according to Watling, is to attract a greater number of development businesses to look at Somalia. “In bad times, these companies are more likely to look at a contract in somewhere more dangerous.”?

Pirates’ legal defence?

Francis Kadima, a human-rights lawyer in Mombasa, represented 65 suspected pirates in eight different cases between March 2009 and August 2010. “When these people were arrested, they did not have representation. I got involved in the piracy issue when members of the Fourth Estate who knew of my work in public-interest law approached me,” he explains.

“I offered the suspects pro bono services until I realised that the EU had made provisions for defence funds that were running into millions of dollars.” Kadima defended the pirates by contesting the jurisdictional grounds on which they were being tried. Kenya, he asserts, was not a neutral party, as it was cooperating with the EU on anti-piracy measures. Kadima is irked by what he considers to be deliberate attempts by the Kenyan government to deny the pirates a fair trial. “These people were brought to Kenya, a foreign country. They had no representation, could not communicate with their relatives, were being tried by a foreign court in a foreign language. How could justice ever be served?”?

But it is his insight into the pirates, held incommunicado at Mombasa’s Shimo la Tewa prison, that is revealing about their role in the scheme of things. “They are foot soldiers, poor people who are the victims of the turmoil in Somalia. They have no clear source of livelihood. Typically, they are aged between 20 and 40 years. I can say with a clear conscience that they are not at the top of the food chain. They are not the type of people to demand million-dollar ransoms. If they were to be implicated in pirate activity, it is because they are being used. This is an organised activity.”

At least some of the piracy money is laundered in Kenya. Over the past few years, Somali investment in real estate has grown enormously. Stories abound of offers to buy or rent properties at exorbitant amounts, far exceeding quoted prices. Rajab, a real estate agent in Mombasa’s Kisauni area, attests to the rise in prices. “Two years ago, rents began to go up. It was when the Somalis arrived. They would pay six months in advance and three months’ deposit. That’s how prices rose. The locals could not afford those prices. So, now, people have moved further away to areas where it’s cheaper.” Claims that the new investments are the proceeds from piracy are partly rooted in the collective zeal of Kenyan property magnates to cash in on the urban property boom: criminals can afford to pay more for their land and houses.

“These are baseless allegations,” says Omar Ahmed, a Somali businessman. Piracy started about two years ago, long after property values in Kenya started to rise, he said. “We don’t see piracy money here. The investment in real estate is a general business trend in the country. We are a hardworking people. We don’t give up.”