Bell Curve The Law Talking Guy Raised by Republicans U.S. West
Well, he's kind of had it in for me ever since I accidentally ran over his dog. Actually, replace "accidentally" with "repeatedly," and replace "dog" with "son."

Monday, April 13, 2009

Yo Ho Ho and another Kind of Bailout

Piracy in the Gulf of Aden and off the horn of Africa is finally hitting the spotlight in the US, for the predictable reason that one of our own was nabbed. Apparently, paying millions in ransom money had become a common practice for many shipping companies. It begs the question: why pay millions in ransom instead of hiring security forces? What is the cost of a hiring six or seven men to take shifts on watch with guns compared to the ransom? Why not delay shipments for a day or two to go in convoys and share the security costs among ships? Leaving aside the free rider problem, why is the cost of paying ransom ever considered a cheaper option?

The craziness is that shipping companies routinely send hundreds of millions of dollars of merchandise around the world at sea with just a dozen or so unarmed men as the only protection. Nobody does that on land. Why? Basically, it seems they expect the taxpayers of the world to pay for naval protection for them. Or they just don't mind the risk they are putting their employees through. There are currently a dozen ships under pirate capture in this area right now, according to almost every major news source. A dozen. And they are still sending unarmed and unprotected ships through there one at a time. If there were a dozen buses on I-95 currently being held hostage by gangs of bandits, I suspect that bus traffic would die down a bit.

I think that NATO or the other leading naval powers need to call in the heads of major shipping companies and tell them to take reasonable steps to pay for their own protection on the high seas as part of fighting piracy. Convoys and armed personnel are a good start, so are longer routes out to sea. Then the naval forces can concentrate on protecting the convoys and shutting down pirate operations. Asking taxpayers to do this over and over again is just another kind of bailout.

27 comments:

Raised By Republicans said...

Well, the only thing that carries as much cargo on land is a train and those do go unguarded. Like the ships, trains are expected to be protected by a general respect for the rule of law.

I think if I owned a shipping company I would work out the odds and probably decide to put some sort of defensive capability on my ships (either those new non-lethal thingamajigs or armed sailors). But I don't think most companies will think it's in their interests to do much more than improve the security of individual ships. And pirates will always be able to overwhelm individual ships now and again given enough time to solve the problem and the right set of advantageous circumstances. Also, I don't think the national governments should abdicate their responsibility to ensure freedom of the sea lanes.

Governments must ensure freedom of the seas to ensure continued trade. Individual companies cannot do this and won't try because of the free-rider problem that LTG alluded to. Public safety is a classic public good and market forces cannot be expected to provide an adequate amount of it. This exactly the kind of situation where governments need to step in.

On a side note: How ironic that Maersk, a Danish shipping company, should now be paying "Danegeld" to pirates. :-)

The Law Talking Guy said...

RBR - Trains go unguarded when they go through safe territory. I guarantee you that a train through Somalia would be guarded. In fact, they don't even run trains through dangerous areas. So that's a bad analogy.

The better analogy is the fact that businesses in the USA use armored (and armed) cars to transport cash. Reasonable private precautions are always required even when there is an expectation of public safety. It is unreasonable for Wells Fargo to expect the US Taxpayers to fund police protection for each shipment of cash.

As I se it, it is not reasonable to scatter one's gold jewelry on the front lawn, go away for the weekend, then expect the police to keep it safe. That is excessive. I see these shipping lanes of unarmed multimillion dollar vessels past Somalia as almost that bad.

I agree that public safety is a public good, but there's also a big difference between worldwide safety and safety within a given territory. Again, it is about what level of reasonable private precautions are required. In dangerous zones far from the sovereign waters of big naval powers, US taxpayers have a right to demand that shippers take more precautions.

By the way, shame on the naval powers of the world for not intervening sooner before the shipping companies began paying large ransoms, promoting piracy. That was their responsibility.

Dr. Strangelove said...

The difference here is that armed sailors cannot effectively defend a large ship against the most common tactics of modern pirates. Pirates typically approach at night on couple of small, fast-moving boats with mounted machine guns or rocket-propelled grenade launchers. The pirates threaten to sink the merchant vessel unless they are permitted to board. (They must then pay the pirates to leave.)

The pirates have a huge advantage here. Several small, low, fast powerboats are much harder to hit than a single large, tall, slow, shipping vessel--especially at night. Moreover, all the pirates need is one mediocre hit and they can sink the entire vessel with all its contents, possibly drowning the crew as well. Rather than risk such an enormous loss, shipping companies much prefer to pay a few million dollars' ransom. Besides, less than 1% of vessels passing Somalia are subjected to piracy, so the "cost per voyage" of a $3,000,000 ransom averages out to about $30,000.

The only effective defense is to have an armored vessel or to engage a similar fleet of fast-moving small cruisers to engage the pirates before they get close enough to be threatening. In other words, you need a navy. I agree that convoys are a sensible practice, but they are not cheap. In fact, if y convoy costs a few million dollars a day, it might not even be worth it.

Raised By Republicans said...

The train analogy does work if you think back to times when trains did transit through territories in which the rule of law was shaky...the old west for example. Train robberies were not unheard of back then.

An armored car is much different than a ship. First, the contents are much more valuable by weight (a 100 pounds of cash is worth a lot more than a 100 pounds of oil or other cargo). Few people are needed to pull off the theft/cashing in phases. So the incentives per criminal to rob are higher and the costs of the job are lower.

All that said, I think Dr. S makes several good points here. At $30,000 per voyage you wouldn't even think it was worth it to hire and equip a mercenary to guard the ship let alone enough of them to actually do the job right. And if you armed your crew the additional insurance costs for having that many armed men on board might outweigh the benefits.

Task Force 150 (the multi-national naval task force operating off Somalia) has been going after pirates since 2002. Of course, the shipping companies may have been paying ransoms a lot longer than that. But it makes sense that the ransoms would predate the naval response. After all, it's the ransoms that alert both the shipping companies and the navies to the problem.

Navies have been fighting pirates off an on for as long as there were navies. The Malaysian, Indonesian and Singaporean Navies operate against pirates in the straights of Malacca (another hot bed of piracy). However, these are small poorly equipped navies and only Singapore is open to outside help - they are currently getting it from India and it wouldn't surprise me if the Thai, Chinese, US and Australian Navies were operating nearby too.

This is a major problem and it can't be solved by either ad hoc defensive measures by the shipping companies. If the response is to cut down the oceanic trade, that would be a disaster. It would also be cutting off our noses to spite our collective faces.

Raised By Republicans said...

Oh, some humor that seems to fit today's world rather well...

http://www.youtube.com/watch?v=KX61PUZ3xkI

The Law Talking Guy said...

I can't believe the big ships are as vulnerable as all that. Maybe an RPG is a problem, but not a machine gun. Bullet-resistant boats have been around for a very long time. I would think the ability to spray a small boat with machine gun fire would help.

The Law Talking Guy said...

This is from US News as of January 2009 about an analysis by the Office of Naval Intelligence:

"In addition, none of the successful pirate attacks occurred at night, leaving mariners with a clear formula for minimizing trouble. All vessels are advised to proceed through the entire Gulf of Aden at maximum possible speed. Vessels with characteristics that put them at higher risk, like maximum speeds of 15 knots or less, as well as those with low freeboard, are advised to minimize risk by transiting as much as possible of the eastern Gulf of Aden in hours of darkness.

For deterring speedboat-riding pirates, several ships reported success with fire hoses, parachute flares, smoke bombs, and sound cannons.

http://www.usnews.com/articles/news/world/2009/01/13/piracy-a-50-million-business-and-counting.html?PageNr=2

The Law Talking Guy said...

Of course, the BBC says otherwise, (also Jan 2009) "However, the pirates move extremely quickly and often at night and so it is often too late before the crew has realised what has happened." The BBC says that they do not threaten ships, but "To actually hijack the ships, the pirates first use grappling hooks and irons - some of which are even rocket-propelled - and climb aboard using ropes and ladders. The pirates have also on occasion fired at the ships to scare them into stopping, so it is easier for them to board the vessel."
http://news.bbc.co.uk/2/hi/africa/7734985.stm

I wonder what the truth is.

Dr. Strangelove said...

Piracy near Somalia has been going on for many years, of course, although it has become more common recently. The Combined Task Force 150 is a multi-national naval group, and since 2006 they have been working to combat piracy in the seas near the Horn of Africa.

Anonymous said...

the answer to all of this is one word: Blackwater.

The Law Talking Guy said...

I'm sure that sending convoys through the Gulf of Aden, then re-routing some trade routes to the east in the Indian Ocean, would not be devastating to the world economy. Apparently the Maersk Alabama was running from Djibouti to Mombasa. Now, is delivery so time-sensitve on that route that they could not have coordinated with convoys?

Raised By Republicans said...

According to Wikipedia, 7.5% of all the world's trade (including 2/3 of Europe's oil imports) passes through the Suez Canal and virtually all of it goes through the Gulf of Aden. The average cost per ship of transiting the canal is $150,000 so that kind of puts Dr. S's $30,000/voyage cost in perspective.

The only alternative for ships is to sail around the southern tip of Africa. This alternative has become somewhat more popular because of the piracy problem in the Gulf of Aden.

The wikipedia story on the Suez Canal does mention that ships transit the Canal in convoys so there may be something to LTGs idea of convoying through the piracy zone. It would make it a lot easier for Task Force 150 to escort them. But we are talking about an enormous volume of shipping so maybe that's not feasible.

Dr. Strangelove said...

Just to be clear, I picked the ransom amount of $3,000,000 randomly. Obviously if it is ten or twenty million, the 1-in-100 estimate rises accordingly.

The Law Talking Guy said...

They can't have two well-guarded convoys a day through the Gulf of Aden? That would slow up traffic by only a few hours, and they could also go faster elsewhere. According to the BBC, they usually travel at 10kt, but could go 15kt easily. So they can make it up. The Gulf of Aden is about 600 miles long. That means at 10-12kt, that's about 2 days to transit. So they need four convoy task forces. Is this so hard? The great thing is that there's almost no limit on how many can go in a convoy, so you just hang out in the Red Sea for 6 hours or so in a guarded area, then they all go through together. IT just takes coordination. They can up the fees at Suez to pay for it.

The Law Talking Guy said...

Then you need to add a couple days to the voyage to swing wide east in the Indian ocean, not hugging the AFrican coast. Sure, this adds 2-4 days to shipping time, but that's not a huge deal.

Raised By Republicans said...

I'm surprised an aircraft carrier isn't part of Task Force 150. It would seem to me that even a small carrier capable of launching Harriers or something would be able to cover a lot more area and respond a lot more quickly to distress calls.

I just looked it up and Task Force 151 (which supplements or replaces TF 150?) does have a ship capable of launching attack helicopters (USMC Cobras to be exact). These things can fly a few hundred miles and are faster than a destroyer or a frigate but not exactly super sonic. But once on site, one of these things could easily take out a pirate speed boat or even one of these new "mother ships" we're hearing about now.

Dr. Strangelove said...

Just a note... I think the US Navy has a total of about 12 aircraft carriers, 4 of which are more than 30 years old. They are very expensive and we don't have that many.

The Law Talking Guy said...

OK, but what are we doing with them of more value right now?

I am struggling to understand why the world's most powerful navy is supposed to be helpless against illiterate fishermen in speedboats.

Dr. Strangelove said...

The convoys you suggested, LTG, are the only feasible solution right now I can see.

The Law Talking Guy said...

Dr.S- come clean. Surely we have an underground spy satellite center somewhere in suburban Virginia that maintains visual surveillance on all shipping in the world, plus some super-awesome super-secret satellite-guided spyplane drones that can be directed remotely to kill the pirates. Not even a little bit? Is it all outsourced to India?

Pombat said...

Damn! Who told him about India? ;-p

Raised By Republicans said...

Dr. S. re: how few aircraft carriers we have...Name a country, besides us, that has more than two of them. (especially considering that most other countries "aircraft carriers" are really little more than helicopter carriers) ;-)

I'm with LTG, I'd think we could detail one of those 30 year old models to this problem.

Pombat said...

UK's currently got three I believe (Invincibles), to be replaced with two STOVL plus a helicopter one in a few years (again, I think). Although point taken - very few countries have lots of them. But then the US has always gone for the bigger is better approach with the military, which can have its moments - "quantity has a quality all of its own" after all.

However, a 30yr old aircraft carrier, complete with Navy crew, is not all you'd need - you'd also need fighter planes and pilots, and once you start factoring a few of those in, your pricetag skyrockets - Dr.S is taking all that into account when he says that aircraft carriers are very expensive.

You also have all sorts of issues with operating aircraft in marine environments, which are rather exacerbated with helicopters - you would not believe the sea-water corrosion that can happen, and the cost of attempting to avoid it / fix it (really all you can do is rinse the aircraft off really well, and salt seems to be worse than sand - gets absolutely *everywhere* in helicopters). Then there's the additional danger - landing anything on an aircraft carrier is in the difficult to dangerous category: when planes are landing, they have to be gunning their engines like mad, in case they don't catch their landing wire and need to take off again (rather than roll off the edge of the carrier and sink, usually complete with pilot); landing helicopters is even worse - the damned things are hard enough to fly at the best of times (a naval fighter jet pilot once told me that they don't fly, they're just so ugly the Earth repels them), and a gust of wind at the wrong time as they're trying to smack the aircraft down onto the deck - and they really do smack helicopters down onto carriers, to make sure they're down - and you can end up with a very dangerous machine, complete with whirling rotors, skudding across the deck, and even catching one of its skids on a railing as it tips overboard (I've seen that video, it still chills me).

Far as I'm concerned, we shouldn't be asking highly trained pilots to be putting themselves in that kind of danger to protect commercial assets. From a different point of view, we shouldn't be putting a fairly rare, very expensive asset (the pilots) into that kind of situation. Convoys it is.

Raised By Republicans said...

"Far as I'm concerned, we shouldn't be asking highly trained pilots to be putting themselves in that kind of danger to protect commercial assets. From a different point of view, we shouldn't be putting a fairly rare, very expensive asset (the pilots) into that kind of situation. Convoys it is."

This is an interesting point. What other kinds of interests are more legitimate? If you prick a merchant marine does he not bleed?

Besides, professional navies were established in the first place for exactly this purpose really - that is protecting commercial sea traffic from pirates. It's all about controlling the sea lanes for the purposes of trade. That's why blockades are such a popular tactic. Cut off the other guy's trade routes.

Point taken about salt water and all that. But in the Battle of the Atlantic, the USN and RN weren't able to really protect the convoys effectively until they started escorting them with "Jeep Carriers" (small aircraft carriers that could provide just enough air cover to scare off German subs and commerce raiders).

I like the quote about the reason helicopters fly.

Just a note about carriers. Not only does the USN have many more of them than anyone else, they are far more capable carrier for carrier than the other guys'. Most countries that have carriers have smaller ones like HMS Illustrious (although I hear the RN is developing some big ones now). Here is a picture of USS John Stennis (Nimitz Class) sailing next to HMS Illustrious. http://en.wikipedia.org/wiki/File:USS_John_C._Stennis_(CVN-74)_%26_HMS_Illustrious_(R_06).jpg Either is more than enough to patrol the Gulf of Aden I'm sure.

But if you add the "Amphibious Warfare" ships in the USN that are capable of launching the same AV-8 Harriers that Illustrious carries, the USN has 22 not 12 carriers (adding 8 Wasp class and 2 older Tarawa class). And in fact, I just looked it up and Task Force 151 includes just this kind of ship, USS Boxer. She is a Wasp class amphibious warfare carrier. I don't know if she is currently carrying any Harriers or if she only has helicopters at the moment.

The Law Talking Guy said...

Again: speedboats vs. US Navy.
Seriously, people. I understand it's not as simple as pushing a button, but this doesn't seem like it's beyond our capacity. If we need to impose some tax to pay for it on the merchant marine, that's fine. We could randomly ask 1% of the ships to pay us $3m each, for instance...

Raised By Republicans said...

"We could randomly ask 1% of the ships to pay us $3m each, for instance..."

OK, I laughed so hard at that one that I scared the dog.

Dr. Strangelove said...

LTG is right to insist that the US Navy (or any major navy) could easily defend ships in a convoy. No question.

But attempting to clear the oceans of piracy--even clearing a relatively "small" area like the Gulf of Aden--is not feasible due to cost etc.