World's ships held to ransom by pirates' growing greed

The 1,000 or so Somalis creating chaos in the Indian Ocean are living like kings, and there's little anyone can do to stop them

Even by the outlaw standards of Somalia, the mayhem being created by its pirates is extraordinary. This weekend, as negotiations reportedly continue over a $25m ransom demand for the return of a Saudi Arabian supertanker carrying two million barrels of oil, the impact of the country's buccaneers is scarcely credible. There are 14 ships and 268 crew still in captivity, including one that has on board 33 Russian battle tanks; no fewer than eight of the vessels have been seized in the past 14 days alone; urgent talks are going on between nations and international bodies over how best to defeat the hijackings; navies are on standby to put more vessels into the area; some of the world's leading carriers are having to reroute ships thousands of miles out of the pirates' way, and wartime-style convoys, the latest one of nine ships escorted by a Russian frigate, are now being formed. A quarter of the entire Indian Ocean has swiftly been turned into a marine badlands, and the law of the seas is, at present, powerless to stop it.

It is an awful lot of chaos for just 1,000-odd men to have created. But the piracy crisis is estimated to be the work of not many more people than would fit on to the average Clyde pleasure boat. They have seized 39 ships this year, with the biggest prize by far being the Saudi supertanker. This is the Sirius Star – with a crew of 25 that included two Britons – which was captured last Saturday by pirates armed with Kalashnikovs and rocket launchers. Saudi Arabia's Foreign Minister has said that his government was not negotiating with pirates and would not do so, but tellingly added that what the ship's owners did was up to them. Three more ships, including The Delight, a Hong Kong-flagged cargo vessel carrying grain to Iran, and a Thai fishing vessel, were subsequently seized. And yesterday, at the end of a hyperactive week for the pirates, came news that they had released a Greek-owned tanker hijacked in September. The tanker MV Genius was liberated with its cargo of refined oil intact and the crew of 19 safe. The owners later confirmed that a ransom had been paid.

These pirates, and their back-up teams of negotiators and computer experts, have, within the lawless state of Somalia, created nothing less than a pirate kingdom. The port of Eyl is its epicentre, a place where no meaningful government has functioned for 20 years. Such authorities it has are honeycombed with corruption; force is the law, and, crucially, there is no banking system. So the pirates do not need to launder their proceeds, merely spend them. Hany Abou-El-Fotouh, an Egyptian banker and anti-money-laundering specialist, said: "They live like monarchs, like kings. They do everything in public, without the need to hide or disguise the source of money." Eyl's economy runs not on the nation's nominal currency, the shilling, but on dirty dollars.

The coast either side of Eyl is the perfect location for carrying out a piracy business. Every year, some 20,000 ships sail from the Indian Ocean into the ever-narrowing funnel of the Gulf of Aden that leads to the Red Sea and then, via the Suez Canal, the Mediterranean. The set-up is like a fish trap, and each week hundreds of juicy potential victims come ponderously and unarmed towards the pirates' net.

Working on tip-offs from ports, the pirates, dressed in military fatigues, travel in open skiffs with outboard engines, working with larger "mother" ships that tow them far out to sea. They use satellite navigational and communications equipment and an intimate knowledge of local waters. Many of the leaders are former fishermen. Once alongside a target vessel, the pirates fire warning shots and then clamber aboard with ladders and grappling hooks. They are typically armed with automatic weapons, anti-tank rocket launchers and grenades – weaponry that is readily available throughout Somalia.

For the world's forces of law and order, it is an unequal contest. The pirates have struck most often off Yemen, which has just nine operational boats to patrol a coastline of 1,191 miles. So other countries have put in ships. Nine nations now have warships in the area, including France, Russia, Malaysia, Denmark, and elements of the US 5th Fleet, based in Bahrain. Turkish and British frigates are also conducting deterrence patrols in the Gulf of Aden, where they engaged in a firefight last week with pirates attempting to hijack a Danish ship. While there has been the odd success – an Indian frigate sank a pirate mother ship last week – the pirates have simply extended their range. The Sirius was seized 450 miles off the East African coast, and their reach now covers an area equivalent to seven Mediterraneans.

The world's navies are also hampered by working under a restrictive UN mandate that allows force only in the case of direct attacks on ships. Nato spokesman James Appathurai said: "They can patrol. They can deter. They can even stop attacks that are happening, but what they do not do is then board the ship that has been hijacked elsewhere to try to free it." The US navy is similarly constrained. Some shipping companies have hired private security firms and are even considering arming their crews, but national laws generally forbid merchant ships from carrying weapons. Instead, the International Maritime Organization recommends sailing through pirate-infested waters at night, battening down all hatches to prevent entry into the ship, and posting lookouts with high-pressure hoses to ward off the light speedboats.

So shipping firms, already in trouble with rates falling, and facing the loss of a supertanker which could cost up to $150m, are negotiating and paying up. Ransoms worth an estimated $150m have been paid in the past year – each payment dropped in sacks from helicopters, or floated on skiffs towards its recipients in waterproof suitcases. As schemes for redistribution of wealth go, it is crude but highly effective. In Eyl, the pirates are building fancy villas, driving flashy cars, opening restaurants to feed their hostages and throwing their money around in a way that has won them widespread support. That may not last. Heavily armed Islamists were reported on Friday to have gone into Haradheere, one of the pirates' bases, off which the captured Saudi supertanker is anchored. They were said to be searching for pirates and would "punish" them for seizing a Muslim ship. Some analysts, however, felt they may simply want a cut of the spoils.

The owners' only immediate remedy – with insurance rates for boats going through the Gulf of Aden rising tenfold in the past year – is for their vessels to change course. In the past few days, the Copenhagen-based AP Moller-Maersk, which handles 16 per cent of the world's container traffic, and Norwegian Odfjell SE, which has more than 90 tankers, have ordered their ships to sail to Europe via the Cape of Good Hope, and Frontline Ltd, which ferries five to 10 tankers of crude a month through the Gulf, said it was negotiating a change of shipping routes with some of its customers, including the oil giants Exxon Mobil, Shell, BP and Chevron. The southerly route adds 12 to 15 days to each trip, at a cost of between $20,000 and $30,000 a day.

But the pirates can – with a will, warships, and a certain robust attitude towards the law – be defeated. In 2004, Far Eastern waters had a big problem, with 38 attacks in the Malacca Straits alone. Yet this year, after the governments of Malaysia, Singapore and Indonesia deployed greatly increased naval strength, and turned a blind eye to the strict letter of maritime law, there have been only two incidents. But then, there is no lawless haven like Eyl in Asia. There is in Africa, and it's getting richer by the day.

1. 'Sirius Star'

Vessel type: supertanker

Date hijacked: 15 Nov 2008

Place hijacked: East Africa

Crew aboard: 25

Cargo: 2 million barrels of oil

Ransom demand: $25m

2. 'Faina'

Vessel type: cargo

Date hijacked: 24 Sept 2008

Place hijacked: Gulf of Aden

Crew aboard: 21

Cargo: 33 tanks

Ransom demand: $20m-$30m

3. 'Centauri'

Vessel type: cargo

Date hijacked: 17 Sept 2008

Place hijacked: Coast of Somalia

Crew aboard: 26

Cargo: 17,000 tons of salt

Ransom demand: Not known

4. 'Delight'

Vessel type: cargo

Date hijacked: 18 Nov 2008

Place hijacked: Coast of Yemen

Crew aboard: 25

Cargo: 36,000 tons of wheat

Ransom demand: Not known