Piracy costs global economy $7-12 bln a year: study

Thu Jan 13, 2011 3:29pm GMT

A host of navies from emerging and developed powers including of the European Union, China, India, Russia, Japan and the United States have upped patrols in the region to combat piracy, but little has been done onshore in Somalia.

Overall, Bowden estimated the total cost of piracy had increased roughly fivefold since 2005.

In November 2010, it said the highest ransom on record -- $9.5 million -- was paid to release a South Korean oil tanker, up from $7 million to release a Greek supertanker in January. The average 2010 ransom looked to be around $5.4 million, the report said, up from only $150,000 in 2005.

Because of this -- together with a rising number of pirates and the increasing distance they operated from shore -- war risk and kidnap and ransom (K&R) premiums for ships passing through the region had tripled and increased 10 fold respectively.

Assessing the cost of rerouting shipping was difficult as shipping lines were often reluctant to release details, the report said.

Egypt's Suez Canal revenue had fallen 20 percent in the past two years, the report said, although this was in part due to the economic crisis. The researchers estimated around 10 percent of shipping traffic was now avoiding the area.

"It's very difficult to get data from the shipping companies," she said. "But we've made the best estimates that we can."

Gauging the impact on global commodity prices had proved too difficult to exactly cost, she said, but if piracy continued with a wider economic recovery then increased delivery costs could drive up oil, mineral and food prices.

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