By Thomas Bennett, L.L.B., featured on maritime-executive.com
Somalia remains a failed state. Poverty, the absence of enforced law, and psychopathy masquerading as a just cause create an environment where money for gain, or money to finance terror, means that piracy in the Indian Ocean has not gone away. What started in the Somalian North as a tax on shipping is a continuing threat to global trade.
Still, piracy has abated. Nation states have acted. Armed guards have helped. The threat has been contained- or has it? It is a brave shipping company that sends an unprotected crew through the high risk area of the Indian Ocean. And if the rationale for piracy remains, then piracy remains. Somalia, lawless as it is, will wait.
Western powers will not finance armed forces to patrol the Indian Ocean indefinitely. The maritime industry will price the risk according to the threat. The probability of piracy has diminished. The business of maritime security must adjust. As the perception of threat falls, so will the cost of protection. Competition will force prices down and many armed security companies will not survive. Some will merge. Consolidation is inevitable. Or so it seems.
Maritime security is still big business. We estimate that total revenue in the Indian Ocean is $400 million a year. The supply chain ranges from nation states to former servicemen, maritime agents and legitimate dealers in arms. All vested interests. All of whom take their piece of the whole. Today, prices for transits on vanilla routes are so low that it is hard to discern how a profit is achieved. If there is no more profit to be had, then competitive tension is designed to push all but a few players in this market to mutually assured destruction.