The Economic Model
Consensus is growing that ultimately, offshore solutions are at best a complementary or supporting part of a larger solution. Somali piracy is a business driven by profits. With the success of the model over the past five years, it is worth asking whether initiatives ashore can affect the calculus of those involved.
Some fairly detailed and well-documented analyses of the economic model have been published. Norwegian piracy researcher Stig Hansen provides exceptional insight into the business model and three primary designs. 7 The first involves a responsible-group structure within which an investor functions as leader and carries all costs, also taking most of the ransom. The second is a shareholder template in which the pirates themselves invest to meet current operating expenses. The third is a shareholder structure in which a leader gathers shares from local investors and hires a crew, often on commission. In all three cases, a well-connected leader draws on his personal network for protection and problem-solving.
At a 1 March 2011 ad hoc meeting on the Financial Aspects of Piracy, European Union naval forces representatives described a process in which about 15 investors fund the industry, creating a written contract with one of approximately 50 leaders who then subcontract to one of hundreds of various pirate action groups comprised of several thousand foot soldiers. Roughly 20 negotiators and translators support this model.
Ongoing network analysis by the Center for Advanced Defense Studies highlights the role of a larger but limited set of financiers and a structured logistics network that operates in a very dynamic and fluid manner, with alliances constantly shifting. Exact figures are difficult to determine, but the key takeaway is that despite increased revenues, “high-demand, low-density” assets (leaders, financiers, interpreters/negotiators) remain relatively small despite the metastasis of seafaring pirate action groups. The challenge for policymakers is how to penetrate a business model that is cash-based, extremely dynamic, reliant on tribal affiliation, and nearly impervious to the offshore triad, and how to accomplish this in such a way that affects cash flow, creates disincentives, and pressures the highest levels of the organization.
A New Ashore Triad?
In contrast to the maritime triad, a three-pronged ashore effort must energize local and regional governance capacity building across the legal, security, and financial domains. The United Nations, European Union, United States, and United Kingdom, in cooperation with countries in the region, are engaged in limited efforts to strengthen security, governance, and the rule of law in Somalia. 8
While the African Union maintains a peace-support mission with 8,000 troops in Somalia to support dialogue and humanitarian operations, there is little international appetite for sending in troops to counter piracy, and it would be a counterproductive strategy that would threaten any domestic momentum opposing the problem. Successful efforts must begin with political engagement that determines where local efforts are showing promise and have popular support and legitimacy.
Furthermore, success cannot be led by an ineffective transitional federal government in Mogadishu, but must be initiated by those subnational authorities in the northeastern state of Puntland (established as an autonomous state in 1998) and in the south-central federal division of Galmudug (established in 2006) that have proximity and leverage to influence piracy logistics and networks. This course of action is implied in the Dual Track Approach articulated by the U.S. Department of State in late 2010.
But the approach remains more theory than reality. Success won’t be quick, as questions about U.N. political will and local-partner viability abound. Yet efforts ashore will impact the business model and mitigate piracy in ways that will never be accomplished afloat. The joint statement issued following U.N. consultative meetings in Kenya in early April 2011 reflects a growing subnational authoritative push to move beyond the current transnational federal government quagmire and intensify coordination with regional authorities, civil society, and the diaspora as a way to reform future governance and create legitimate partners for regional and international efforts.
Addressing Conventional Wisdom
Concerns about endemic corruption are valid and need to be at the forefront of any carrots and sticks that are applied as part of an ashore solution. However, this concern alone does not justify a failure to engage ashore. The latest 2011 U.N. piracy report indicates that adjustments of the government of Puntland in March 2010, and the implementation of counterpiracy measures by local authorities, have put Puntland on an improving trajectory. 9 That government has repeatedly affirmed a commitment to tackle the issue; efforts at removing the criminals in Eyl in 2009–10 and ongoing initiatives support the claim. 10
Puntland security officials started operations in Garowe in May 2011 following reports that bandits associated with the seizure of the MV Renuar were operating in the area. This resulted in ten arrests and a continuing investigation, with one focus being to gather details on the financiers behind the group. Security personnel have been deployed to Eyl, Bander Byla, and Bargal as an extension of the initiative. Arrests were also noted in Galkayo and Bosasso. 11 Despite the conventional wisdom that Puntland writ large remains complicit in piracy, it is holding approximately one-third of the prisoners, well more than any nation now prosecuting the brigands abroad. 12
In fact, most experts now focus on Galmudug and the thriving Hobyo-Harardera pirate mafia as the center of gravity—complicated by al-Shabaab’s proximity and less-developed international-community engagement. The recent inauguration of a Galmudug regional antipiracy center in the Galkayo district, however, underscores the subtle shift that continues locally, not just in Puntland but also with the more nascent subnational governance in Galmudug. Officials there reportedly detained and are prosecuting 12 pirates apprehended in Galkayo in March 2011. Moreover, Puntland and Galmudug administrations have started to coordinate some security efforts, with authorities of the former handing over six criminal suspects on 9 April 2011, paving the way for greater future collaboration. 13
A Mudug police spokesman stated that additional operations continue, with indications that pirates are leaving Galkayo as a result. This matches with Stig Hansen’s observations from 2009 that local police provide a deterrent. 14 While not intended as an exhaustive list of local efforts against piracy, this should provide some context for areas where the U.N. and regional actors such as the African Union and Gulf Cooperation Council can partner. They can bolster fledgling and under-resourced efforts ashore. 15 Both presidents Abdirahman Mohamed Mohamud “Farole” of Puntland and Mohamed Ahmed Alin of Galmudug led delegations to the April 2011 U.N.-Nairobi conference to support building solutions to Somalia’s long-term issues. This reflects a desire for international partnership and cooperation. It is in concert with these subnational elements that the ashore triad must be developed.
Targeted Legal Prosecution
The current prosecution of foot soldiers is unlikely to deter future crimes and does little to minimize leadership return on investment. Legal efforts need to focus on bridging the evidentiary gap between those apprehended at sea and those up the organizational chain who fund and facilitate the business. Although more than 800 pirates are in custody, a small percentage are action-group leaders cognizant about business leadership. Whether through plea-bargaining and amnesty options or aggressive information-gathering from arrested pirate action-group leaders, legal cases need to be built to prosecute more relevant senior partners.
One can see this starting to play out with the arrest of Mohammad Shibin, charged for his leadership role as a hostage negotiator while on board the Quest . The American yacht was seized by pirates in February 2011, a story that ended tragically with all four hostages killed during the rescue attempt. The indictment alleges that Shibin conducted research on the Internet to learn about hostages on the Quest and determine the amount of ransom to extort, along with the identity of family members whom he could contact about payment.
A second case involves Ali Mohamed Ali, arrested 21 April 2011 at Dulles International Airport, Virginia, for his role as a suspected negotiator associated with a 2008 hijacking of the MV CEC Future , a Danish-owned ship with U.S. cargo. 16 U.N.-proposed efforts to build specialized courts in Puntland and Somaliland may assist in this leg of the triad. However, focusing on core high-demand, low-density actors would minimize the need for an expansive and costly prison regimen. Five hundred foot soldiers in jail are far less useful than 5–10 financiers.
An aggressive legal agenda needs to be supported by local law enforcement, such as that of Puntland’s forces ashore. The most recent attempt to develop a 1,050-person marine force using Saracen International was suspended due to concerns that security and law-enforcement training without proper notification to the U.N. violated the arms embargo in Somalia.
The larger takeaway is that Puntland recognizes the critical law-enforcement role to complement legal reforms and capacity-building, and is moving ahead with this in the absence of international-community leadership. Any future marine force would greatly enhance the existing police/border guard (Darawisha) that underwent reforms in spring 2009 and is indispensible to a mutually supporting ashore solution.
Galmudug has also identified this capability gap in the standup of its regional antipiracy center. In fact, reporting from late April 2011 indicates that Galmudug governmental elements were able to free Iranian and Pakistani sailors held following an attack by the state’s forces against a pirate-held boat in the Hobyo district. 17 Of the three legs of the ashore triad, it is most critical that the security one be based on local legitimacy and not assessed by the populace as an imposition of foreign forces on their territory. Outlaws could leverage this type of thinking to stir up xenophobic opposition. This aspect requires financial and material support, technical training (potentially hosted in a neighboring country), and a limited foreign footprint on the ground.
Financial Network Forensic Development
Regional efforts are under way to fight the movement of illicit money. The ability to track large currency and cross-border financial transfers, conduct financial analysis and investigations, and build the needed financial legal framework are critical and in various stages of maturity. 18 The U.N. Office on Drugs and Crime has begun to shed light on the regional illicit financial situation by describing the role of informal money-transfer systems ( hawalas ), ransom allocation, laundering, regional financial flows, and unusual investment trends. 19
However, in this cash-based environment, regional efforts will shed little light on piracy-money movement in Somalia unless they are extended to the Puntland and Galmudug local levels, and target the intersection where ransoms initially meet the informal economy. In May 2011, the U.N. Political Office for Somalia announced the establishment of a piracy unit that would use the Kampala Process as its framework to coordinate activities against the illicit economy across Somalia. 20
This may prove a useful vehicle, over time, for expanding financial-security capacity into subnational elements. Although probably the most difficult endeavor of the ashore triad due to its technical nature and the information-sharing complexity involved, efforts such as this will be essential to complement legal prosecution and directly influence the business model.
The ashore triad provides policy options that lead to a more direct approach than that of the afloat triad in compelling pirate leadership to reevaluate its business model. Success will take time in this complex and fragile environment. The ashore triad must engage local governance and civic entities to achieve any meaningful success, but likely at a fraction of the cost.
This is particularly important in the current budget-constrained atmosphere, where the U.S. State and Defense Departments must make hard choices on priorities and resource allocations. Any opportunity to leverage local initiatives and regional support structures for much less money than the current afloat triad should be thoroughly considered.
A number of other initiatives ashore will also need to be addressed to defeat piracy and stabilize Somalia. All deserve a more thorough and deliberate review. They include alternative economic-development programs, vocational training for young Somalis, and regional information-sharing hubs. Some of these are already being developed. Three regional facilities—Maritime Rescue Coordination Center in Mombasa, Kenya; Sub-Regional Coordination Center in Dar es Salaam, Tanzania; and a new center in Sanaa, Yemen—will be critical to collaboration and information dominance.
Ultimately, just as the ashore triad will strengthen disincentives to piracy for high-demand, low-density actors, economic development must provide alternative opportunities for lower-level criminals. Actions ashore need to be energized, expanded, and synchronized with those afloat if the international community is to move beyond simply addressing the symptoms of piracy.
1. Ecoterra International email distribution, “Status of Seized Vessels and Crews in Somalia, the Gulf of Aden, and the Indian Ocean,” 6 September 2011. “Pirate Ships Must Be Sunk: BBC Report,” NauticWebNews.com, 15 April 2011, http://en.nauticwebnews.com/899/pirate-ships-must-be-sunk-bbc-report/ .
2. International Maritime Bureau Piracy Center, 2010 Annual Piracy Report, www.icc-ccs.org/piracy-reporting-centre .
3. “Pirate Attacks Reach Record High,” Breakbulk.com, 19 April 2011.
4. “Piracy Biggest Threat to Southern Africa Security,” Defence Web , 11 April 2011.
5. “Piracy Costs Global Economy $7–12 Billion a Year: Study,” 13 January 2011, Reuters Africa, http://af.reuters.com/article/topNews/idAFJOE70C0BP20110113 .
6. Ad hoc meeting “Financial Aspects of Piracy,” U.S. State Department, 1 March 2011, summary at http://blogs.state.gov/index.php/site/entry/piracy_financial_networks .
7. Stig Hansen, Piracy in the Greater Gulf of Aden: Myths, Misconceptions and Remedies (Oslo, Norway: Norwegian Institute for Urban and Regional Research, October 2009), http://en.nibr.no/ .
8. EU Council Secretariat Fact Sheet, “EU Engagement in Somalia,” April 2010, http://www.consilium.europa.eu/homepage.aspx?lang=en .
9. United Nations Report on Legal Issues Regarding Somalia Piracy, January 2011.
10. Congressional Research Service (CRS), “Piracy off the Horn of Africa,” 27 April 2011, http://opencrs.com/document/R40528/ .
11. Said Ismail, “Puntland Tackles Piracy on Land,” SomaliaReport.com, 15 May 2011.
12. U.N. 1901 Report on Legal Issues Regarding Somalia Piracy, January 2011.
13. Said Ismail, “Puntland and Galmudug: Improving Ties,” SomaliaReport.com, 20 April 2011.
14. Hansen, Piracy in the Greater Gulf of Aden, p. 41.
15. Ismail, “Puntland Tackles Piracy on Land.”
16. CRS, “Piracy off the Horn of Africa.”
17. Abdalle Ahmed, “Galmudug State Calls on Iran Government to Take Rescued Fishers from Galkaio,” RBC Radio, 8 May 2011, http://www.raxanreeb.com/?p=95291 .
18. United Nations Office on Drugs and Crime (UNODC), brief to ad hoc meeting “Financial Aspects of Piracy,” U.S. State Department, 1 March 2011, http://www.unodc.org .
19. UNODC, “The Illicit Financial Flows Linked to Piracy off the Coast of Somalia,” background paper for 17–19 May conference Illicit Financial Flows in Nairobi, Kenya, http://www.unodc.org/unodc/en/frontpage/2011/May/awash-with-money---orga... .
20. Statement by special representative of the Secretary General for Somalia Augustine P. Mahiga to U.N. Security Council, 11 May 2011, http://www.un.org/News/Press/docs/2011/sc10246.doc.htm .