Anna Bowden and her mob of “fellow researchers” don’t care much, if at all, for all the criticism they evoked. They’re working in a field where honesty and ethics are disadvantages, not assets.
A new Study of the notorious Oceans Beyond Piracy (OBP) team wouldn’t be worth mentioning and paying any attention at all, if not for the publicity those Studies get, and rather muddy background of the whole project. But the publicity of OBP studies is the function of much more important fact, than publicity itself. I’m talking about the status of the studies, which is actually, an assessment of the piracy recognized by authorities, as the one and only, all-embracing and flawless, breakdown of the piracy. In case somebody forget or just missed it – the first Study of the OBP was officially presented in London and immediately recognized by all the shipping officialdom, by politicians and by navies, and of course, by major media. Outrageously falsified figures of the first study were accepted by main maritime bodies as absolutely correct, and all those bodies referred to those figures later on as if they were facts beyond any doubts. This fact alone is enough proof to blame maritime organizations , starting from IMO and including of course, ITF, for their participating in a fraud, which is called “Fighting the Piracy” Project.
OBP referred to the maritime organizations as the main sources of the data and statistics OBP used in its’ studies. A year after their first Study, OBP recognized first Study as being somewhat erroneous, and from $7-12 billion losses slipped to $6.6-6.9 billion. Maritime organizations as the main source of data then and now, as the organizations who claim themselves to be the world shipping leadership, managed to overlook those “erroneous” billions, as if we’re talking some pocket change. Maritime organizations didn’t bother themselves with an explanation to us poor souls, how could it happen at all, how could they trust the so-called “think-tank” with apparently falsified studies, and how the leadership of the world shipping could praise OBP and accept its’ figures as truth and nothing but the truth.
There are only to possible answers to that riddle – either maritime organizations are headed by hopelessly ignorant persons, or on the contrary, the chiefs know all too well what is it they’re after, and where their personal profits lie.
In fact, all the criticism aimed at OBP studies is aimed at maritime organizations, because OBP is the officially recognized source of general appreciation of the piracy. New OBP study, unlike the first one, attracted much more criticism, but critics believe they criticize just OBP, thus lacking the logic of the whole situation. Am I to believe, that the whole idea of OBP and its’ studies is the initiative of one Mr. Marcel Arsenault, 62-year-old yogurt and real estate tycoon? I don’t know who Mr. Arsenault is, maybe he’s in quest for the most exotic way of wasting his money, maybe he’s ill or something, but even if I believe that he’s the sponsor of the OBP project, I can’t explain official support and recognition of OBP as caused just by the virtues of OBP studies, because there are none. What that OBP project was exactly, in what clandestine ways it was created, who was paying for what and whose interests were taken into consideration, is a secret and will remain a secret. But just the logic of the events, sudden emergence of never heard of before piracy “experts”, impersonated in OBP think-tank, and their pompous presentation in London, lead us to logical conclusion, that the project was supported by some forces, interested in falsified picture of the piracy.
But even if the new study should be void of lies and falsifications, it should still be meaningless, just because the basic conception of the study, the idea behind it, is outdated and wrong. I think that the new approach to the assessment of the piracy is of much more importance than squabbles over this or that figure, than just the criticism of the new OBP study, that’s why I’ll restrict my criticism with several most important, or most outrageous, lies of the study. Speaking in general, the study in question, or any other studies of the OBP “researchers”, is a lie and can’t be otherwise, due to a very simple fact of being predefined, ordered and paid for. OBP, or to be correct, those who’re behind OBP, has to create a distorted image of the piracy and piracy’s threat, because it suits their interests.
The section is quite a surprise, frankly. The OBP simply didn’t count the ransoms, because “Since most ransoms are paid under shippers insurance, we do not include the cash value of ransoms in the total cost of piracy. Instead, we account for the above excess costs of ransoms, which we have estimated to be approximately 100% of the ‘cash value’ of ransoms of $159.62 million”.
What are the excess costs of ransoms they are talking about?
“As noted in our 2010 report, the ‘cash value’ of the ransom paid to pirates is not the only cost of hijackings. The total cost incurred by shipping companies is expanded by a number of factors, including the delivery of the ransom. Other excess costs include damage caused to the vessel while it is held, the cost of negotiators, consultants and lawyer fees. There is a high cost of having ships held and out of service. For example, at charter hire rates of perhaps $17,500 per day, a bulk carrier held hostage for six months could cost as much as $3.15 million in unrealized charter hire rates alone. Indeed, according to Stephen Askins of Ince & Co., the excess costs of having ships held hostage for months on end is potentially as large as $20 million for a $4 million ransom”.
It was estimated, in times when we knew the exact amounts of ransoms, that the ransom was only part of total losses incurred by the hijack, something between a half and one third of the total volume of the costs. OBP in their first study estimated the ransom as being just half of all the losses. Year after the first exposure of piracy, OBP assumes the loss may be five times more than the ransom, and finally, doesn’t count the ransoms at all. Ransoms are not losses, because they’re covered by insurances – that’s quite a breakthrough in piracy research, in any research, actually. Where do the insurance money come from, that they can’t be considered as losses? They fall from the sky, they’re nobody’s money?
OBP quotes consultancy agency Stephen Askins of Ince & Co as world-known experts in piracy, when saying that the cost of hijack may be five times more than the ransom itself. Stephen Askins of Ince is praising itself with advising owners in famous Faina case, but forgot to mention the results of those advises – owners and pirates together rejected the Stephen Askins of Ince services, and after Stephen Askins of Ince came out of the way, talks were completed, and vessel released, in a very short time. I’ve been in much more close contacts with owners of the Faina, with Ukrainian authorities, and with the relatives of the crew, than Stephen Askins of Ince, so I know, what I’m talking about.
Stephen Askins of Ince says that the excess costs of having ships held hostage for months on end is potentially as large as $20 million for a $4 million ransom. What does it mean? How to understand their mind-twisting estimation? Is the ransom one-fifth of total losses, or do the total losses depend on ransom’s volume? If a ransom for a big modern vessel, being held in captivity for several months, happens to be just half of a million – say, pirates were in jolly good moods after too much khat – what are the total losses, then? Still $20 million, or $2.5 million? Does Stephen Askins analyze imply, that total losses directly correlate with ransom volume?
New research as an old one, in its’ ransoms estimation, has only one source of information on ransoms volumes, pirates word. All the calculations of OBP with regards to ransoms are built on a trust, trust to what pirates said. There is no exception, not one ransom is confirmed by other sources except bad guys. My estimation is and was, some $70-80 million collected annually by pirates in 2010-2011 period. As for the other losses, there is rather generous allowance in OBP calculations, with regards to vessels’ operational costs. The captivity is, in economical terms, a lay-out. Owner doesn’t pay for fuel, port tariffs, etc. OBP in blessed innocence, calculated each vessel as operational, but with no profit.
We can’t estimate all the losses incurred by hijack unless very approximately. My estimation is and was, some $150 million annually in the period 2010-2011, ransoms and other losses including. Not much difference from OBP figure in general volume, but a great difference in the basic approach.
Much was said about insurances and piracy, but it didn’t make the picture clear and understandable. Insurance remains a black box. I’ve been trying several times to understand what War Risk insurance means, and why it is necessary. I failed. I’ve had talks with underwriters and ship owners, and all I could get was their general opinion, that War Risk premiums are considered by shipping as enforced and inexplicable levies, or in other words, extortion. Be OBP what it claim it is, a think-tank, it should deeply investigate into the very important matter of insurances, and provide us with a clear picture of insurance market with regards to the piracy, they should give examples based on typical cases of hijack, demonstrating the share of losses owners were able to recover through different kinds of insurance, and explaining the nature of compulsory War Risk premiums. If such an investigation failed, due to, say, unwillingness of the insurers to yield any information and explanations, OBP should state the fact and maybe draw some conclusions.
As for K & R premiums, OBP wouldn’t be OBP and the dear to IMO and Round Table, if they wouldn’t mess up with K & R estimations, too. Even Lloyd’s underwriter, notwithstanding their general sensitivity on insurance matters, was so indignant that said, that while around 20,000 vessels a year transit the Gulf of Aden each year, kidnap and ransom premiums have actually been falling sharply of late. Two years ago, the cost per voyage was around $15,000-$20,000, last year it was around $10,000 and right now it is around $3,000.
As long as OBP’s studies have an official status, at least in public view, such an utterly disappointing, superficial and non-professional research is in fact, not just OBP’s failure, it’s more than that, it’s an evidence against maritime organizations, who support OBP’s research work and recognize OBP’s studies in public.
Calculations given by OBP are far beyond any sensible criticism. OBP managed to make the share of cost of increased speed the biggest in total cost volume, with record high and breathtaking $2.71 billion.
OBP is giving out figures without any plausible explanation or grounding, or just without any explanation at all. OBP calculated the cost of increased speed of container vessels only. OBP estimates the total volume of container vessels crossing the High Risk Area HRA as 16165, this volume being the sum of vessels sailing routes East – West and Europe – Persian Gulf. It means, all those vessels had to transit Suez Canal. Suez Canal statistics give the general number of all container vessels transits in both direction for the year 2011 as 7178. The difference is 8987 vessels. Where did they come from, and where did they go? Don’t ask me, ask the OBP. There is not any need at all actually, to nail OBP for their strange estimation of the number of vessels. There is one simple consideration, which makes OBP’s estimations and calculations absolutely wasted. What is the estimation of security cost for year 2011? $530 million were paid for providing with armed guards 25% of all the vessels which crossed HRA in 2011, if we are to believe OBP’s figures. It means some $2 billion as being the cost of providing with guards all the vessels. Well then, owners of the container vessels could hire all the guards in the world, depriving all other vessels, and still be in profit. Why should they spend billions on increasing speed, if they could easily provide their vessels with protection, enabling guaranteed safety, and spend at least twice less?
Number of vessels transiting HRA
OBP estimated the total number of vessels transiting HRA during year 2011 as 42450 transits, OBP’s estimation is based on data presented by MSC HOA, i.e. on number of vessels registered with MSC HOA. A monthly average of registered vessels is 2830, which makes the number of registered vessels for the year as 33960, and as long as 20% of all the vessels go unregistered (says OBP referring to MSC HOA), the total number is 42450 vessels.
I don’t know what figures did MSC HOA presented, because I wasn’t able to find them in the internet. I don’t know the details of MSC HOA registration, the principles of the records. Maybe they register and count as equal to ocean-going merchant vessels local dhows and yachts, maybe there are some other intricacies in MSC HOA statistics and data, I don’t know.
There is data though, which may be trusted and accepted as undisputed. Some 1500 vessels were transiting Suez Canal monthly, during the whole year 2011 Suez canal recorded 17799 transits. Nearly all those transits imply sailing through HRA. OBP counted 42450 vessels. The difference is 24651, though actually it’s even bigger. We must ask ourselves where those vessels came from, and where did they go. We can’t ask OBP about the origin of those 24651 vessels, because OBP doesn’t know, doesn’t care and doesn’t bear any responsibility for its’ figures and data, for anything OBP writes, actually.
There are two main routes in HRA, one is directed East – West / West - East, another one is directed North – South / South - North. The mainstream is of course, East – West / West - East, it’s a major world trade road, connecting the biggest consumer of the goods, Europe, with the biggest producer of the goods, Far East. But the volume of East – West traffic, i.e. Suez Canal transits, includes in itself not only Far East or Europe bound vessels, but substantial share of Persian Gulf traffic, too.
On daily average, 14 tankers were passing the Hormuz Strait in year 2011, that gives us 5100 transits for the whole year. Some went South, some went East, and some went West. Therefore, only part of total 5100 vessels may be attributed to mystical 24651 vessels, invented by OBP and MSC HOA.
Most part of extra vessels, then, should be sailing from East to Africa, there is simply no other route, no other choice. If we’re to believe in those 24651 vessels, which didn’t pass Suez Canal, then, we are to believe, that bigger cargo flows, than Far East – Europe, exist somewhere in Indian ocean, that countries of Eastern Africa consume and export at least as much volumes of cargo as Europe, and that along the coast of Africa there are ports bigger than those in Europe. I don’t know such ports, and as for consumption, Kenya or Mozambique as equals to France or Spain, are really “surprise, surprise”.
The fantastic figure of 42450 vessels transiting HRA annually makes investigations into other sections of OBP’s study, such as Cost of re-routing, or Labor Cost, simply meaningless, because all the estimations and calculations are based on initially wrong assumption.
Other critics found other devastating mistakes in OBP study. News agency Somalia Report writes:
The case study assessments of the cost to regional economies, too, are far from thorough. The damage to Kenya’s $800 million a year tourism industry seems to be based on little more than a finger in the air. “Between $129 and $795 million lost in tourism revenue, and 3% and 20% of tourism jobs lost.” The truth is that tourism revenue to Kenya "soared" 32% in 2011. Oops. A grade school teacher would have sent this paper back for fibbing.
Using the creative methodology of making things up and roping in every available cost the authors could have found some argument to include the entire cost of the Kenyan invasion (estimated at KSH200 million, or $2.5 million per month); some might say this was partly due to those kidnappings on Kenyan soil, some of which have been subsequently linked with pirate gangs.
And this is only part of Somalia Report’s investigation into OBP’s study!
There is no need to go deeper into the criticism of OBP fantasies, because in fact, one must take entirely different approach in investigating the results of OBP creativity – stop looking for what’s wrong or questionable, and start looking for what’s right, for any figure or analyze which is not wrong or falsified. I for one, didn’t find anything believable.
I don’t think, that Anna Bowden and her mob of “fellow researchers” care much, if at all, for all the criticism they evoked. Well, they’re humans of course, or so I hope, and they may have some bad feelings about being a laughing stock of all the shipping, but they’re businessmen, and as such, they can’t be too scrupulous. They’re working in a field where honesty and ethics are disadvantages, not assets. Humans are strange creatures, they are capable of turning everything around them upside down or inside out. When humans start fighting this or that evil, more often than not, the fight turns into worse evil than the initial one. Somali piracy is an excellent example of such a transformation. “Fighting the piracy” process evolved into much more harmful and costly phenomenon than piracy itself. A number of institutions and organizations, States and politicians, made out of piracy a source of very substantial income, either financial, political or reputational. They need a public explanation of their activities, and as long as what they do is wrong, explanations they give should be false. An existing international mechanism of generating such falsifications, and presenting them to public, needs so-called think-tanks, pseudo-scientific bodies ready to concoct any lies. The think-tanks are actually, part of the mechanism of duping the public. In fact, all the criticism of OBP works in their favor, because other organizations “fighting” other evils wouldn’t let it go unnoticed, they’ll mark the OBP for its absolute shamelessness and audacity, with which the “think-tank” manages to falsify easily accessible for check data. Let’s not forget, though, that OBP is the tool, not a mastermind. They’re servants, not masters.
March 14 2012
® Voytenko Mikhail