Last year, 31 ransoms were paid to Somali pirates with a total value of $160 million, or an average payment of $5.1 million. However, these payments accounted for only 2% of the total cost to the world of Somali piracy. The biggest cost is in increased fuel consumption due to increased shipping speeds. Ships travelling at 18 knots or faster have so far been immune to attacks, but high-speed transit of the high-risk area is estimated to have cost ship owners $2.7 billion last year.
The next-highest cost attributable to Somali piracy is the cost of military operations. More than 30 countries have contributed to counter-piracy operations, at a total estimated cost last year of $1.27 billion. Private security operations paid for by ship owners are estimated to have cost a further $1.1 billion last year. Re-routing of ships to reduce exposure to the high-risk areas may have cost around $550 million, while war risk insurance and kidnap and ransom insurance cost $635 million.
Other significant costs incurred last year are estimated at $195 million for increased wages paid to ships’ crews, $21.3 million funding costs for counter-piracy organisations, and $16.4 million for prosecution and imprisonment of pirates. When the bill for all of these activities is added up, the amounts of the ransoms actually paid to pirates pale into insignificance, leaving the suspicion that there must be some creative solution to piracy that costs less than $7 billion per year.