• Sun
  • Oct 26, 2014
  • Updated: 1:05am

Ransom for Chinese ship 'raising the bar'

PUBLISHED : Tuesday, 29 December, 2009, 12:00am
UPDATED : Tuesday, 29 December, 2009, 12:00am
 

The US$4 million ransom paid to free 25 hijacked mainland sailors yesterday is one of the largest ever delivered to Somali pirates, sparking fears in the shipping industry that it represents a new high-water mark for future payments.

Shipping industry officials in Hong Kong and London said it was further proof that the pirates continued to have the upper hand, despite ongoing international naval patrols off the Horn of Africa.

'It is one part of our business that is in an upward trend, I'm afraid,' said one shipping lawyer involved in the burgeoning business of freeing sailors captured by Somali pirates. 'The pirates know the industry will pay to keep people alive ... and we can see they are pushing every new negotiation as far as they can.'

The comments came after Foreign Ministry officials in Beijing hailed the 'rescue' of 25 crew aboard the De Xin Hai, a coal carrier seized by pirates northeast of the Seychelles on October 19.

Officials and the ship's owners confirmed the ship and crew had left the Somali pirate stronghold of Hobyo and were now under the protection of Chinese naval warships that are part of the international anti-piracy task force. An official with Cosco, which owns the ship through its Qingdao Ocean Shipping subsidiary, said PLA navy doctors would be conducting initial medical checks on the crew, who would receive further attention on their return to China.

'We are very thrilled that the ship is finally free, and we were very impressed by the response of the crew members and their families.'

Both Foreign Ministry and Cosco officials refused to comment on the payment of a ransom, however. Pirates aboard the ship said they had received US$4 million, dropped from a helicopter, to release the crew, while European naval officials said they had also confirmed a ransom had been paid, but not the amount.

'If [the figure] is true, then US$4 million would certainly be at the highest end of the range,' said Commander John Harbour, spokesman for the European Union's naval forces off Somalia, the largest international presence in the area.

Secret negotiations involving the ship's owners, its London-based insurers and the pirates had rumbled on for weeks, with the pirates threatening to kill the crew at one point if the Chinese military attacked. Chinese government officials were also helping the owners with connections and advice. Typically, owners hire lawyers who in turn engage private security firms to deliver cash to the pirates - a highly fraught operation given the lawlessness that pervades Somalia, a failed state.

The difficulty of the operation means the ransom is merely part of the final costs borne by owners and insurers. Some insurers have estimated that ransoms account for just a quarter of the final bill, meaning many shipowners are prepared to seek special piracy insurance to approach the Horn of Africa. That insurance can cost more than US$20,000 per trip - nearly a day's charter for some ships.

'As ransoms go up, we can expect everything else to go up ... both insurance rates and the amounts charged by the security types, who sometimes work on percentages of ransoms,' one Hong Kong-based insurer said. 'When you consider that even the cash ransom must be insured en route to the pirates, it is not hard to see how the costs rise when the ransoms rise.'

The De Xin Hai was the first Chinese ship to be hijacked after Beijing's historic deployment of three warships to the Horn of Africa last December - the first time Chinese naval vessels had entered an international conflict zone in centuries.

Zhang Yusheng, director-general of the Ministry of Transport's bureau of public security, said it was still unclear when the ship would return as it still held 76,000 tonnes of South African coal bound for the Indian port of Mandra.

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