Shipowner Calls for Suez Canal Boycott over Pirate Threat

By Walter Gibbs | March 17, 2011

A leading Norwegian shipowner called on tanker operators to boycott the Suez Canal which he said would force global powers to intervene in Somalia to crush piracy by forcing up oil and commodity prices.

The call, which has yet to receive widespread support from other shipowners, raised the possibility that owners and crews could join hands in demanding more action against pirates.

The International Transport Workers’ Federation, the largest seafarer’s union with 720,000 members worldwide, said last month it was considering advising crews to refuse to enter pirate zones.

“The only way the politicians will be forced to take action is if we agree to stay out of the Gulf of Aden, meaning we wouldn’t go through the Suez Canal,” said Jan Hammer, chief executive of Odfjell Tankers, which has 95 chemical tankers.

The Suez Canal is a short-cut between Asia and Europe using shipping lanes that traverse the Gulf of Aden north of lawless Somalia.

More than 35 vessels and 800 crew members are being held for ransom in and around Somalia, with recent ransom demands above $10 million per ship and the global economy drained of $7 billion to $12 billion a year, according to the One Earth Future Foundation.

“I can’t see any other solution” except for a military intervention, Hammer told Reuters. “The politicians will have to get together in a NATO or UN context and address the real problems on land.”

NO PUBLIC ALLIES SO FAR
So far Hammer said he has no public allies among shippers. He said many express private support for no-sail zones but fear banding together could violate anti-competition laws. In his view shippers should also consider shunning the Persian Gulf, source of 40 percent of the world’s oil transported by ship.

He said today’s international naval presence off the Horn of Africa would have to grow 700 percent to scare pirates who now attack from hijacked “mother ships” with hostages on board far out in the Indian Ocean.

Jakob Larsen, maritime security officer at the BIMCO shipowners’ association, said industry support for a strategic no-sail zone was growing as some crew unions threaten to hold shipping companies liable for pirate violence.

“We are not there yet, but if things continue to escalate it’s possible they (shipowners) will be tempted to avoid conflict areas completely,” Larsen said. “Oil prices would then climb even higher than they are now.”

Sailing around southern Africa instead of through the Suez Canal adds weeks of travel between the Indian Ocean and the Mediterranean Sea. Doing so regularly would boost commodity prices and cut the slack in a freight market weakened recently by too many competing ships, Hammer said.

Frontline, the world’s largest oil tanker company, opposes such coordinated action. “You would hit the Egyptian economy very hard at a time when they probably need every dollar,” said Frontline technical director Olav Eikrem, in a reference to the political turmoil in the region that forced President Hosni Mubarak from office last month.

Eikrem agreed with Hammer that military and political intervention in Somalia was needed to root out pirates but said a shipping campaign that hurt the global economy could backfire.

“We are not going to engineer that,” he said. “We are in the supply business. But at the end of the day all these extra costs for security and insurance and diversions will be passed on to the consumer.”

A marine insurance expert said a boycott of dangerous waters would be “fully understandable.”

“If companies feel that the threat is so immense that they put forward that solution then it’s fully understandable,” Stein Are Hansen, assistant director of the Norwegian Hull Club marine insurer.

(Additional reporting by Joachim Dagenborg; editing by Sonya Hepinstall)

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