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Quick Hits: In Light of Economy, Somali Pirates Reconsider Ransom


Brief scrutiny of today's headlines.

Pirates are entrepreneurs, but who knew ransom demands were subject to market forces?

The Somali pirates who hijacked the Saudi tanker Sirius Star with a cargo valued at about $100 million had demanded $25 million to free the ship and crew, but now say they may be open to a price reduction.

That's probably because there are now about 15 warships off the coast of Somalia where the pirates have seized about 40 ships and nearly 600 crew members this year. Warships now active in the area include four NATO vessels as well as ships from India, Russia and Malaysia. In the last 2 weeks, war ships from Britain, India and Russia have battled the pirates.

The pirates may have misjudged the market. International commerce may have been able to tolerate an occasional raid and write it off as a nuisance, but the cost of doing business in the region is going higher as ransom demands have grown into the millions of dollars per ship from tens of thousands a few years ago. In response, a few oil companies appear to be diverting ships through the Suez Canal to avoid the pirates in the Gulf of Aden.

Middle Eastern oil producers may not want to see their money flow interrupted by rag-tag pirates and may therefore agree with Western nations that there's something to be said for the rule of law and orderly commerce.

Prince Saud al-Faisal, Saudi Arabian Foreign Minister, says his nation will contribute to the NATO force, but didn't say if the contribution would be cash or troops.

The situation is probably more serious than the pirates realize – and cutting ransom demands probably won't sooth the jangled nerves of international shippers. The situation won't change much until the pirates' bases are hit.
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