Delivering Cash to Pirates as Difficult as Negotiating Ransom

NAIROBI, Kenya, Nov. 20, 2008 — -- Negotiating with pirates is such a cutthroat business that shipowners have to make sure they don't get robbed a second time while delivering the ransom.

Firms that have negotiated the return of their ships and crews from Somali pirates have discovered that one pirate may grab another pirate's ransom, leaving the captured ship still in hostile hands and an angry pirate still demanding his booty.

A kidnap-for-ransom consultant, known as a K&R specialist, is likely telling that now to the Saudi firm that wants to recover its supertanker the Sirius Star, loaded with $100 million worth of crude oil.

"There are around 12,000 pirates in the water now and all of them know that a ransom has been asked for," said Capt. Thomas Brown, manager director of Seacurus, a British insurance brokerage company that who offers a piracy specific insurance policy.

The Agence France-Presse reported today that pirates had made their first demand for the return of the tanker: $25 million. Vela International, the tanker's owners, has made no public comment on whether negotiations are under way.

Brown said that ransoming a vessel is such a cutthroat business that shippers now must not only insure their ships and their cargo, but their ransoms as well.

Negotiating with Somali pirates has become a booming and very expensive business as they have turned the busy shipping lanes of the Somali coast into a shooting gallery for passing tankers, trawlers and container ships.

After a ransom fee has been settled on, which is usually between $1 million and $2 million, there is the difficult business of delivering the cash into a country that is carved up by vicious turf wars among feuding warlords.

Most ransom drops are made in the same seas where the ship was taken, at agreed-upon coordinates, said Jack Cloonan, an ABC News consultant and a former FBI agent who runs Clayton Consultants, a K&R consulting firm that negotiates kidnap-for-ransom cases globally.

An obvious drawback to paying a ransom in waterways infested with pirates is being robbed of the ransom before it can be delivered.

Consequently, a new industry has sprung up in the neighboring country of Kenya where tugboat captains in the coastal city of Mombasa offer to make the drop for a fee. Cloonan says that as hijackings have increased and ransom payments have grown more extravagant, so have the delivery fees.

$1 Million in $100 Notes Weighs 29 Pounds

"In some cases, the fees to deliver the ransom have been more than the ransom itself," he said.

One new technique is to airdrop the money. A million dollars in $100 notes weighs about 29 pounds. It is placed into a container like an inflatable ball and dropped out of an airplane using a parachute guided by a Global Positioning System.

Both Cloonan and Brown say this is a more accurate and a less risky way to deliver ransom money, but it's very expensive and the K&R company has to have the capability to do it, and not all do.

Adding up the ransom, the drop, the K&R fees and the loss of productivity during the negotiating time equals millions if not tens of millions of dollars for a company whose ship has been hijacked, Cloonan said.

Because of the rising danger of piracy, Brown has seen a "tenfold increase" in the demand for his piracy policies since Seacurus started three years ago. He even had to interrupt his interview with ABC News twice to take calls relating to negotiating new policies.

As complicated as the ransom drop can be, getting to that point is a tedious and delicate process. Though the pirates are based in one of the poorest and most chaotic countries on Earth, they have access to sophisticated satellite phones, faxes, even text messaging.

And negotiating with them can be nerve wracking.

"It's unlike negotiating a kidnapping in Mexico or Afghanistan or Baghdad. It's taking place in a hostile maritime environment," said Cloonan. "You have to have the resources to deliver the ransom if required to. You have to be very strong-willed and understand what the risks are."

The most important part of the negotiations is establishing who will speak for the company and who will speak for the often squabbling pirates.

"First, one has to have a communicator on behalf of the shipowner who has to be identified. And then what you hope is that the bad guys will come to their senses and put a good communicator on their end," said Cloonan. "He has to have the authority to speak to reach a consensus. Until you get a good communicator on behalf of the hijackers you can waste a good amount of time."

Speaking in English Helps Control the Deal

The K&R specialist does not negotiate for the shipping company. Instead someone within the shipping company is chosen to do the talking.

"We train them and help them through the process," Cloonan said. "You would be surprised how well people can be coached, how well they adapt to a script that's laid out and how well they use their own talents."

The shipowners don't pick the pirates' negotiator, but they can insist that whoever speaks for them do the negotiating in English. Cloonan says it's one way of "controlling the script."

The talks usually begin with the pirates demanding a sky-high fee for the safe return of the ship and crew. The shipowner then replies by warning the pirates they "have a responsibility to take care of the crew, and that includes adequate medical care and enough food and water to survive for weeks," Cloonan said.

"What we are doing in effect is always stressing the human aspect to all of this," said Cloonan.

Eventually the ransom price starts coming down. Unlike Nigeria, Afghanistan or Baghdad, says Cloonan, pirates almost never have a political agenda.

"In all the cases I know of, they've never said they want the money to spread the wealth to the starving population or that they have taken a ship or a crew for some religious or political reason," he said.

He says their motive is money, pure and simple.

And it's a lot of money. The U.N. report on piracy estimates that pirates have been paid between $25 million to $30 million in ransoms this year.