Economic woe threatens Somali Pirate industry

The writing was on the wall; it was just hard to read from way out to sea.

Last week the 5-month-old MV Faina affair, in which Somali pirates seized a Ukrainian arms ship and held it for ransom, was resolved peacefully when the pirates agreed to the paltry sum of $3.2 million and released the hostages.

After seizing the ship last fall, the pirates were reportedly expecting to negotiate an exchange of the vessel and its crew for a ballpark figure of $20 million, but that was before the global financial crisis, which took the wind out of the ransom market.

The 85% plummet in value of their only commodity has many pirates worried that the MV Faina affair is a bellwether for the future of the industry; piracy has already dipped in 2009 after 2008 saw industry growth of more than 200%.

Already some economic analysts are arguing that the pirates must diversify their financial interests or face total ruin. Relying on a single source of revenue in a market with elastic demand is tantamount to steering a ship of fools. There will be no taxpayer-funded bailout, the analysts warned.

At least some Somali pirates seem to have given up hope; recently ten of them were captured without a struggle by a Russian naval vessel, whose crew witnessed the pirates dumping their weapons into the sea in a futile attempt to pass as itinerant fishermen.

Veteran Somali pirates, however, say that with a few cutbacks in their lifestyle, they will be able to ride out the storm. They may have to downgrade from RPGs to bottle rockets, from AK-47s to Super Soakers, and from parrots to plastic parakeets. But they will survive this crisis.

[Related post: Pirates seize tanker, make a fortune in oil futures]