Investing in piracy at the Somali “stock” exchange

An oil-filled supertanker, hijacked just over a week ago by Somali pirates has reached the Somali coast. The biggest prize to date, the tanker is carrying approximately US$150 million worth of oil, so the pirates should be in for a hefty ransom payout.

Sharing in any ransom payout here will be a number of landlubbers who have invested in the successful “maritime company” that hijacked the ship. That’s right, Somalis can now invest in piracy on a local stock exchange recently set up in the main pirate lair of Haradheere. Locals buy into or contribute to one of these companies—essentially made up of the men who will go out on the missions—and share in any spoils from their raids. The exchange started with 15 companies and now there are 72 of these. And the potential return on investment can be seen in the following example where a young woman contributed a rocket-propelled grenade to a maritime company:

Piracy investor Sahra Ibrahim, a 22-year-old divorcee, was lined up with others waiting for her cut of a ransom pay-out after one of the gangs freed a Spanish tuna fishing vessel.

“I am waiting for my share after I contributed a rocket-propelled grenade for the operation,” she said, adding that she got the weapon from her ex-husband in alimony.

“I am really happy and lucky. I have made $75,000 in only 38 days since I joined the ‘company’.”

This influx of wealth into the area has seen the local economy boom, and pirates are charged more for most goods than non-pirates. Piracy money also gets taxed by the local district and used to improve infrastructure such as roading, the local hospital and schools.

While somewhat amusing, we should perhaps note that this is not the first time that a free market economy has developed around piracy. In fact, it wasn’t uncommon back in the 17th and 18th centuries for public money to be raised so ships could go a-pirating. The following information is excerpted from the book Pirates, Privateers, and Profits, and it reads as a template for what is now happening in Somalia:

And it was the New Yorkers who first realized that by encouraging privateers to come to their port, the whole city thrived. Thus during Queen Anne’s War (1702-1713), New York agreed to waive admiralty court fees in addition to the waiving of the royal tax, and successfully lured privateers from other colonies. By the time of King George’s War (1739-1748), privateering was a full-on business venture, with most of New York’s leading citizens investing shares in privateer expeditions. By the French and Indian War (1756-1763), the privateering market was nearly as sophisticated as today’s stock or commodity markets. New York was full of privateer fever. Shares in privateer expeditions were traded, as rumours came back from the Caribbean about the various prizes and losses of each privateer vessel. Merchants and inn-keepers would sell provisions and services to sailors on credit, in exchange for a 25% share of their “take” at the end of their voyage.

As of today, there are thirteen ships being held by Somali pirates awaiting payment of ransom demands.

 “Coastwatch” Somali Style — The Benefits of Piracy

Pirate Report

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3 Responses

  1. [...] Investing in piracy at the Somali “stock” exchange [...]

  2. [...] predicted in a previous post on this subject, Somali pirates were in for a big pay day after seizing an oil tanker, the Maran [...]

  3. [...] a later date, and the reason is the next, related, item that is actually true and that I found on this website and again at Reuters while trawling for more detail on this [...]

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