Somali pirates are hijacking merchant ships in the “target-rich” waters of the Indian Ocean after hundreds of vessels diverted south to avoid the Houthi attacks in the Red Sea.
Shipping organisations have told The National that much greater co-ordination is needed between Nato, European Union, Indian and Chinese warships in the area to halt the piracy that created crippling costs for businesses a decade ago.
There is also a suspicion that Iran might be funding the increase in attacks to cause more disruption to western economies and divert warships away from its Houthi allies.
Target-rich environment
The Houthi missile and drone attacks on shipping going through the Red Sea has reopened a potential new source of revenue for the Somali pirates,
The attacks have caused a 40 per cent drop in Red Sea cargo and a surge in shipping taking the three-week longer route via the southern tip of Africa and the Indian Ocean.
“This is a more target-rich environment for any pirate,” said John Stawpert, of the International Chamber of Shipping. “The intelligence is quite hazy as to exactly what their intent is and whether these are just probing attacks or whether there's something bigger going on.”
The pirates now have more ships to choose from, said Ben Manzin, a shipping intelligence analyst at the Sibylline security company.
“They are exploiting the vulnerability and chaos created by the Houthis and this is now presenting quite a significant threat to the shipping that that is going south.
“This has created a moment where, maybe these Somali have thought there is some space for us to re-engage in this activity with a large number of targets and because everyone is looking further north, leaving these seas more vulnerable.”
UAE seizure
Earlier this month, 1,000km off the Somali coast, 20 gunmen seized the MV Abdullah that was taking coal from Mozambique to the UAE.
That followed a rise in piracy off the Horn of Africa since November last year which saw three merchant ships targeted and 18 dhows hijacked.
There are now concerns that Somali piracy is resurgent, potentially making the waters off the Horn of Africa once again the most dangerous in the world.
At its peak in 2011 there were 212 attempted hijacks with $53 million paid in ransom cash in a crisis that also cost an estimated $18 billion to world trade.
It was only after navies across the globe co-ordinated a significant armada that piracy petered out, with many Somalis tried and locked up.
Iran funding?
There has been a degree of sophistication in the actions of the pirates, who use mother ships then small attack boats to board vessels far out in the Indian Ocean.
It has been suggested the Somalis might have received funding from Iran for their operations in order to draw western warships away from patrolling the Red Sea.
“Iran could be using yet another vehicle to stoke the situation and divert resources,” said retired commander Tom Sharpe, formerly of the Royal Navy. “It would not be hard for them to start funding elements of the original Somali pirates.”
Their aim would be to disrupt freedom of navigation in order to “drain Western resources”.
He also questioned whether all the pirates were Somali with a suggestion that some might be Yemenis, further underlining the Iran connection, as Tehran supports the Houthis.
He added that the surge in shipping had also seen a growth in piracy off the Gulf of Guinea on the other side of the African continent.
Indian navy success
However, the pirates suffered a setback when the Indian navy conducted a highly successful operation earlier this month by retaking the MV Ruen and rescuing its crew after it was hijacked in December.
But an international coalition of navies needs to establish firm communications to co-ordinate against both the piracy and Houthi attacks, said Mr Stawpert, whose organisation represents 80 per cent of the main global shipping organisations.
With Nato, EU, Indian and Chinese warships in the Red Sea, Gulf of Aden and Indian Ocean “we have more grey hulls [warships] down there than we’ve ever had”, he said.
If the various flotillas “keyed into one another at a tactical level” that would give them “maximum flexibility” to respond to the threat.
“Then if it's the Houthis or if it's a Somali pirate attacking you, you can be reassured that there will be a military response,” he added.
Who has lived at The Bishops Avenue?
- George Sainsbury of the supermarket dynasty, sugar magnate William Park Lyle and actress Dame Gracie Fields were residents in the 1930s when the street was only known as ‘Millionaires’ Row’.
- Then came the international super rich, including the last king of Greece, Constantine II, the Sultan of Brunei and Indian steel magnate Lakshmi Mittal who was at one point ranked the third richest person in the world.
- Turkish tycoon Halis Torprak sold his mansion for £50m in 2008 after spending just two days there. The House of Saud sold 10 properties on the road in 2013 for almost £80m.
- Other residents have included Iraqi businessman Nemir Kirdar, singer Ariana Grande, holiday camp impresario Sir Billy Butlin, businessman Asil Nadir, Paul McCartney’s former wife Heather Mills.
Hunting park to luxury living
- Land was originally the Bishop of London's hunting park, hence the name
- The road was laid out in the mid 19th Century, meandering through woodland and farmland
- Its earliest houses at the turn of the 20th Century were substantial detached properties with extensive grounds
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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