The impact of piracy off the coast of Somalia is reaching alarming levels. Over the last five years, the average ransom paid per ship reportedly has jumped from $150,000 to $5.4 million. While this is a disturbing statistic in its own right, the price of a ransom is not the whole economic cost. A recent study estimated the actual cost of piracy on the international economy to be somewhere between $7 to 12 billion annually when you include all economic implications -- such as higher insurance premiums, longer transit times for detours, and depreciation of cargo while detained. Yet in this increasingly distressing narrative, the economic story is only part of the story.
Above all, there is also the human cost to consider. Innocent hostages are often held for months, sometimes under abusive conditions, and occasionally killed. The recent deaths of crewmen aboard the M/V Beluga Nomination and four U.S. citizens aboard the Quest underscore the potential for piracy to end in tragedy. Piracy also exacerbates Somalia's humanitarian suffering by disrupting the flow of humanitarian aid, and undermines its fragile political development.
The Contact Group on Piracy off the Coast of Somalia (CGPCS), a voluntary international forum created in January 2009 pursuant to UN Security Council Resolution 1851, leads the international community's response to piracy. The Contact Group is making progress on many fronts including: coordinating naval patrols, establishing a trust fund to assist prosecutions, addressing legal deficiencies in piracy-related laws, promoting shipping best management practices, and developing a strategic communications plan.
Yet more needs to be done. Domestically, we at the Bureau of Economic, Energy, and Business Affairs, along with the Bureau of Political Military Affairs, have championed U.S. Government efforts to develop a strategy for disrupting the financial networks that sustain piracy off the coast of Somalia.
As part of our effort to address the scourge of piracy, I recently opened an ad hoc meeting of the CGPCS to address the financial aspects of Somali piracy, which drew over 150 participants representing 46 countries and 10 international organizations. The discussion focused on how to identify and target piracy financiers and instigators, how to prosecute them, and how to better partner with the private sector. We also examined the applicability to piracy of techniques developed to attack the financial flows associated with terrorism, narcotics trafficking, and other transnational organized crime.
This highly collaborative meeting highlighted that sustained, international effort is needed to address piracy-related financial flows as part of an overall counter-piracy strategy. Working with our international partners, we will continue to identify and disrupt the financial flows related to piracy and do our part to alleviate the vast economic and human damage left in its wake.