* Payments technically breach sanctions, say U.N. officials
* Britain, United States say al Shabaab are terrorists
* Pirates say forced to deal with militants
* UK shipping says ransoms only way to rescue hostages
By Richard Lough
NAIROBI, July 6 Ransoms paid to Somali pirates
to free merchant vessels are ending up in the hands of Islamist
militants, laying shipping groups open to accusations of
breaching international sanctions, U.N. officials told Reuters.
John Steed, the principal military adviser to the U.N.
special envoy to Somalia and head of the envoy's counter-piracy
unit, said links between armed pirate gangs and Somalia's al
Qaeda-affiliated rebels were gradually firming.
"The payment of ransoms just like any other funding activity,
illegal or otherwise, is technically in breach of the Somalia
sanctions regime if it makes the security situation in Somalia
worse," said Steed.
"Especially if it is ending up in the hands of terrorists or
militia leaders -- and we believe it is, some directly, some
more indirectly," said Steed, a retired military officer.
Ransom demands have risen steadily in recent years.
According to one study, the average ransom stood at $5.4 million
in 2010, up from $150,000 in 2005, helping Somali pirates rake
in nearly $240 million last year.
Steed acknowledged he had no proof of an operational
relationship between the pirates and the al Qaeda-linked al
Shabaab rebels who control much of southern and central Somalia
and parts of the capital Mogadishu.
Some political analysts said the policy of some Western
governments to endorse the payment of ransoms, seen as fuelling
the insecurity, is at odds with their financial support for the
Somali government and the African troops propping it up.
Under the terms of the arms embargo on Somalia, financial
support to armed groups in the Horn of Africa country is banned.
Both the United States and Britain regard al Shabaab as a
The U.N.'s Office on Drugs and Crime (UNODC) says pirates
are increasingly launching their cross-ocean raids from the al
Shabaab-controlled southern coastal city of Kismayu. Recruitment
for pirates from the region was also on the rise, it said.
"Detained pirates tell us that some level of cooperation
with al Shabaab is necessary to run a criminal enterprise," said
Alan Cole, piracy programme coordinator at UNODC.
Al Shabaab sources agree.
"If there was no relationship between us, there is no way
the pirates would be able to operate, or carry their weapons
within zones we control," said an al Shabaab militant based in
the pirate haven of Haradhere, north of Mogadishu.
BIGGEST GAMES IN TOWN
Natznet Tesfay of Executive Analysis said al Shabaab was
heavily involved in smuggling through Kismayu, slapping taxes on
illegal charcoal exports to the Gulf, arms shipments from Yemen
and electronic goods destined for the region.
"Piracy and contraband smuggling are the two biggest games
around," said Tesfay at the specialist intelligence company.
Tesfay said she had yet to see evidence of an "operational
relationship" between the pirates and al Shabaab but that the
militants had a reputation for monopolising key income-earning
sectors once they had taken control of an area.
In February al Shabaab seized a number of pirate gang
leaders in Haradhere and forced them to accept a multi-million
dollar deal under which the pirates would hand over 20 percent
of future ransoms.
A Reuters investigation found the following payments had
been made to al Shabaab's "marine office":
On Feb. 25: $200,000 from the release of the Japanese-owned
MV Izumi after pirates received a $4.5 million ransom.
On March 8: $80,000 from the $2 million release of the St
Vincent & Grenadines-flagged MV Rak Africana.
On March 9: $100,000 after the Singapore-flagged MV York was
freed for $4.5 million.
On April 13: $600,000 from the release of the German ship
Beluga Nomination after a $5.5 million ransom was paid.
On April 15: A $66,000 share of the $3.6 million ransom
handed over for the Panama-flagged MV Asphalt Venture.
On May 14: $100,000 from the release of two Spanish crew of
the Spanish-owned FV VEGA 5.
The amounts were corroborated by pirates, al Shabaab
militants and residents of Haradhere.
ONLY WAY TO FREE HOSTAGES
"Some money has to be ending up in al Shabaab's hands," said
Michael Frodl, a Washington Lawyer and head of C-level Maritime
Risks, which advises Lloyd's of London underwriters.
Frodl questioned whether payment of ransoms would be even an
indirect breach of the arms embargo, but said that if proved, it
might break laws in the United States and Britain against
Sanctions experts said ransoms could violate the arms
embargo if they were voluntary financial support to armed groups
in Somalia, but said the payments could be considered extortion,
and therefore involuntary, blurring the issue.
Some Horn of Africa experts argued there appeared to be no
clear systematic link between pirates and al Shabaab's central
command, but there probably were ties at a more local level.
It was likely there was a bleeding of pirate money to local
rebel commanders through clan ties, "taxes" or even protection
money, they said.
C-level Maritime's Frodl said the U.S. Treasury's Office of
Foreign Assets Control (OFAC) carried out reviews of all
potential ransom payments to determine if the pirate group in
question had ever handed over part of a ransom to al Shabaab.
"Most times OFAC has authorised payment because it has found
no link," Frodl said. "But if there is indeed a 20 percent 'tax'
being applied by Shabaab against pirate ransoms in Haradhere, a
major pirate hub it now controls, then things could change."
In April 2010, President Barack Obama issued an executive
order barring any financial dealings with 11 masterminds of the
Somali conflict. According to the OFAC, two of them are in
charge of pirate gangs.
While Washington has firmly opposed ransom payments,
counter-piracy experts say London -- home to the world's
shipping and insurance industries -- has demonstrated a
conspicuous lack of appetite to follow suit.
The UK Chamber of Shipping said it would continue to
consider piracy a criminal activity, until proof emerged of
financial ties between the sea-bandits and insurgents.
The association welcomed what it called the government's
"balanced view" in refraining from preventing ransom deals.
"Frankly, that's the only way we get people released," said
Mark Brownrigg, the chamber's director-general.
(Additional reporting by Mohamed Ahmed in Mogadishu and
Jonathan Saul in London, editing by Tim Pearce)
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