Crime on the high seas seems to be doing fine, all things considered. While cases of piracy off the coast of Africa were significantly reduced, the menace of piracy on the Asian seas continues largely unabated. So far, 2015 has seen increase in the number of thefts, primarily aimed at tankers. Based on reported incidents, one may imagine that Asian seas resemble dark woods filled with robbers taking the riches of traders and promptly reselling them for handy profits. To add insult to the injury, those acts are not happening thousands and thousands of miles away from land. They are happening practically at the doorstep of maritime nations equipped with a reasonable amount of military technology and capable of deterring and containing the pirates. However, this article is not about the seemingly powerless enforcement of the safety and law on the high seas. This article is about the shadow economies fed by the pirates and the questions they raise.
Let’s think about this clearly for a moment. Every act of piracy is done to meet specific market demand. Those pirates are not burying their riches in caves on some forgotten islands. The stolen products are quickly sold off to willing buyers waiting in the wings. A reasonable amount of demand forecasting and planning goes into determining what will be needed and when, before it is passed on to the pirates for operational execution. The stolen product cannot simply arrive and get dropped off at the gates. Fuel and gas require specialized storage, so do complex chemicals, and so does crude oil. Then the purchaser has to have facilities and production lines to process the stolen products, as some of them may be of no value, unless processed or blended to specifications. There is inventory planning and production scheduling to be done, and then of course the logistics of distribution. Hard to say where the destination markets lie, but let’s assume they are not that far from the locations of kidnappings.
As I am thinking of this entire shadow economy and its shadow supply chains, a huge question arises in my mind. Who are those enterprises engaged in this fairly complex demand and supply planning, production planning and scheduling, and distribution planning. Are those plants deep underground, hidden from public eyes at the edges of unpopulated isles crowding old pirate tales? No, for sure not. These are living and breathing enterprises operating in broad daylight, visible to authorities, and well connected to downstream markets and customers. And those enterprises cannot be small either, as building and operating a plant dedicated to contraband would suffer from unsteady flows of supplies, changing quality of input materials, fluctuation of line usage, and frequent inventory shortages. No, we are talking about decent size enterprises buying reasonable quantities of stolen-to-order goods, blending them into their legitimate supply chains, maybe repackaging stolen goods or processing them as their own, and then effortlessly selling them on the open market.
Would such enterprise be hard to catch? Would they report production in excess of legitimately bought supplies? Would they be selling products in excess of their production capacity? If you are a wine drinker, you may recall wine makers spread across various winegrowing regions of Europe producing and exporting more wine than it was possible to produce from the grape harvests in given years – blending water and what else into the wine to increase sales. Well, it was possible to catch them and it was possible to eradicate criminal behavior then. So, why is it so difficult now, with so much more sophisticated technology to trace the origins of the supplies, all the way down to the chemical signatures of the specific product shipments, to catch the enterprising criminals and the thieves that ensure their inbound supplies?
Is there some unspoken code of silence we are not aware of? Are the means and ways available to authorities so unsubstantial, as to render the enforcement impossible? Are the enterprises so lax in their self-auditing and self-regulation, that criminal behavior can go on inside them unabated? These are legitimate questions that need to be posed and they need to be answered. The crimes of the high seas are not mysteries. As I explained, the goods are forecasted and planned for demand, supply chains are planned and scheduled, and the distribution systems are in place to handle their swift disbursement into the downstream supply chains. Those supply chains are big enough to hide mixing of stolen goods into legitimate goods, but they are not invisible and not impossible to break down allowing the authorities to shine the light on unseemly business practices of the operators.