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Friday, January 25, 2013


Anthony Sharp of Typhon.
Beware, pirates of Africa. You may have outlasted years of patrols from the world’s navies. You may have driven fear into the hears of shipping magnates and sent insurance rates skyrocketing. But now you’ll have to contend with a dapper British investor who is seeking to privatize the fight against seafaring brigands.

Anthony Sharp, a 50-year-old veteran of tech startups, grew up with a love for ships. On February 7, he’ll turn that boyhood affection into what might be the first private navy since the 19th century. Sharp’s newest company, Typhon, will offer a fleet of armed ex-Royal Marines and sailors to escort commercial ships through pirate-infested waters. In essence, Typhon wants to be the Blackwater of the sea, minus the stuff about accidentally killing civilians.

Sharp thinks the market is ripe for Typhon, a company named for a monster out of Greek myth. Budget cuts are slicing into the wallets of the militaries that provide protection from pirates. The conflicts and weak governments that incubate piracy in places like Somalia persist. “Maritime crime is growing at the same time that navies are shrinking,” Sharp tells Danger Room by telephone from the U.K. “The policemen are going off the beat.” Sharp thinks that creates a potent opportunity for the fleet he’s buying.

But he might be too late. Without much notice, piracy actually declined in 2012, bringing down the high insurance rates that send shipping companies running for armed protection. Meanwhile, the market for such security is being filled by companies that station armed guards aboard commercial ships to deter or combat pirates. That practice, known as “embarked security,” follows years of security firms, including Blackwater itself, trying and mostly failing at amassing fleets to escort commercial ships — Typhon’s model.

Sharp says he’s heard the objections and is undeterred. “We’ve got personnel. We’ve got clients,” he insists. And when Typhon launches on February 7 and begins operations in April, Sharp won’t just take a gamble on a market much different than the ones he made his money in. He’ll reintroduce the world to the forgotten concept of a private navy. And the U.S. Navy is watching, with much curiosity.

It used to be that when navies needed aid on the high seas, they would hire private warships as auxiliaries. The auxiliaries, known as privateers, would fly the flag of the nation that hired them, and were thereby empowered to do the rough nautical business of raiding and plundering commercial ships from hostile nations. During the War of 1812, for instance, America hired a privateer fleet of more than 517 ships; the U.S. Navy had just 23 vessels at the time. But by the mid-19th century, the notion of private navies seemed like a threat to a stable economy. “A privateer coming across a wrongly flagged ship could become a pirate very quickly,” recounts Kevin McRainie of the U.S. Naval War College.

So in April 1856, most western nations (with the important exceptions of Spain and the United States) signed the Paris Declaration Respecting Maritime Law. “Privateering is, and remains, abolished,” it reads.

Not that Sharp is, strictly speaking, a privateer. Privateers were hired by governments, not companies. Historians don’t really have an apt framework for Typhon. “It’s like if Exxon, Coca-Cola or one of the other big companies was arming and commissioning ships for their security, or for someone else,” says McRainie. “I can’t think of any precedent that goes along with that.” And while other companies have recently tried to do what Typhon is doing — more on that in a second — Claude Berube, a prominent analyst of maritime security, considers Typhon reminiscent of the British East India Company, the firm chartered to protect the Crown’s all-important eastern trade.

Sharp is less concerned with historical analogues than with how his own private navy will operate. He’s purchased three ships out of the 10 that Typhon envisions, all of which began life as container vessels, to sail through the dangerous waters of the Gulfs of Aden and Guinea. The first of these 130-foot ships, shown above, is currently getting retrofitted in Abu Dhabi, a million-dollar process to allow the ship to accommodate a larger crew and build special weapons lockers — and fight.

Each ship in Typhon’s fleet will carry a crew of 60. Of that group, 40 will be veterans of the Royal Navy or Royal Marines. On the vessel will be “small arms, long-range rifles and non-lethal baton rounds” or rubber bullets, Sharp says. His ships will be able to speed past at 20 knots, but when that isn’t swift enough for a pirate pursuit, his former sailors and marines will climb into the four fast-patrol boats each ship will carry. Those ships can reach 50 knots, much faster than most pirate skiffs: a safety manual for ships in the Horn of Africa notes that no ship going faster than 18 knots has ever been boarded by pirates.

“Let’s say you’re going from Djibouti to Mumbai, you’re crossing the Indian Ocean right through the pirate-risk area,” Sharp says. “That would be one of what we call our milk runs. So you can join our convoy.” If a ship breaks off the convoy before Typhon carries it to port, the company’s operations center in Dubai tracks a “video wall” with the publicly-available ship data of sea-lanes traffic (it’s called the Automated Identification System), as well as information from what Sharp vaguely calls “nine different sources” mapping recent areas of pirate traffic. So Typhon can keep a virtual watch until a client’s ship has docked, for $1000 per day. Being part of the convoy will cost between $5,000 and $10,000 dollars per day.

While in the convoy, the Typhon fleet maintains a cordon around a commercial ship of at least a kilometer. Should a suspicious vessel break the perimeter, Typhon’s crew will shout warnings, escalating into actually opening fire with lethal rounds. Not that that’s what Sharp wants. “The important thing is, at a long range, to detect pirates and avoid them,” he says, sounding a bit like the admiral he never was.

Sharp doesn’t have any naval experience. He made money instead. During the boom of the late 90s, he invested in an early online broadcasting venture called Network Media TV (NMTV) based out of London, which published a business-news forum for IT professionals called Silicon. In 2002, he began running a start-up that traded in electronics called Earthshine, which he took to the NASDAQ in 2008. “I served my time working in the salt mines of investment banking when I was very young, and then branched out,” Sharp says. He claims to have raised $40 million for Typhon over the past two years, all preparing for the February launch in London and the fleet’s first voyage in April.

That business experience may prove to be crucial. Typhon will be an outlier in a maritime security field that analysts and practitioners think is overcrowded — and has peaked.

“This is a very tough market to enter,” warns Roger Hawkes, a security specialist for shipping and oil-services companies who’s worked in both Somalia and Nigeria, near where Typhon’s ships will patrol. “You’ve probably got several hundred companies that are just websites, with ex-military guys who thought this was a great idea but don’t have customers. I see them standing up every day.”

Like shipping itself, maintaining an armed, private fleet is expensive and cumbersome. Ships cost big money, as does having logistics crews in ports ready to service ships with the right parts. Insurance is expensive, though it’s recently gotten cheaper. Arranging with port officials to allow weapons to be transited and stored is another headache; corruption is ever-present. Fuel costs are back-breakers.

During the private-security boom of the 2000s, lots of companies thought the way Sharp did, only to learn the hard way that it wouldn’t be easy. One of them was Blackwater itself. In 2007, it bought and refurbished a 183-foot ship called the McArthur, but its dreams of fighting pirates in the Gulf of Aden burst after its crew claimed its officers subjected them to racial epithets and physical abuse. Other companies throughout the decade tried and failed to launch their own anti-pirate fleets, such as Top Cat Security — which even inked a deal with the Somali government in 2005 to fight pirates before imploding in scandal.

But in the past few years, maritime security firms have settled on a different model: just put armed guards aboard commercial ships. It’s taken off with shipping companies that have seen pirate threats spike their insurance rates. In 2011, my colleague David Axe profiled guards working for Protection Vessels International, a British firm that put its own “kitted-up” military veterans on tankers passing by Somalia. (Protection Vessels International, which is said to have its own private fleet as well, didn’t return a request for comment.) “Companies have had success with embarked security teams,” says Cmdr. Jason Salata, a spokesman for the U.S. Fifth Fleet, which patrols the northern Indian Ocean, and works alongside those companies. Even Sharp concedes his $5,000-$10,000 daily price range is higher than embarked security firms charge.

“The marketplace has come round to probably the optimum solution as having these small number of armed guards aboard,” says Graham Kerr, a top executive at competitor Hart Security. In the early 2000s, Hart had a contract with the Puntland regional government in Somalia to protect fishermen using its own small, purchased fleet. But it proved to be too heavy a financial burden for too small a financial reward. “Convoys are inherently, on the one hand, inefficient.”

The combination of the U.S. Fifth Fleet, its partners in the international counterpiracy Task Force 151, and embarked private security have shown results. On Wednesday, the International Chamber of Commerce reported that global pirate attacks dropped to a five-year low in 2012, including a “huge reduction” in Somali piracy. The pirates are still out there — pirates boarded 174 ships and fired on another 28 – but they’re coming under major challenge. One of Somalia’s pirate kingpins announced his retirement last week. Shipping insurance rates are declining accordingly.

The Typhon, name of the new private navy, was the father of many of the great monsters in Greek mythology.

All that suggests Typhon may be too late to its market. Sharp has answers for all this. He points out that maritime efforts like Blackwater and Top Cat didn’t run aground because the business model failed, but because of scandal — or because they may have been “too early” to the market. Sharp also disputes that piracy is actually down: he believes companies aren’t reporting pirate attacks so their insurance rates don’t spike. “For every one piracy incident that get reported, there’s another nine that don’t,” Sharp says. “Governments around the world are clapping themselves on the back saying, ‘It’s wonderful, we’re doing a great job, piracy is really slumping’… They’re just looking for a reason to pull their assets out.”

Doubtful, says Patrick Cullen of the Eurasia Group, who co-edited a book on maritime security last year. “State navies and task forces are keeping their own in-house stats on attacks, sightings, arrests, et cetera, and they are coming out saying the numbers are down,” Cullen tells Danger Room. Salata, of Fifth Fleet, says the U.S. Navy is staying on-station. “Budget realities are budget realities, and I’m not going to say it won’t have effect on other countries,” Salata says, “but our intent is to keep a presence.”

Salata and the fleet profess not to have an opinion on Typhon — aside from viewing the project with fascination. Private navies are something that haven’t happened in the lifetime of anyone serving in the fleet. “We’re going to wait and see if the companies move into hiring these private navies,” he says. “We have yet to see that model.” The U.S. Navy is officially fine with whatever lawful private security the shipping companies say they’re willing to bear.

Sharp has a lot to do before he can prove Typhon’s model can last. His crew of ex-Royal Marines and Sailors isn’t hired yet, only his 15-man management team. He hasn’t finalized a deal with insurance mega-market Lloyd’s of London that he says will help his clients save money. And even if that all gets sorted by April, he only anticipates having one ship ready to start with — and it’ll sail in international waters under the Panamanian flag. (“I’d love to fly the U.K. flag, the Red Ensign,” Sharp says.)

But if Typhon beats the odds, it’ll have revived a very old concept for a strangely enduring threat. “I saw an opportunity,” Sharp says. “To get those armed guards on your vessel, you have to divert to a port to pick them up, then you have to divert to their international armory in international waters, you then complete your transit and you have to divert to the international armory to drop your weapons off, and then you have to divert to port to drop your armed guards off.” Maybe, he’s gambling, it’ll be cheaper to pay for the modern-day version of a privateer.


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