Drugs and Terrorism Roams the High Seas Under Tuvaluan Flag

The Straight Times

May 22, 2003
By MICHAEL RICHARDSON

SINGAPORE - The recent capture of a North Korean freighter attempting to smuggle heroin worth US$50 million (S$86 million) into Australia has exposed yet again a fatally weak link in the regulation of global shipping.

At a time when Pyongyang's nuclear ambition is causing worldwide concern, this fresh discovery is prompting the United States to consider working with like-minded nations to remedy the weakness. The strategy would be to scour the seas and interdict any North Korean-owned vessel suspected of trying to export dangerous materials to rogue states and terrorist groups.

The impounding of the 4,000-tonne Pong Su in Australia and the detention of its North Korean crew of 30 until they appear in court on Aug 12 is the latest in a series of abuses involving ships sailing under a 'flag of convenience' - the flag of a nation other than the home state.

The Pong Su was registered in the small South Pacific island-nation of Tuvalu. The abuse of this practice has grown in recent years with the global recession and pressures to cut freight cost.

The problem facing the US and other countries determined to stop weapons of mass destruction, and the means of delivering them, from getting into the hands of unfriendly states and terrorist organisations is that international shipping is vast and unevenly regulated.

For a small fee, seagoing vessels owned by North Korea or other interests with criminal or terrorist aims can easily find the flag of another state under which to operate.

The North Korean freighter Sosun - found to be carrying 15 Scud missiles, conventional warheads and rocket propellant under a cargo of cement after it was stopped last December by US and Spanish naval vessels in the Arabian Sea - was registered in Cambodia. It was searched but then allowed to proceed to its destination in Yemen, a US ally in the fight against terrorism.

The seizure of the Pong Su is the latest evidence of state-organised maritime smuggling of drugs and arms by North Korea to help pay for its nuclear and missile development programme, prop up the embattled regime of leader Kim Jong Il, and prevent the derelict North Korean economy from collapsing completely.

Hawks in the Bush administration are arguing that the US should seek to cordon off Pyongyang's exports of drugs, missiles and weapons of mass destruction, either through an economic embargo or by interdicting its ships at sea.

Under international law, every ship must sail under the flag of a sovereign state to gain the protection of a government while on the high seas. The rules are also supposed to ensure that safety and other standards are maintained.

But to cut costs or evade scrutiny, thousands of shipowners now register under foreign flags where fees, taxes, regulations and laws protecting seafarers are often minimal or non-existent.

As global trade shrinks because of the economic downturn, shippers demand lower freight costs. Some shipowners respond by registering wherever it is cheapest to do so.

'Globalisation has helped fuel this rush to the bottom,' said Mr David Cockroft, general secretary of the International Transport Workers' Federation (ITF). 'In an increasingly fierce competitive shipping market, each new flag of convenience is forced to promote itself by offering the lowest possible fees and the minimum regulation.'

At least 40 states around the world, most of them developing countries, sanction open registers, or flags of convenience, as a way of making money. Some don't even have access to the sea. Landlocked Mongolia, for example, opened a register last March in Singapore, one of the world's busiest seaports.

The flag of convenience registers compete for business by offering quick and cheap ship registration, often online and with few questions asked.

Mr Nik Winchester, an analyst at the Seafarers' International Research Centre at Cardiff University in Wales, and a colleague researched and analysed the regulatory capacity of 37 states that offer shipping flags, including national flags and open registers. Tuvalu and Mongolia were not among them. But their flag state audit released earlier this year rated Cambodia and St Vincent and the Grenadines as having a 'poor' capacity to regulate ships on their registers.

'A large number of open registers have failed to produce adequate regulatory regimes that ensure the safe operation of vessels, safeguard labour standards and ensure the transparency of vessel ownership,' Mr Winchester said.

The ITF said that in 2001, 63 per cent of all reported ship losses at sea, measured by tonnage, were accounted for by just 13 flag of convenience registers and that the five worst performers were Panama, Cyprus, St Vincent, Cambodia and Malta.

Mr Cockroft said that since the Sept 11 terrorist attacks on the US, concerns had increased that terrorist groups can own and operate ships in the flag of convenience system with impunity.

'Arms smuggling, the ability to conceal large sums of money, trafficking in goods and people, and other illegal activities can also thrive in the unregulated havens which the flag of convenience system provides,' he added.

A congressional panel in Washington last year held hearings on open registers amid reports that the US and Nato countries were hunting up to 23 ships believed to be controlled by Al-Qaeda and operating under flags of convenience. There is also concern that a weapon of mass destruction could be smuggled by terrorists into the US or another target nation via ship as a result of lax rules and checks.

Dr Rohan Gunaratna, a terrorism expert at Singapore's Institute of Defence and Strategic Studies, said that transparent ship ownership was a very important issue because 95 per cent of the world's trade goes by ship. 'Many terrorist organisations have been known to use vessels registered in the 'HonPaLib' countries,' he said, referring to Honduras, Panama and Liberia.

The Cambodian register has been among the most notorious flag of convenience operations in recent years - so notorious that the government in Phnom Penh, under pressure from the US and the European Union, decided to terminate its contract last September after scandals involving some of the more than 1,600 Cambodian-flagged ships.

In June last year, French commandos boarded the Cambodian-registered freighter Winner in international waters in the Atlantic and seized more than one tonne of Colombian cocaine worth US$100 million from a cargo registered as scrap iron destined for Spain.

In November 2001, Irish customs officers found 20 million smuggled cigarettes on the Maria M, a Cambodian-registered freighter that arrived in Estonia supposedly carrying a cargo of timber. The cigarettes were liable to tax amounting to about three million Irish pounds (S$7.6 million).

Anti-terrorist officials said that the operation was organised by criminals with links to the Real IRA, a terrorist faction opposed to the peace accord in Northern Ireland agreed to by the mainstream IRA, the Irish Republican Army.

South Korean and US intelligence agencies had been concerned about an official North Korean connection to the Cambodia Shipping Corp, the company appointed by the Cambodian government in 1994 as the exclusive agent to register ships under the Cambodian flag. The connection was through a senior North Korean diplomat who was stationed for many years in Phnom Penh and was one of the founding investors in the company.

Intelligence agencies had noted the inclusion of North Korean vessels among ships that flew the Cambodian flag. A South Korean analyst said that such ships were suspected of smuggling North Korean ballistic missiles and components to Pakistan, Iran and Iraq.

The writer is senior Asia-Pacific correspondent of the International Herald Tribune. Copyright: YaleGlobal Online, www.yaleglobal.yale.edu