In this episode of the Alongside: Future Thinking mini-series from NorthStandard, we look at the crisis in the Red Sea and what the impact will be on shipping in the medium and long term.

Mike Salthouse is joined by John Thompson, a former British Army officer who led Security Planning for the Olympic Delivery Authority in the run up to the London Olympics. He is also the co-founder of Ambrey, the largest provider of maritime security services globally. 

In this episode, we are taking a look at the dominant issues at the start of 2024 for global shipping, including the crisis in the Red Sea. To guide us through this topic, we are joined by John Thompson from AMBRI. John is a former British Army officer who led security planning for the Olympic Delivery Authority in the run up to the London 2012 Olympics.

Two years before that, he co founded AMBRI, which is now the largest provider of maritime security services globally. Today, the business supports more than 500 commercial vessels per month with security risk, crisis and marine services. John, welcome. Maybe you could start by telling us a little bit about Ambri, the services that it provides and how it has evolved over the years that I've known you to help meet today's threats to shipping.

[00:01:21] Mike Salthouse: So if you were to look forward, um, and you're, you're, when you're talking to, to ship owners, What are the sort of big security concerns that you see, um, are either here and you now in 2024 or likely to start to appear during the course of the year? What are the things that ship owners need to look out for?

The multi jurisdictional areas in which those are applied and in which they are often registered and which they're trading and the legal implications. And then now you overlay what isn't probably certainly for most people who are alive as a generation, the most complex geopolitical outlet that we've faced in the modern era.

And so when you take what is effectively a really international business, you then overlay a whole load of kind of soft power effects like the sanctions regime, some of which work well and some which don't. Don't work so well. And you might want to have a whole nother podcast about that. At some point, the sanctions work, discuss, you then have the complexities of trading around the world.

Um, and you know, and, and where is a ship owned and registered and what's its trading history and what's its background. And for me, that is, that is the existential problem for a ship owner operator today that we're helping them try to navigate. Uh, and forecasting risk in a trade that was a safe trade last week.

How can you say that that's going to be one that will sustain in the future in such a dynamic environment, whether you're looking at risk in the Black Sea, um, now the Indian Ocean, Southern Red Sea, but potentially in the future in the Taiwan Straits or elsewhere, it's a real. Uh, conundrum for ship operators.

And I think without doing the industry too much of a disservice, I think some are, some parts of the industry are very much focused on what I would call minimum management practice rather than best management practice.

Nicholas will be, you know, there were particular circumstances behind that. We've seen the Houthis also seizing a ship, uh, taking a ship. Um. We have, and you can perhaps tell us a little bit more, the possibility of Somali piracy re emerging. There is military action going on, um, from, from the West, um, to, to, to suppress or manage the, the Houthi threat.

I mean, realistically, what can a ship owner do against, I suppose, the most acute threat, most, um, the largest threat is, is, is missiles and drones coming out of, um, out of Yemen? Is it, you know, practically, what is the, that a ship owner can do to protect itself against that particular threat?

Or it's a horizontal attack from a ballistic missile. Those are the three broad threats we've seen emerge. All slightly different, all slightly nuanced, uh, all effective in different areas. Ultimately, it's the military that have to stop that. I mean, you, you, you can't do a lot about a ballistic missile coming at you except shoot it down with a, with a, with a counter.

Uh, and that technology rests solely with the military. UAVs is interesting. I think counter UAV technology is improving the Ukraine wars being almost a battle lab for. Both drone and counter drone technology over the last few years, so it's really moved on leaps and bounds and we're actually trialing some some technology at the moment, historically, though, that has been very expensive and not particularly effective.

But I see both of those things improving both price and effectiveness. So that may well help a helicopter assault force landing on a vessel. Um, you know, you know, when you see a helicopter coming at you, that that's a state actor. And I think for armed guard companies, we've been very mindful of the risk of taking on a state actor directly in a kind of kinetic firefight situation, like we would with a, an armed criminal gang coming at us in a skiff.

When it's a skiff, it's easy, it's less easy to identify whether it's a state actor or, or not. And I think some of those very deliberately, perhaps the, the Houthis are thought to have been supporting some of the waterborne skiff attacks on vessels. Um, it's not yet proven, but that certainly seems to be the case, um, that versus a helicopter, which is very clearly coming from a state actor.

Certainly we've been recommending not to take that on. And I think that's because even if your armed security team are acting again, with the rules on use of force and proportionately, the response that that state actor will have, even if that helicopter flies off into the distance, uh, half an hour later, will.

quite potentially be a ballistic missile or worse. So I think once you identify a clear state actor coming at your vessel, you really then have to go down a certain route of, of, of, of appeasement and containment of the situation as best you can. And certainly in that scenario, we recommend the crew treat it like a piracy boarding and get inside the Citadel along with the armed security team, uh, and then, and then call for help.

And I think certainly when the Galaxy Leader happens. The response times of international forces to that kind of thing were too long in the Red Sea, but as the density of warships has increased, you can pretty much guarantee you're going to have a helicopter over you within 30 40 minutes, and you probably have a naval vessel within an hour or two, then actually that's, it's worth trying to use the Citadel and delay them from from potentially seizing the vessel and putting you into what looks like to be a very significantly extended duration hostage taking and, and, and, and, and, and seizure of the vessel.

You've got to talk that through as a, as a crew in a prior briefing and go through effectively and actions on and say, if we see this, we'll act like this and then drill it and rehearse it. Because if you get it wrong, you have minutes to respond appropriately or not. And I think, uh, it's a really, it's a really serious risk that I think has perhaps been a little, um, under rehearsed across the sector because the Galaxy Leader happened once.

And then since then, it's been a very different aerial threat. The UAV and missile threat has been better countered by things like minimum crew manning. So we've got a protocol around, obviously, minimizing manning on the bridge, minimizing time on deck, and keeping as many crew as possible above the waterline, but within the vessel.

So if the worst happens, you are at least mitigating the number of people who might be affected.

[00:08:25] John Thompson: It's interesting. I think ship owners have had to try and work out where they sit in the target list very, very quickly. So what we've spent a lot of the last few weeks and months doing is trying to understand who the Houthis are attacking and why. And then make sure that we're assessing each client's vessel and fleet on a, on a, on a fleet basis, uh, to try and understand if they're going to be targeted or not.

And inevitably, in some of this, our assessment is that perhaps some of their targeting hasn't been as precise as they or I, or we would like, uh, and there've been perhaps a few cases of mistaken identity. But I think if you know that you're a target, we can mitigate to some extent, but you are reliant on an effective.

Counter aerial screen from the navies that are supporting either prosperity guardian or, or the U S military and UK military response. A lot of clients have been going, well, where do I sit in the target list? And why, uh, what can I do about it? Some are reflagging to, you know, reduce risk there, but you can't change things like your prior trading history.

And you certainly can't change quickly things like your investors and owners. So those that fall higher up that list are quite prudently rerouting. And those that assess themselves to be lower down the list are going through and I think for the most part, you know, clients just trying to work out where they are in that in that priority list and then doing it and then when they are applying their kind of range of mitigation measures you need, you need to put in place.

I think there are some notable gaps and inevitably there are inevitably some people who are shrugging their shoulders and going, you know, there's safety in numbers. And if you look at it from a statistics perspective, uh, we ran some numbers at the end of December, and I think less than 1 percent of the vessels going through at that point were Israeli affiliated, and of those, a third have been targeted.

So actually, if you're looking at 0. 3 percent of the, of the flock, if you will, for the wolf to be targeting, um, that's actually a lot of people look at that and go, well, I'll, I'll roll the dice and go, and I, I. I don't endorse that approach, but you can see that in some boardrooms. That was okay. Most boardrooms it wasn't.

And I think, um, some people, some crews have received a healthy crew bonus and been told to get on with it. And I think a lot of people have made what I would say is the prudent decision, which is we've got to reroute until we're very clear on. On how one, how this whole scenario is going to pan out into exactly where we are as an organization in that list.

And we receive things from clients where they've perhaps had intelligence that someone might particularly want to target them, or they've had locals reach out to them via email, who perhaps being entrepreneurial saying, I've got intelligence, you might be being attacked, but if you pay me X or Y, I'll let you know.

And lots of things like that come out of the woodwork that, that cloud the situation. And, and it's just trying to help clients navigate that sensibly.

[00:10:58] John Thompson: I think that that is almost the million dollar question. When, when is

[00:11:03] John Thompson: Yeah, no, I think you got it. I think in terms of the volume of trade, we're seeing it's come down now and I think it's stabilizing at a lower level and depending on which sector you look at, that's between 30 and 50 percent drop, um, and in containers, it's sort of 90 percent drop.

The big question then is when is it safe to come back and how do you know? There was a period where the, um, the military footprint was ramping up. Uh, and I think that's now stabilized as well. And as I said, because the militaries are the ones that are, that are really on the front foot, the Americans and the British in particular, they are trying to contain this.

They're not going too far. So I think, you know, the military buildup effectively has happened. I think if it escalates significantly, so if the Houthis come back in a different way and really try and take on the militaries next with firing the ballistic missiles far more consistently at naval warships, because of a lack of targets in commercial shipping, for example, then you might see another escalation again.

Um, and that's pretty much guaranteed. The Americans have a longstanding sort of doctrine of responding very heavily to any direct target on their military. And you can understand why. So I think it's very interesting when the big question for me, actually, is when will, you know, go, go with the light fleet, if you will, and go with the blue chip.

Guys and go, when are they going to think it's safe to come back and there is going to be a going back to my kind of sheep and wolf analogy earlier, who's going to be the first sheep through the hole in the fence when, when that when, when other us and others say it's okay, shipping is a, you know, um, an incredible economy.

I've never known it. be so responsive as a market. There's no other market I can think of that is as responsive and commercial shipping. So someone will always be that first sheep going through the gap. Uh, and then others will follow because they'll say, well, okay, I think I'm fairly similar and I can take the same risk, but it's not, it's not going to be an easy one.

This is complex and it's, we're certainly advising people to be in this for the medium term. You know, it's got a, it's got a six to nine month horizon on it, at least I'd say.

[00:13:08] John Thompson: It's funny, isn't it? I think if you'd asked me that question a year or two ago, I'd have gone, no, that's, that's, that's surely not. I think, I think that is a very prudent measure in the modern world. If nothing else, go back to, is it a surveillance drone or an attack drone? At what point do you draw the line that go, it's okay for a surveillance drone to come close to my ship and have a look and disappear, and I don't know who it is and where it's from and what it's doing.

And I think, um, insurers are getting their head around that as well. You know, and I think I, so I think detection and countering technology for drones is here to stay. I think it's a prudent measure, certainly go back a few years, and we were getting quotes from very good. Technology that was straight out of defense and it was a million pounds to equip a ship properly for it to be really effective at both detecting and countering.

Then more likely that's been more like a quarter million. And I think there's a target price point around 50 to 100, 000 where, which is coming and arguably some of it we're trying now is here where you go. That's a, that's a number that a ship owner would probably spend, uh, and is on a technology that's broadly effective enough to protect their ship from being.

Being, being looked at when it shouldn't be looked at and potentially being struck when it shouldn't be struck. There's lots of issues around, does that interfere with communication systems, things like that. It will be particular to each ship and spectrum and part of the world is operating in.

[00:14:33] John Thompson: I, well, it's interesting on a whole host of levels. So the bad old days of 2010, I think the world has changed. But I'll come back to that. The issue of Somali piracy, I think, like many people, when, when we first saw DAOs being hijacked, um, Iranian DAOs, there was, there was a lot of suspicion around how was this, was this armed criminal gangs or was this state, um, gangs or.

Organizations, or was it a combination of the two? And I think the jury is still out slightly as to the drivers behind it on some of the, some of the scenarios we saw on the Central Park, um, where, uh, uh, a skiff successfully boarded, um, a vessel in the Gulf of Aden, uh, and then more lately, the Americans picked up, um, the pirates afterwards that they were Somalian.

Uh, and that's what we received from the U. S. Navy. But the skiff that they were on, very clearly from the aerial footage we saw of it tied alongside the vessel, was a Yemeni skiff. Um, so we know there's a, there's a, you know, long standing existing nexus between the Houthis and Somaliland. It's very hard at this stage to know exactly what's going on.

We know there's some tribal dynamics and some local politics in Somalia at the moment, which are driving perhaps some of the, some of the, um, the Dao hijacks. Um, so I think what you're getting Is a combination of potentially some state backed interference and also some local exploitation of the current environment, whilst also, you know, dealing with local politics, whether it's here to stay or not really depends on how quickly it turns into a cash economy.

And for that, you've got obviously the envy ruin currently in Somalia. Um, being, being held the agencies that sign off on the payment of ransoms, as you know, need to be sure that the money is going not to a terrorist organization or a sanction state. And that's going to be complex. Um, I think for ransom payment, which will slow down the cashflow and slow down the subsequent attacks.

The other thing you've got is things like. Um, going back to my first point that the world has changed, 10 years ago, motherships could operate largely with a huge amount of freedom in the Indian Ocean. They could exploit gaps in intelligence about where they were located, and they could go out and they could hit multiple ships.

And then perhaps, often sometimes, one DAO might successfully hijack more than one vessel. We've got technology now that can identify where these skiffs are. 24 7, um, multiple different ways of doing it. And so, for example, the Almiraj 1, the first Iranian DAO that went out into deep water of Somalia back in November, she made no successful attacks, in fact, no, no attacks at all on, on commercial ships.

And that's because we, I certainly know that we rerouted around 20 vessels around her. Uh, so she never even saw any vessels. Uh, before she then hit bad weather, lost her skiffs and returned to Somalia, go back 10 years or 5 years and that she would have had the opportunity to make several attacks. And that could have led to a very different outcome.

So, so prevention and mitigations, you know, surveillance technology has moved on. Uh, companies like us have much more. You know, joined up on that now. And we are more joined up with the authorities and things as well than we ever were and with, with the clients. So the industry is much more responsive to a live threat.

It's a really interesting time. We'll have to see how long it, how it evolves as ever with these things. If you feed the beast cash, then it will keep coming. And I think that the key thing in a minute is, is who is behind this first piracy act and how quickly they get paid. And it depends, that depends on whether they're an armed gang or, or whether they're a state backed organization, I think.

[00:18:13] John Thompson: Uh, an area that is being, I'm certainly picking up is already a problem for ship owners is, is, is a massive resurgence in, in narcotics trafficking out of South America. I think that'll be familiar to many of your listeners as a current problem, but it may not have hit the radar of everyone yet. And again, there are lots of things that companies like us can do to help counter that.

You know, you can't, you can't completely screen against these things, but you can mitigate. Migration is a really thorny topic and is, is existential around the world. You've got hotspots for it, but I think for a ship owner, they're often put in a difficult situation. Um, we've had multiple examples in the Mediterranean, for example, where, you know, a laden tank has been hailed.

By the authorities to respond to an emerging migrate migrant boat situation. And then when we are live, watchkeeping team has stepped in to look at it. There's three vessels that are closer and more suited to respond, but for whatever reason they've been hailed. And that's an interesting conundrum for a crew that want to do the right thing that want to stick to Solas, but also a ship owner operator that wants the same thing, but wants to make money.

And so good real time intelligence. About that and good situational awareness of that maritime domain at that time helps you respond quickly, effectively, compliantly, um, but can avoid that. And then actually, that's a particular scenario. I saw a few weeks ago where in the end, we, we, we stepped into the authorities and said, hang on a minute.

Have you thought of these 3 other vessels that are far closer and far more suited than a laden tanker? And they said, yeah, great point. Thank you. And that's, that's what changed the scenario for that particular owner. So I think, um, understanding. The migrant situation, the threat, and also just making sure you have that real time awareness is really important.

I think behind that actually, interestingly, many companies keep security and with that things like responding to migrant vessels, very low down the priority list, and they aren't set up to respond in real time to an emergent situation like that as well as they should be. So I think having the right resilience preparedness and set up to identify what's going on and respond quickly and support the master with good decisions will help save and make money.

And in terms of other emerging areas, um, you could look at Malacca and you say, well, actually there's been, there's been an increase in, in what's going on there. I think ship owners are pretty familiar with that now. And then what's needed to mitigate it is clear. The big question on everyone's minds is, is what's going to happen in the South China sea.

And I think many of the problems we've seen in the Black Sea or in southern Red Sea over the last 12 to 18 months, everyone knows that they are going to be similar questions multiplied by 100 times. If something happens in the South China Sea this year, companies really need to take on board the lessons.

They're learning in the Black Sea in the Red Sea because. No one can predict what's going to happen in South China Sea. Um, I'd love to be able to say we could, we can tell you straight away what's going to happen next, but everyone knows you can't do that. But understanding the lessons learned from those other two theatres, you can apply should the sort of the worst happen, if you will.

You’ll find the Alongside podcast and these Future Thinking episodes on the NorthStandard website at north-standard.com, or wherever you get your podcasts. You can also click follow to ensure you don’t miss an episode! From me Mike Salthouse, it’s bye for now.