SINGAPORE, March 5 (Reuters) - Malaysia and Indonesia said on Thursday they are stepping up security in the Strait of Malacca, one of the world's busiest shipping lanes, following the Singapore navy's warning of possible attacks on oil tankers.
The Singapore navy "has received indication a terrorist group is planning attacks on oil tankers in the Malacca Strait", the Singapore Shipping Association said in an advisory. "The terrorists' intent is probably to achieve widespread publicity and showcase that it remains a viable group."
It did not name a group or say where the intelligence came from.
Malaysia's coast guard said it was increasing security measures in the narrow waterway that tankers use to carry oil from the Middle East to Japan and China.
Indonesia is intensifying patrols there, Defence Minister Purnomo Yusgiantoro told Reuters. "We will increase the security and step up patrols in that area. Oil tankers can pass, but we will increase our readiness."
The 900-km long (550 miles) Malacca Strait links Asia with the Middle East and Europe, carrying about 40 percent of the world's trade. More than 50,000 merchant ships ply the waterway every year.
An attack that closed the Strait of Malacca or the Singapore port even temporarily could have a disproportionate impact on global trade, since Singapore is the world's top container shipping port and biggest ship refuelling hub.
"Maritime attacks offer terrorists an alternate means of causing mass economic destabilisation," terrorism risk analyst Peter Chalk said in a RAND report on piracy and maritime terrorism.
"Disrupting the mechanics of the global 'just enough, just in time' cargo freight trading system could potentially trigger vast and cascading fiscal effects, especially if the operations of a major commercial port were curtailed," Chalk said.
The Singapore Shipping Association said the navy warning did not preclude possible attacks on other large vessels besides tankers. Singapore's Ministry of Defence declined to comment.
The Malacca Strait has long been infested with pirates, but a terrorist attack has been seen as a more recent threat, possibly from groups affiliated with al Qaeda.
Indonesia said on Wednesday it had detained 13 suspects from a group taking part in an Islamic militant training camp in its province of Aceh, at the northern end of the strait.
A Thai naval attache in Singapore said the original warning came from Japan, which informed the International Maritime Bureau (IMB) that ships in the Strait could be hijacked.
IMB spokesman Noel Choong said it had received the information from a foreign government agency.
"It is a terror threat," Kuala Lumpur-based Choong said when asked whether it was a terror threat or piracy.
The strait is only 1.7 miles wide at its narrowest point, which creates a natural bottleneck and makes it vulnerable to terrorist attack.
NO INSURANCE IMPACT
An attack by either a terror group or pirates would almost certainly raise insurance costs for shipowners.
But experts saw no immediate impact from the warning.
"At the moment, there is no story for underwriters," Neil Roberts, secretary of the Joint War Committee at Lloyd's Market Association (LMA). "There is no reason to meet at this stage. In the short term, there is no effect. Trade continues as normal."
Middle East crude accounts for 90 percent of Japan's imports, while up to 80 percent of China's oil imports and 30 percent of its iron ore imports pass through the Strait of Malacca.
Any attack could also have a big impact on shipments of some major commodities from Sumatra. The island is a key producer for palm oil, rubber and coffee.
"Are people going to avoid the straits? I would be stunned if they did," said energy consultant John Vautrain of Purvin and Gertz in Singapore. "If you have to take additional security measures, you take them. That is less difficult than by-passing Malacca."
A spokeswoman for Japan's Mitsui O.S.K. Lines Ltd, the country's second-biggest shipping firm, said the warning would not cause it to change operations. "I don't think we would change the route. Basically the area is dangerous, so we have been taking precautions."
Shipping presents a soft target, particularly after global airline security was massively tightened following al Qaeda's use of hijacked planes as flying suicide bombs in its attacks on the World Trade Center and Pentagon in September 2001.
The United States and Japan have pushed for greater involvement in security and patrols in the Strait of Malacca.
Indonesia's Yusgiantoro told Reuters that Indonesia welcomed input from Washington but not direct patrols in the strait, which are currently undertaken by Indonesia, Malaysia and Singapore.
The ease with which Somali pirates have been able to board and hijack large vessels -- including an oil supertanker in 2008 -- has also raised concerns of another kind of terrorist attack in which a ship is commandeered and turned into a "floating bomb" that could shut down a major shipping lane or destroy a port.
But analysts say fears that terrorists could detonate ships carrying crude oil or liquefied natural gas (LNG) are overdone. Crude is not very flammable and LNG carriers are robustly constructed and include significant safety features. They might be easy to board, but not to quickly convert into a weapon.