A few years ago Eyl – the main lair of Somalia’s modern-day pirates – was nothing more than a tiny fishing port. A few tin-roofed shacks were its only dwellings.

Today it looks rather different. The shacks remain, but there are also several new restaurants, while new 4x4s race around dusty lanes, gunmen show off gleaming new weapons and “middlemen” in smart suits punch numbers into the latest mobile phones.

Their conversations are held in English, French, Swahili, Arabic or Somali with the owners of the latest prize or yet another negotiating team. Huddled together with clan elders, and oozing bravado, they would not look out of place in a Western nightclub.

Millions are starving in Somalia, but in this corner of a broken land, piracy is big business. Puntland, Somalia’s semi-autonomous northeastern province that lies astride the busy shipping lanes of the Gulf of Aden and the Indian Ocean, is experiencing a boom.

Moneychangers offer wads of new US dollar notes, the only currency that matters in a country that has been in chaos for almost two decades. Along the coast, building work starts each month on palatial villas more usually associated with the nearby Gulf states than the biggest and most dangerous failed state in the world.

Whenever word spreads that another ship has been hijacked, activity in Eyl moves up a gear. Clan elders arrive, eager to broker a deal between their young clansmen, who use speedboats to board vessels, and shipping companies eager to pay a ransom for cargoes and staff.

The ransoms are sometimes paid into foreign accounts in places such as the United Arab Emirates and even Western Europe, and may also be paid in cash through middlemen in neighbouring Kenya. These have spawned more pirate gangs, armed with better weapons and better attack boats. They have also raised fears of an even bigger momentum for Somalia’s relentless descent into armed anarchy.

“Piracy is extremely organised and sophisticated, and it has links way beyond Somalia,” said Abdirahman Ibrahim, an academic from Puntland. Piracy has injected at least $35 million (£23 million) this year alone into Puntland. The huge sums leave little doubt in the minds of those that know Somalia that the practice has at least the tacit support, probably much more, of senior politicians.

President Abdullahi Yusuf Ahmed, of the Transitional Federal Government, which has British support, is the former leader of the Puntland region, largely inhabited by members of his own Majeerteen clan. Given Somalia’s interlocking clan and subclan system, it is inconceivable that his closest aides are not involved. “You can’t have that much money coming in or going out without the top clan people being involved,” Mr Ibrahim said.

In Eyl, more than 220 hostages are being held. They are prized assets and are well looked after – often taken out by their captors to eat in new restaurants that were set up primarily to cater for nonSomali tastes. That the Sirius Star is reported to be lying off Harardheere, to the south, demonstrates how other clans want to emulate the success of Eyl.

The transitional Government, which drove Islamists from the capital with the backing of the Ethiopian military in 2006, has been a colossal disappointment to its Western backers. It had been been hoped that it might bring peace because it included representatives of virtually every Somali organisation. However, many of its top ministers, who were once living in exile in Britain, are unacceptable to the Abgal clan, which controls the area near Mogadishu, the capital, and which was the subject of past massacres by northerners.

The Abgal, who have links with moderate Islamist factions, and other clans have been driven into piracy out of fear that the Majeerteen will use their gains to buy weapons and dominate the rest of the country.

“All sides are involved in piracy now because it is a huge money-earner . . . The income has the potential to ignite a whole new round of bloodletting,” a regional security expert said.

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