Russia sells deep-sea crab quotas

On the fourth attempt, the Russian government has found a fishing company willing to buy deep-sea crab quotas, but Far Eastern fishermen expect this will be a hollow victory.

Deep-sea crab quotas have been a headache for the Russian authorities for the past year. The Federal Agency for Fisheries ran three auctions since October of 2019, but each time with no bidders.

Georgy Martynov, President of the Primorye Association of Fishing Enterprises / Георгий Мартынов, президент Ассоциации рыбохозяйственных предприятий Приморья

Despite that, the Agency refused to transfer the remaining quotas in 2020 to the non-investment category, said Georgy Martynov, President of Primorye Association of Fishing Enterprises.

‘As a result, the companies that for years were involved in deep-sea crab catching, lost the right to more than 8500 tonnes of triangle tanner crab (Chionoecetes angulatus) and beni-zuwai crab (Chionoecetes japonicas),’ he said.

The idea of selling crab quotas through auctions have been consistently criticised by Russian fishermen, as wreaking havoc on the entire industry.

‘We have built crab-processing plant in Nevelsk – the only one of its kind in Russia before the crab auction reform. Now, we had to close it, laying off the entire staff, because the crab has been taken from us,’ said Maxim Kozlov, President of the Sakhalin Association of Fishing Enterprises.

Some companies have been negatively affected by the crab auctions, cutting back on activity / Некоторые компании уже были затронуты крабовыми аукционами, из-за которых им пришлось сократить деятельность

The industry has claimed that the deep-sea crab quotas were of little interest to Russian fishermen, because of the high starting price, and as the winning bidder would be obliged to build four crab catchers for at least Rub1 billion ($16 million) each.

Maxim Kozlov, President of the Sakhalin Association of Fishing Enterprises / Максим Козлов, президент рыбохозяйственных предприятий Сахалина

In this background, Federal Agency for Fisheries decided to cut the starting price dramatically – from the original Rub3.7 billion ($55 million) to Rub1.2 billion ($18 million). This offer has been picked up by Russian company Tefida, which acquired quotas for the next 15 years. The government officials were delighted as the auction ended.

‘Selling quotas in the current market conditions is an obvious success, and demonstrates that the market maintains interest in deep-sea crab,’ said Andrey Stepaneko, general director of the Russian Auction House.

‘Although, the price has been cut, the investment conditions regarding building new ships have not been altered. Given the Russian ruble’s depreciation, construction would cost investors more than a year ago, when the quotas had been put up for sale for the first time,’ he added.

Primorsk-based company Vostok-1 – formerly the holder of these quotas – has not been participating in the auctions, said Alexander Perednya, member of the board of Vostok-1 said. The company was looking forward to the Federal Agency for Fisheries returning the quotas to the non-investment category, and so back to the company, which hasn’t happened, he added.

Successful bidders at auction are required to invest in new tonnage / Победителям аукционов придется строить новый флот

Early this year, the Russian federal prosecution office ruled that Federal Agency for Fisheries should return the quotas to the non-investment category, as is prescribed by law, but even this was not enough to convince the regulator.

Vostok-1 – the biggest Russian producer of deep-sea crab – has had to take seven fishing vessels out of operation because the quotas were taken from the company.   It is believed that from 500 to 700 employees in the Russian fishing industry have been affected, and quite a few lost their jobs.

Lack of economic sense

The Russian press claimed the investment conditions of the crab auctions were clearly loss-making. For instance, Russian news outlet Prima Media, citing sources in the industry claimed there was no economic sense in placing a bid for the deep-sea quotas.

Building new crabbers could be a loss-making venture for many companies / Для большинства компаний строительство нового флота по итогам аукционов может быть убыточным

In this background, the winner could use quotas for three or four years, and then announce that it is short of resources for building new vessels, and then give up the quotas, suffering no real consequences.

The suggestion is that Tefida could recoup the the auction price in two or three years, while the company is obliged to build new vessels in five years, Prime Media estimated. Surprisingly, not building those ships would be fully legal, the only penalty the auction terms stipulate is termination  of the quota provision contract.

In addition, the Russian government reported it was examining plans to extend the timeline to seven years. At a technical level, many Russian shipyards leave much to be desired, and the construction of many new fishing vessels is delayed in the country, government officials stated.