The Russian Federal Agency for Fisheries is planning to run a second stage of investment-quota auctions some time this year.
Russia introduced investment quotas in 2017, reserving 20 percent of the total catch of cod, halibut, herring, haddock, squid, and plaice in Russia’s Northern and Far Eastern Fishery Basin over a 15-year period for companies build new vessels at Russian shipyards or build fish-processing plants in Russia. In 2019, the government initiated auctions for crab quotas, which handed out 15-year fishing rights to 50 percent of Russia’s total allowable catch for crab – or around 46,000 metric tons (MT). The crab-quota auctions netted the Russian government RUB 142.4 billion (then USD 2.22 billion, EUR 2.01 billion) and resulted in the emergence of “The Crab King” as then-Russian Fishery Company owner Gleb Frank – who later sold his stake in the company after the U.S. imposed international sanctions on him in response to Russia’s invasion of Ukraine – won more than one-third of the quotas up for auction.
Subsequent rounds of investment-quota auctions have raised additional funds for the Russian government.
Now, Russia is reportedly preparing for a second phase of crab quota and investment quota auctions, after Russian President Vladimir Putin signed a law changing the system for allocating quotas in December 2022. The new auctions will cover the remaining 50 percent of crab quotas, and 20 percent of pollock quotas. Russian Federal Agency for Fisheries Head Ilya Shestakov called the new program a “priority task” for the department in 2023.
“Now the regulatory legal framework is being adopted, [and] we plan to hold crab auctions for the main types of objects this year,” Shestakov said.
The agency expects the program to result in the construction of eight large fish processing plants in Russia’s Far East and 15 large and medium-sized vessels, Fishnews reported.
“We hope that this will be able to increase the modernization of the capacities that are in the Far East Basin by 80 percent,” Shestakov said.
The auctions will also allow for investments in new infrastructure, such as transport refrigerators, but Shestakov said investment in those is unlikely due to the lack of competencies in domestic shipyards.
“We do not see much demand in the second phase for either refrigerated vessels or fishing vessels. The only place where there will certainly be demand is for crab-fishing vessels,” he said.
Russian companies have had difficulties meeting the obligations of the previous investment-quota program. Through the program, Russian shipbuilders were contracted to build 64 fishing and 41 crab vessels. But by February 2023, only 14 vessels have been handed over to customers – a pace that would leave many companies out of compliance with federally mandated deadlines.
Russian fishing giant Norebo announced a plan to move its shipbuilding away from a state-owned shipyard to its Pella-Stapel shipyard in the Leningrad region for that reason, according to Vedomosti.
Norebo is also predicting that if companies actually go through with building the number of ships that are needed, the fleet will end up having an overcapacity of fishing capability for the amount of quota there is in the crab fishery.
"The crabs will have an overabundance of ships,” Norebo Representative Vladimir Grigoriev said. “Before the construction of new crab [vessels], the existing fleet coped with the production volumes. As new [crabbers] are put into operation, old ships built in the '70s and '80s of the last century will be decommissioned.”
The pollock fishery will also have problems with too much fishing capacity, Union Fisheries of the North General Director Konstantin Drevetnyak said.
“New vessels are able to catch up to 200 tons of fish per day. With such productivity, 10 new vessels are able to catch the entire Russian cod quota,” Drevetnyak said.
Additonal questions about the program's viability have emerged. According to B-port, participants must use their new equipment to catch or process 70 percent of their new quota by volume. But that condition isn’t feasible, as the value-added products being produced in greater quantities by the new factory trawlers and processing facilities weigh far less than the raw material they catch. The Federal Agency for Fisheries doesn’t take this into account, according to Drevetnyak.
“Assuming that such sanctions are possible, many heads of fish processing industries in the region have already stated that if they are applied, they will immediately begin to bankrupt their enterprises,” Drevetnyak told B-port.
Image courtesy of Norebo
