Russia is continuing to prepare for a second round of crab quota auctions, issuing a new decree revising regulations governing the second stage of the program.
The Russian Federal Agency for Fisheries began preparing for a second round of the crab quota auctions after Russian President Vladimir Putin signed a law changing the system for allocating quotas in December 2022. The original round of auctions, initiated in 2019, netted the Russian government RUB 142.4 billion (then USD 2.22 billion, EUR 2.01 billion).
The new auctions will cover the remaining 50 percent of crab quotas, and 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 in early June.
Since that time, the Russian government has begun to make changes to the original auction plans, including releasing a new list of construction projects that qualify companies for additional quota. Under the program, companies must invest in infrastructure – either a new fishing vessel or a processing facility – to earn quota for a particular species of crab. Species covered under the new program include opilio, spiny crab, hairy crab, king crab, red snow crab, and bairdi snow crab.
Under a 14 June decree, the Russian government added small and large logistics complexes to the list, making three large logistics complexes being constructed in the Far East, two in Russia's North, and a small logistics complex slated to be built in Far East as eligible for the program.
The Russian government issued another decree on 28 June amending rules set by the recent legislation, revising the cost of quota lots and setting up procedures to monitor compliance with the program's investment requirements. The amendment also revises the calculations on the initial price of quota shares, with the coefficient of calculation increasing from 0.25 in the first stage to 0.6 at the second, with each lot for auctions having a starting price of more than RUB 1 billion (USD 10.9 million, EUR 9.9 million).
The decree also outlines the time limits of compliance with the program, requiring auction complete a signed agreement with a Russian company for the construction of a facility within 180 days of the conclusion of the crab quota auction.
The changes come as the head of the All-Russian Association of Fishing Industry (VARPE) cautioned of the risks of “crab fever” resulting in an overinflation of the value of previously sold crab quotas, Fishnews reported.
In an opinion column for RBC, VARPE President German Zverev said the crab sector currently looks extremely attractive to companies due to high profits and cash flows recorded in recent years by several crab operators. But that situation is likely a coincidence of market trends that may not be permanent, he warned.
Zverev pointed out that Russia recorded a sudden, unexpected launch to the top supplier in the global crab market - now at 40 percent of the world’s total crab supply - after catches in other areas of the world decreased. Russian crab firms capitalized on their market dominance to expand into developing markets such as Japan, Korea, and China. The Russian crab industryhas earned earned almost USD 8 billion (EUR 7.2 billion) in five years, according to Zverev.
However, the initial round of crab-quota investments forced winners to take on high debtloads, and fishing companies have taken on even more debt as banks have opened their lending spigots on the perception the industry is reliable and highly profitable, Zverev said. As a result, the sector's debtload has nearly quadrupled in just five years.
The next round of crab auctions the industry is currently preparing for will further increase the industry's indebtedness and Russia's crab sector still faces the usual market risks for crab sales, pplacing the industry at a high level of risk, Zverev warned.
Photo courtesy of the Russian Federal Agency for Fisheries
