Russia: on the brink of big changes​​

Russia: on the brink of big changes Igor Artemyev, the head of the Russian Federal Anti-Monopoly Agency (FAS), which is one of the main initiators of the proposed introduction of auctions for fishing rights. FAS

​The Russian fishing industry is on the verge of major changes, due to the recently announced state plans to completely replace the existing distribution of fishing rights based on track records with by a system of auctions, reports Eugene Gerden

The duration of the majority of Russia’s allocated fishing quotas are due to expire in the near future, and current plans are that these will not be automatically extended for a further 10-15 years, as has been done in the past.

According to an official spokesman on behalf of Igor Artemyev, the head of the Russian Federal Anti-Monopoly Agency (FAS), which is one of the main initiators of the proposed changes,  the introduction of auctions is very important, as will facilitiate additional investment to the industry.

Igor Artemyev also said the new initiative could also contribute to the increase of annual fish catch in Russia and will stimulate the establishment of further processing facilities, particularly in the Far East and North-West regions.  In addition, FAS believes the introduction of auctions will raise the level of competition in the industry, as providing quotas for 10-15 years to a particular company prevents new players from entering the industry.

To date, the introduction of auctions has already been approved in the crab sector, and the same process could be applied to other industry sectors as early as 2019.

According to recent assessments by FAS and the Russian Federal Fisheries Agency, introducing auctions to the crab sector alone could generate 200 billion rubles (US$3,4 billion) of additional revenue to the state, while applying the same principles to the Russian fishing industry as a whole could be increase these figures eight- to ten-fold.

The system of auctions for fishing rights has already been used in post-Soviet Russia, taking place at the beginning of 2000s. At that time auctions were conducted on an annual basis and the arrangement was criticised by analysts as providing little real competition, and due to the participation of local and foreign ‘fish mafias.’

In the meantime, the introduction of auctions for crab fishing rights has already had its negative consequences for the industry, as companies have already started to terminate contracts with the shipyards that had already been signed for the building of new fishing vessels.

According to preliminary estimates, these terminated contracts could have been worth US$320 million. This will be equivalent to approximately ten vessels, ordered by Russian crab producers at domestic shipyards and there is a possibility these figures may significantly grow by the end of the current year.

Analysts at the Russian Pollock Association reported that these terminations are quite understandable, as the introduction of auctions means fishing companies will need to make one-time allocations of substantial funds during the auction process, which will not leave them with sufficient available funds to build new vessels.

At the same time, the situation is also aggravated by the fact that some companies will probably face significant losses by terminating contracts, having already put funds into advance payments towards the construction of these new vessels.

According to Alexey Zaplatin, general manager of the Arkhangelsk Trawler Fleet, part of the Northwest Fisheries Consortium, a leading fish and crab producer, to date, ATF has already invested US$110 million in the construction of four vessels of a total US$280 million investment and there is a strong possibility that this contract will  be terminated.

The feeling in the industry is that, as well as being promoted by the state, the idea of auctions for fishing rights is being lobbied for by major industry players which hope to secure the majority of quotas during these auctions, and which have the financial strength to be able to do this.

Earlier this year, Russian crab producers have even publicly accused the Russian Fishery Company (RRPK), Russia’s second largest fish producer and processor, of making attempts to destabilise the current balance in the Russian crab and fish industry through the introduction of auctions.

“It is RRPK, which is trying to withdraw fish quotas from ‘historical principle’ and to put them on auctions,” said Alexander Duplyakov, president of the Association of Crab Producers of the Far East, and he has called on Ilya Shestakov, the head of the Federal Fisheries Agency,  to halt the introduction this new system of quota distribution.

"What is happening now, is deeply puzzling, because a little more than two years ago, the Russian president made a principled decision on legal regulation of the industry,” Alexander Duplyakov said.

“These decisions were fixed in the existing federal law ‘On Fisheries,’ which is the main legislative act in the Russian fishing industry.”

He added that RRPK entered the crab sector in 2012, when crab production was not so valuable in Russia, and until recently it was not particularly interested in this fishery. However as the crab sector and some other fishing industry sectors such as pollock, have become more attractive for both producers and investors, RRPK is making attempts to change the legislation in order to secure quotas.

A final decision on changes to the distribution of fishing rights is expected to be taken soon by the Russian government, possibly by the end of December. At the same time, much will depend on the position of the newly appointed Minister of Agriculture Dmitry Patrushev, who is known for his enthusiasm for reform.

The current delay in taking this decision is seen as being due to the position of some state officials, who are proposing to maintain distribution of at least 20-30% of quotas under the existing principle of historical fishing rights.

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