Allocation of 15-year quota shares clouded by proposed quota auctions for Russian crab harvesters

November 30, 2018 09:39

Under the 2016 amendments of the Law on Fishery, as per mid-November Russia’s Federal Agency for Fisheries (FAF) has already renewed some four thousand capture quota allocation contracts for a new term of 15 years as of 2019 inclusive, according to FAF and media reports.

The renewal is based upon the so-called historic principle stipulating that the companies which have been fishing the stocks under the previous 10-year contracts are supposed to be entitled for a renewal now for a longer term.

However the government is not totally happy with the results of the expiring 10-year period and in exchange for an extra 5 years it is encouraging the quota holders to add more value to the catch by building new factories and boats in Russia under the investment quota scheme (20% of the commercial fishery part of the TAC as of 2019). 

Federal Antimonopoly Service also demands more access to the fisheries for the new entrants proposing that a percentage of the TAC should be allocated from time to time at quota share auctions, especially in the crab fishery.

More specifically, by February 2019 FAF will draft amendments concerning introduction of quotas for crab capture to be distributed by auctions, said FAF’s head Ilya Shestakov as quoted by Interfax.

In addition, it is reported that the draft budget for 2019–2021 submitted to the State Duma in late September 2018 provides for auctioning highly liquid and highly demanded shares of quotas for crab capture in the Far Eastern and Northern fisheries basins.

To give some idea of the funds in question, at auctions conducted on 18-19 May 2018 Russian Fishery Company purchased quotas for capture of more than 2,400 metric tons of crabs in the Primorye subarea. Those quota shares covering three crab species - blue king crab, horsehair crab and snow crab - fetched more than 10 billion rubles (ca. USD 150 million) for the budget.

The industry regulators (the Ministry of Agriculture, the Federal Agency for Fisheries) have prepared a financial model for selling up to 50% of the rights for crab fishery at auctions and collected opinions and assessments of the business community about the initiative. The industry has predictably responded negatively to the auction initiatives, securing its position in the resolution of the IV Fishermen Congress (held in Moscow in February 2018).

The crab companies are highly unhappy about the idea of the auctions claiming that the “starting” rights for capture of the Russian aquatic biological stocks (crabs inc.) which enabled the fleets to form their fishing history were actually paid for at the auctions in early 2000s. Therefore, the business community underlines that changing the distribution pattern for 50% of the crab quota shares from the historical principle to auction actually means nulling of the government’s obligations and, in fact, putting up for sale those fishing rights which had been sold before.

A massive campaign in the national media is being conducted against the introduction of the auctions while the crab companies are warning the government they would cancel the signed contracts with the Russian yards for new crabber vessels should the auctions materialize.

Instead, many opponents have voiced support for an increased resource fee as the main regulator towards more value-added production and more fish for the home market. The full rates would be applicable to raw material exports while exporters of value-added products and companies making domestic landings would be exempt of the fees. However there is a heated debate how big the fees should be. Experts of Russia’s Public Chamber have sharply criticized what they described as too soft rates drafted by FAF. They say that only considerably higher rates would encourage fishing companies to process more fish in Russia instead of sending the bulk of the catch after only primary processing to foreign buyers.

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