Russia planning new round of investment-quota program, crab-quota auctions in 2022

The Russian government is planning to expand its investment-quota program, which offers seafood companies that build new vessels and processing facilities in Russia additional fishing rights for sought-after species.

Russia’s Ministry of Agriculture has published a new draft of a law that would regulate the distribution of fishing rights in Russian waters. After public discussions with industry and federal bodies – which can propose objections to the law – it will be sent to parliament, where it is expected to be voted on in 2022.

In addition to an expansion of the investment-quota program, Russia is also planning to move all of its crab quotas to an auction system. Russia made the controversial decision to auction off 50 percent of its crab quotas in 2018, which resulted in some big winners and also drew the ire of a Russian financial watchdog, which claims it did not achieve any strategic goals. 

Despite the criticism, the government deemed the auctions a success, and it is now making plans to auction the second half of its crab quotas – along with quotas for other valuable species, including deep-sea scallop, whelk, gray sea urchin, black sea urchin, and sea cucumber.

Similar to the incentives being offered on pollock, auction winners would be required to invest in new facilities – either vessels, storage facilities, or processing plants. The new quotas will be valid for 15 years. Quotas for processing plants are expected to be sold and distributed in 2022, and for vessels and high-value species in 2023. 

The investment-quota program was launched in 2016, and provides additional fishing rights to herring, pollock, haddock, and other species to companies in exchange for investments in new infrastructure. In the case of fishing vessels, participants in the program must build the vessels in Russian shipyards within specific parameters and terms – and similar requirements hold true for processing facilities.

Roughly 20 percent of the country's total allowable catch (TAC) was allocated in the first round of the investment-quota program, which awarded additional quota for the construction of up to 33 fishing ships and 23 fish processing plants. Thus far, the program has resulted in the planned construction of 58 new ships and 24 new processing facilities. Of that total, six ships are already operational – including some supertrawlers used by the Russian Fishery Company – and 21 of the processing plants have opened.

However, the program has been troubled by the pace of construction necessary to meet its requirements. A lack of capacity in Russian shipyards has made it difficult to construct the new vessels within the timeframe outlined in the program's bylaws.

Undeterred, the government began discussions about expanding the investment-quota program in 2020, and those talks took on more urgency as Russia dealt with the COVID-19 pandemic and the resulting closure of the Chinese seafood market to Russian exports. Forced to rethink the country's seafood-supply chain after one of its biggest markets virtually disappeared, Shestakov backed the idea of offering new investment quotas to spur construction of additional processing plants and cold-storage facilities to handle the sudden glut of product, primarily pollock now blocked from entering China. Short-term measures such as finding new markets – this year, South Korea became the country’s top market for seafood – and boosting domestic consumption could not help avoid a glut of pollock, Russia's biggest seafood export product, resulting in Russian fishing companies cuttinb back on their fishing effort. By 29 November, the national pollock catch total was 1.602 million MT, which was 128,810 MT less year-over-year, despite a similar allowable catch.  

Russian Federal Agency for Fisheries Head Ilya Shestakov told SeafoodSource in 2018 he was encouraged by the results of the first round of the program, but that Russia’s fishing industry requires a minimum of 360 new vessels of all types over the next 12 years. He also said the country has an urgent need to accelerate the development of facilities that can process and manufacture value-added products domestically.

The second round of the investment-quota program will once again distribute 20 percent of the TAC as investment quotas, meaning 40 percent of Russia’s TAC will be dedicated to companies that have taken or will take part in the program.

Russia's Federal Agency for Fisheries has proposed allocating half of the new round of investment quotas to fleet renovation and the other half to upgrading processing capacity. The new proposal calls for quota to be offered to companies building facilities capable of processing no less than 80,000 MT of raw material a year.

While the Russian seafood industry reacted positively to the first round of the program, several prominent industry figures are expressing reservations about the new proposal. Valentin Balashov, chair of the Association of Coastal Fisheries of the Northern Fishery Basin, told Big Radio the reform will lead to the monopolization of the country's fisheries, with the country's marine bioresources redistributed from small- and medium-sized companies to large ones, which have deeper pockets and easier access to credit.

At a recent meeting held by Russian Vice Premier and Head of Development for Siberia and the Far Easy Yuri Trutnev, other industry players also expressed skepticism. Alexander Verkhovsky, owner of Kuril-based company Gidrostoy, and All-Russian Association of Fishing Industry (VARPE) President German Zverev both said the government must thoroughly evaluate the results of the first program before launching a second round, Fishnews media reported.

Photo courtesy of Alexey Pevnev/Shutterstock