Stand-off mounts in Russia between crab sector and government

A fight between Russia’s crab fishing sector at the Russian government has escalated after two damaging reports aired on national television and the government initiated a public investigation into crab magnate Oleg Khan.

Russian President Vladimir Putin has proposed reallocating 50 percent of Russia’s crab quota via an auction system. The proposal has generated an uproar in Russia’s seafood industry, with some industry representatives calling the proposal potentially disastrous.

In December, separate reports by television stations Russia and NTV aired investigative reports alleging serious issues related to illegal, underreported, and unregulated (IUU) fishing in Russia’s crab fisheries. Both stations editorialized that only a shift to auctions would stifle the illegal activity that they said had become rampant in the industry.

In its report, NTV, a private channel owned by Gazprom Media holding, the media body of the mainly state-owned conglomerate Gazprom, accused the Russian crab industry of fishing beyond its quotas, and of illicitly exporting the illegally-caught crab to South Korea and Japan. They criticized authorities in South Korean and Japanese ports for not doing their best to prevent illegal import of Russian crab, alleging they often turn a blind eye on improperly filed papers. 

The investigation also probed the enrichment of crab-sector business owners, noting that many of them live abroad, pay little to no taxes, and underpay their workforces. NTV laid blame for the 2018 disappearance of the trawler Vostok and its 20 crew in the Sea of Japan on vessel owner Oleg Khan, dubbed “The Crab King,” who the television program said underinvested in fleet renovation and did not properly care for his employees.

The report by the government-run Russia channel centered around Khan and illegal crab-fishing practices in Russia. The Russia channel directly accused Oleg Khan of serious crimes, citing anonymous sources in Russian law enforcement. Additionally, it added accusations that Khan and Russia’s other crab barons – the report estimated that around a dozen business owners control practically all of Russia’s crab catch – had rampantly violated their quota allocations. In 2017, investigators calculated, the total allowable catch in the Sea of Okhotsk was 70,000 metric tons (MT) of crab worth nearly RUB 145 billion (USD 2.17 billion, EUR 1.92 billion). In reality, two to four times than the official total was harvested, though the TV show did not cite the sources of the data it used in its tabulations. 

Both stations asserted the only way to bring the industry under control was to move to an auction system. The close timing of the two reports and the overlap in the information they provided, not to mention the fact that such reports on the Russia station typically require tacit approval from the Kremlin prior to broadcast, was interpreted by the crab industry as a clear message that the top ranks of the Russian leadership would brook no dissent in their decision to move to auctions. 

Nonetheless, the industry responded vociferiously at a press conference with several heads of industry associations decrying the portrayal of the industry and the damage the reports had done to the industry’s public image. 

“Fishermen of the Sakhalin Island don’t agree with what was said in the TV reports, considering it a lie,” Maxim Kozlov, chairman of the Association of Sakhalin Region Fisheries, said. Other leaders of industry associations in attendance backed Kozlov’s statement.

Soon after the TV reports aired, the Investigation Committee of the Russian Federation declared it would resume a dormant investigation into Khan, adding that the crimes of which he is accused include multiple murders. Khan responded by hurriedly leaving Russia on a private plane, fleeing to a property he owns in Sapporo, Japan.

The larger confrontation between Russia’s government and its crab sector came to a head in January at a meeting of Russia’s Public Council of the Russian Federal Agency for Fisheries. The council moved to request a supervisory body check on the performance of government bodies in tackling the problem of IUU, and Public Council Chairman German Zverev called on the Border Service and the Accounts Chamber of the Russian Federation, the largest governmental watchdog – accountable to the Federal Assembly of the Russian Federation – to revise and analyze the efficiency of its anti-IUU policies. 

The council also criticized the looming move to auctions, citing the economic damage it may cause to the industry. Fishing and processing companies will lose nearly RUB 250 billion (USD 3.75 billion, EUR 3.33 billion) through 2020, as they will be forced to cease investments into new construction of vessels and processing plants, Zverev said. 

Zverev further criticized how the move to auctions would hurt the nation’s economic output, as the sector’s production and value has increased several times over since 2007. He cited statistics showing just RUB 1.5 billion (USD 22.5 million, EUR 20 million) was invested into fisheries-related projects in 2007, against RUB 24 billion (USD 360 million, EUR 319 million) in 2018; while just RUB 2,900 (USD 43.50, EUR 38.60) was paid in taxes per metric ton of catch in 2017, versus an estimated RUB 15,000 (USD 225, EUR 200) paid in taxes per metric ton of catch in 2018. 

In concert with the meeting, more than two hundred fishing vessels stopped their operations for an hour and used prolonged horn blasts “in protest of demonization of the fishery industry,” according to an industry representative.

Zverev’s statement and the council’s actions represented an attempt to obtain an independent review of the current state of affairs in the crab industry. For his part, Russian Federal Agency for Fisheries Head Ilya Shestakov dismissed the claims of IUU made in the two television reports, citing the fact that all Russian vessels fishing crabs and other species are equipped with electronic monitoring systems overseen by Russian supervisory bodies, and that special bilateral agreements signed by Russia with South Korea, Japan, and other countries are supposed to prevent sale of illegally fished Russian seafood in ports of these countries.

Three days after the council’s session, the Russian government officially introduced a draft of a law to restart auctions for quotas. According to the bill, 50 percent of the currently alloted quotas will be sold through auctions, with the other half remaining in the hands of those who have historically held them, a system of distribution known as the historic principle.