State in Unrivaled Drive to Clean Up Fishing

Dalmar.wm.ruFishermen hauling in their catch in the Kamchatka Peninsula, north of Japan. Seafood poached in the area is primarily exported to Japan and South Korea.��
Four poachers glided their Cambodian-flagged schooner, the Kisuka, into Russian waters in the dark of night to haul up traps illegally laid off the coast of Kunashir, a small volcanic island in the Pacific Ocean.

But before the poachers could finish filling their crates with sea urchin, whose bright yellow and orange roe fetch high prices as a delicacy product in Japan, a Russian Coast Guard patrol boat had snuck up on them.

"As the patrol boat approached the area of illegal fishing, the Kisuka began maneuvers to avoid pursuit," the Coast Guard said in a statement.

But the Kisuka, loaded with 500 crates of spiny sea urchin, 200 more than it could carry safely, sank within minutes.

"The majority of the crates were on the top deck, and the ship's crew didn't have time to fix them into place. During one maneuver, the load shifted and the ship flipped over," the Coast Guard said.

Two members of the Kisuka crew drowned on that night of March 18. The other two, including the captain, were rescued and charged with illegally crossing the border into Russia. All four men were Russian citizens, and they had set sail from a Japanese port.

The Coast Guard's attempt to seize the schooner comes amid an unprecedented government bid to overhaul the fishing industry and curb the illegal fishing of sea urchin, king crab and other seafood, which are primarily exported to Japan and South Korea.

First Deputy Prime Minister Viktor Zubkov said Thursday that acute systematic reforms -- including changes to the Tax Code, customs regulations, and federal investment into production facilities and shore infrastructure -- are needed to fuel the modernization of the fishing sector and ensure its economic viability.

"So far, we don't have our own domestically made vessels, our own engines, our own refrigeration units, or our own processing equipment. ... We need to develop a portfolio of orders for our industry so as to not import everything and stimulate the West," Zubkov said at an industry meeting attended by Federal Fishing Agency head Andrei Krainy.

The government took a first step toward revamping the industry on Jan. 1, when a new law mandating that all seafood caught in Russian waters must be hauled back to land and declared to the authorities.

The law, which fishermen have nicknamed "All Fish Ashore," aims to curb poaching and overfishing and boost the supply of seafood on the domestic market by increasing controls over fishing in Russian territorial waters, which stretch 12 nautical miles, or 22.2 kilometers, from the coast. The authorities are now tracking each vessel's location with a special device and making sure that they are returning their catch to shore.

"It is no secret that fishing vessels used to leave the 12-mile zone to sell their catch in the ports of neighboring countries," Krainy told Prime Minister Vladimir Putin at a meeting last month. "This practice was especially frequent in the Far East. The Russian state had no idea how much they were catching and at what prices the catch was selling for."

The reforms -- integral parts of a 12-year development plan by the government to turn Russia into the world's top fishing country by 2020 -- are needed in a sector that sorely lacks transparency, said Alexander Medikov, a maritime lawyer for Jurinflot.


Vedomosti
Andrei Krainy


"The old regime meant easy profits for the fishermen, but it was a serious problem for the state, not only because the fishermen weren't paying taxes but because it was impossible to account for all the fish that were caught -- and these numbers are used to establish fishing quotas," Medikov said.

Rising Fishing Power

The reforms follow more than a decade of state neglect for the industry. After the collapse of the Soviet Union, which boasted one of the world's most powerful fishing fleets, state investment into the industry waned, and with little private investment to take its place, fishermen could not pay for ship upkeep or the purchase of modern technology and equipment.

"In the Soviet Union, we used to fish everywhere, in international waters, in our territorial waters, everywhere. We were No. 1 in the world," said Boris Sorokin, deputy chairman of the Federation Council's committee on sea policy.

But after the collapse, the government had more important things to do than deal with the fishing industry, Sorokin said in a telephone interview. "Now we are left with a graveyard of ships that are occasionally torn apart and used for scrap metal," he said.

The amount of seafood caught from 1991 to 2008 plummeted by 53 percent, from 6.9 million tons to 3.3 million tons, according to government statistics based on officially recorded catches. The catch for 2008 was 2.4 percent lower than the previous year.

Meanwhile, seafood imports have grown steadily to 1.1 million tons last year, triple the amount of 1999 and close to one-third of Russia's own catch.

The Federal Fishing Agency blamed last year's poor catch on rusting vessels, high fuel prices and bureaucratic problems with the quota system, which regulates how much seafood each company can catch.

In 2008, Russia's fishing fleet consisted of 2,509 vessels, 576 less than in 2003, according to the agency's calculations.

With reforms taking effect and a state pledge to pump 33 billion rubles ($1 billion) into the industry's infrastructure over the next five years, the government hopes to reverse the decline in seafood catch volumes already this year. January and February's catch volumes were double what they were in 2008, and the total catch for the year should amount to 3.65 million tons, the fisheries agency said.

Slowdown at Customs


Denis Grishkin / Vedomosti
A worker handling sea urchins at a Moscow warehouse for exotic seafood.


Fishermen, however, are warning that the new customs registration law and other looming regulatory measures, such as the establishment of seafood export exchange, will make fishing unprofitable.

The Association of Pollock Fishers, an influential interest group that includes 29 of Russia's largest fishing companies, said its members lost a total of 5 billion rubles in the first quarter of 2009 after the customs registration law took effect.

"The customs infrastructure was not prepared to process the sharp increase in volumes, and this sorely hindered the work of fishing companies," the association said in a statement.

Exporters, accustomed to shipping their catch directly to foreign ports without a customs stopover in Russia, have taken issue with the extra time and costs incurred over the past three months.

"We aren't against the law per se, but rather the way the changes to the system were handled," said Peter Savchuk, chairman of Nakhodka Active Marine Fishery Base, one of the country's largest fishing companies based in Russia's Far East.

The Federal Customs Service only made changes to its internal regulations and procedures to comply with the federal law on March 4 and officially registered the changes with the Justice Ministry on March 27 -- close to three months after the law came into effect, according to information posted on the fisheries agency's web site.

Savchuk and representatives of other export companies complained to Krainy, the head of the fisheries agency, at a recent Pollock association meeting that customs terminals at ports were severely understaffed and as result, the clearance of their goods took days. By law, customs' clearance of fishing vessels can take no more than three hours.

"Their frustration is understandable because fish are, naturally, a very delicate commodity," said Medikov, the lawyer. "They may rot due to a lack of sufficient refrigeration units at the ports. If they have to be frozen for a longer period of time, companies will incur extra costs."

Seafood Exchange

Large seafood exporters are also up in arms about the creation of the seafood exchange, which could open as soon as this fall. Once established, it will be the only legal way for fishermen to sell their seafood abroad. Exporters fear that the price transparency that will accompany the exchange will decrease seafood prices and hurt their global competitiveness.

"If the exchange is created, nobody is going to sell on it. All the fish will just sit in freezers, because it is not profitable to sell or buy this way," said Savchuk of fish exporter Nakhodka.

German Zverev, president of the Association of Pollock Fishers, said the current export system works smoothly and should not be tampered with. "Prices on the market are already going down with each negative signal, so I don't understand why [the state] is inhibiting Russian exporters and making us sell low on global markets," Zverev said in a statement on the association's web site.

Natalya Kazakova, a lawyer for Nakhodka, said exporters should be given the choice to participate in the exchange or not. "It violates our economic freedom to force us to sell on an exchange," she said. "For some smaller companies it might make sense, but others may not want to disclose -- and shouldn't have to disclose -- their buy and sell prices to the public."

The Federal Fisheries Agency, however, is unlikely to give up its drive to better regulate the seafood trade. The agency maintains that the price transparency afforded by the exchange will make it nearly impossible for companies to hide sales revenues, thereby ensuring that the state collects taxes in full.

Plans are also in the works for a domestic fish exchange that could make fish more affordable for Russians. The state is aiming to increase fish consumption per person from its current level of 12.6 kilograms per year to 22 kilograms by 2020 by enabling small retailers, restaurants and stores to buy directly from fishermen and fish product producers.

"This is a market measure to cut down the number of middlemen and as a result reduce the retail price of fish," Krainy said in a statement on his agency's web site.

The government also wants to edge out middlemen who ship fish from ports to inland towns and cities by creating a large fish trading and transportation company, the statement said.

The agency hopes that the company and the domestic exchange cut fish shipping costs by 17 percent and retail prices by 15 percent and create 900 new jobs.