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. Last Updated: 07/27/2016

New Quota Regulations Cripple Crab Industry

VLADIVOSTOK, Far East — As the snow melts each year in this Pacific port, sailors are hard at work in the open seas, taking advantage of the precious final days of the king-crab-catching season. But this spring they've stayed home, their small crab boats crammed into Vladivostok's Golden Horn Bay.

New policies governing Russia's rich fishing grounds all but canceled the first crab season this year, leaving the world's biggest supply of the delicacy largely unharvested. The lost time has left crab catchers predicting huge losses and local officials sounding the alarm over a looming shortfall in tax revenues.

Regulations that became effective this year require quotas for crabs and certain fish meant for export to be awarded to the highest bidder at open auctions. Previously, the quotas — licenses to catch a certain amount of a given species — were handed out for free or for a flat fee, but the sector was allegedly ruled by favoritism and bribes.

Economic Development and Trade Minister German Gref told reporters recently that it was an "illusion" that no fees were paid earlier.

"This payment was always collected,'' he said, according to Russian media.

"But it wasn't collected according to transparent rules … and it certainly did not go into transparent pockets — needless to say, not into the state budget.''

However, the transition to the new system brought the industry to a halt this year, as companies spent the winter waiting for officials to organize the auctions. The first of two annual crab seasons began Jan. 1, and ends April 21, but the first auction for crab quotas was held only March 20.

In the coastal region of Primorye alone, 90 crab boats float idly in the harbors, losing a total of about $35 million a month, according to the region's fisheries committee. The monthly loss to the regional budget is $7 million, which the ships could have paid in taxes.

"I've told the local tax inspectorate not to expect from us the revenues that we've traditionally contributed in the second quarter,'' said Alexander Perednya, chairman of the Vostok-1 fishing company in Vladivostok, about 6,500 kilometers east of Moscow.

The revenue loss could be particularly damaging to a region still suffering from a severe energy crisis that left tens of thousands of residents without heat at the height of winter this year.

"There will probably not be enough money for utilities and housing, and there may be a collapse again," said Nadezhda Smirnova, an economic analyst in the Vladivostok city administration. Most of the boats moored in Golden Horn Bay have used the unwelcome delay for repairs. On a recent day, sailors on the Rublyovo, a 50-meter crab boat, were replacing the boat's timeworn metal hull, while the ship's engineer was bent over a disassembled gyrocompass.

Meanwhile, poachers, who never bothered with licenses and quotas in the first place, continued to ply the seas. According to Gref's ministry, the illicit catch ranges from $2.5 billion to $5 billion worth of seafood a year.

When it comes to crabs, the delay in handing out quotas has only exacerbated poaching, says Pavel Tarasenko, commander of the Pacific division of the Russian border guards. In recent weeks, coast guards have engaged in high-speed chases after suspected poachers.

In February, a fishing vessel took refuge at the Japanese port of Wakkanai after a 12-hour chase by Russian coast guards. That boat had delivered 27.5 tons of crab this year before any licenses were handed out, Tarasenko said.

Border guards sank another boat suspecting of poaching. According to federal authorities, 20 to 40 Russian boats unload crabs every day in Wakkanai.

But try as they might, the poachers cannot meet demand with the heavyweight companies out of the game. As last year's stock runs low in Japan, the biggest export market for Russian crab, the price could soar.

Despite the criticism, the government insists the auctions are essential to stem corruption. According to one fishing expert, local officials often ask fishing companies to contribute to public projects, such as the construction of a school, in exchange for quotas.

A further benefit of the auctions, officials say, is the $1.6 million they are expected to fetch for the national budget at a time when Russia is trying to pay off its foreign debts.

The 187 crab quotas sold at auction in Moscow on March 20, were sold for $15 million, or 1.7 times the starting price, Interfax said.

But fishermen argue the reform comes at the wrong time after years of industry decline. They say the money they will have to spend on quotas now could be better spent replacing many of the boats in their aging fleets.

Perednya says the changes will set off a chain reaction that will cripple the industry for the foreseeable future. The new costs will be passed on to buyers and that will threaten the market, he said.

"Demand will be lost and the volume of sales will drop,'' he said. "I will have to mothball the fleet and cut people's wages.''