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. Last Updated: 07/27/2016

Albatross of Quotas Strangle Fishermen

MTA view of the Novy Mir port in the Far East. "We can't make a business plan because we live from auction to auction," said Pyotr Chmil, the port's head.
[Editor's note: This is the first of two stories.]

"The fish trade is inherently crooked, that is why their [traders'] wages should be minuscule, and one a year should be hanged to keep the rest of them on their toes." -- Excerpt from Order No. 1669 issued by Peter the Great

NOVY MIR, Far East -- Ten years ago, the proud fishermen of the Novy Mir fishing company would have laughed at predictions that government policy would nearly bankrupt them. Back then, Novy Mir was one of the three top fishing enterprises in the Soviet Union.

But no one was laughing last month when the fishermen sailed into port after 40 days at sea. They found in their pay envelopes only 1,000 rubles, or $32 -- about one-tenth of their normal wages -- and promises that the rest would come later.

"This is just absurd," said Oleg, 52, one of the fishermen on the Kamenskoye, a fishing trawler that arrived at Novy Mir -- or New World -- with a load of herring. "I have no idea when I will get a proper wage, and how much will it be." Oleg, his wife and their two children survive on his wife's salary from the local kindergarten.

The 74-year-old Novy Mir fishing cooperative, or kolkhoz, located a north of Vladivostok, has shrunk to less than one-third of its Soviet-era self. Only 800 staffers are left, along with only eight out of the former 30 fishing vessels.

On top of economic woes that have chipped away at the company, for the past two years, Novy Mir, like other fishing companies, has had to send representatives annually to Moscow to buy fishing quotas at auctions run by the Economic Development and Trade Ministry.

The quotas give fishing companies permission to catch a set amount of fish within a set zone.

Rights to about 40 percent of the allowable catch are sold through such auctions. The rest are distributed free of charge for scientific and other purposes by regional administrations and the federal government.

Fishermen complain that buying quotas eats up much-needed working capital and the paper rights can be rendered worthless if the fish do not confine themselves within arbitrarily drawn zones, waiting to be caught.

The Novy Mir collective fishing farm, among others, has complained that it failed to catch the fish for which it purchased rights.

The Kamenskoye crew, for example, caught only 420 tons of herring while the quota allowed 700 tons, said Yevgeny Sorokin, the ship's captain.

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Kamenskoye Captain Yevgeny Sorokin

"The region for which we bought a herring quota froze over and we had to stop fishing," he said. "We could have gone to another region to catch pollock, but we have no quota for pollock. So we had to go home."

Sailors cannot wait at sea until the ice breaks up. Every idle day costs them about $5,000, Sorokin said.

"It's not a commodity that is being sold [at the auctions] but effectively a forecast of the catch," wrote Yury Kokorev and Vladimir Borisov of the All-Russia Research and Design Institute for Economics, Information and Automated Management Systems of Fisheries, or VNIERKh, in an article published in Fishing Economy magazine at the end of 2002.

Pyotr Chmil, the head of Novy Mir's administration, called the auctions an economic crime.

"We cannot afford to buy enough quotas," Chmil said in an interview in his Novy Mir office with windows overlooking the sea. Novy Mir caught 2,000 metric tons of pollock fewer than it expected last year. As a result of that shortfall, he said, "We can't afford to buy quotas for expensive seafood."

Pollack is not particularly expensive, but crab is, among others.

Chmil, who holds a doctorate in economics, said the auctions make it impossible for fishing companies that are short of working capital to plan their work.

"We can't make a business plan properly because we live from auction to auction and we never know how much the prices will increase and whether we will be able [to afford] to buy quotas. We can't buy quotas for the whole year -- they're just too expensive.

"This year we had to borrow again from our partners -- banks and the clients who buy our fish -- to get quotas on herring and roughhead grenadier," Chmil said. "I can only hope that we will be able to pay them back."

In addition to the auction quotas, fishing companies are also eligible to receive some of the free quotas handed out by the region's administration. But the Cabinet in late December gave Primorye's government 30 percent fewer free quotas to distribute in 2003 than last year.

As a result, Novy Mir got only the right to catch 970 tons of pollock from the Primorye administration. In its heyday, the collective farm caught up to 4,500 tons, more than four times that amount.

As companies grapple with these problems, their mounting debts loom.

Gennady Yakovenko, deputy head of the Primorye Union of Collective Fishing Farms, which represents 12 of Primorye's 38 fishing companies, said only one of the union's enterprises is not in debt.

Novy Mir has two months' worth of wage arrears and 30 million rubles ($984,000) in debt, he said.

"Many fishing companies are selling their vessels to pay off their debts now, while only three years ago it was a problem to find ships to buy," Chmil said.


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Novy Mir chief Pyotr Chmil

Novy Mir earlier this year sold its biggest refrigeration ship because it could not justify keeping a boat that once was used to hold up to two-thirds of the company's entire catch for the year. Now that annual catches have atrophied by a factor of six, such a large boat hardly makes economic sense for a collective fishing farm struggling to make ends meet.

In the early 1990s, Novy Mir hauled in up to 100,000 tons of fish a year. By 2002, its catch had shriveled to 15,600 tons.

As companies like Novy Mir sink further into debt, they are taking whole communities with them.

"The biggest problem is faced by those enterprises that have dependent villages onshore -- they are in the worst state," Yakovenko said. "The villages are dying. Where the people will go and what will happen with the fishing industry, God only knows."

Novy Mir's headache extends beyond balancing its books to the fate of the surrounding village, which depends on the taxes paid to the local budget by the collective fishing farm.

Novy Mir has worked hard to adapt to the new economic realities in the past decade. But, Chmil said, there is a difference between a modern, mobile fishing company with a couple of vessels and a source of financing and a fishing village like his, burdened by an aging infrastructure, with its pensioners, veterans, schools, clinics and social problems.

"We are being told that there are 10 years of perestroika behind us, and if we aren't able to adapt to the market economy, then we have no right to survive as a business entity," he said.

Chmil suggested that the most commercially viable restructuring plan would be to strip the company's assets and register a new company with a few salaried staff unrelated to the village. But he can't do that, he said, because several thousand Novy Mir villagers depend on him for their survival.

"I easily could have gotten three vessels and registered a new company across the road and pretended I don't care about anything but business," he said. "But my mates are here. They are aging and they believe in me."

Chmil says he often goes to Moscow, where he feels intimidated by government officials from a younger generation.

"They just laugh at me, saying I am either a fool or a lunatic," he said. "They can't understand that I have to care for these people.

"Who are these people in our government? What do they think we are here for?"