Rocking the boat of the Russian fishing fleet

April 19, 2016


Sergey Orlov

On 14 April, the world learnt from Vladimir Putin’s ‘Direct Line’ communication with his subjects that on Russia’s far eastern island of Shikotan the fishermen process the fish they have caught with their hands (and they haven’t been paid). The president frowned …

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… and an army of inspectors was immediately sent to resolve the problem. Unfortunately, the everyday, chronic problems in the fishing industry are addressed at a somewhat different speed.

In October 2015, at a State Council session, the president made an announcement, which rocked the boat of the country’s fishing fleet: “The construction of a new fleet is a matter of key importance for the development of Russia’s fishing industry. Close on a critical 90% of our Russian ships are dilapidated: they are not only economically inefficient, they are also unsafe for the fishermen who sail in them.”

It is good to hear that the president takes his fishing so seriously. But a study of the minutes of a previous State Council ‘fish’ session will show that, nine years ago, in 2007, Vladimir Putin came up with the same depressing diagnosis: “The development of the fishing industry is being held back by the unsatisfactory condition of the fishing fleet and the relevant ports.” At that meeting Putin heard from the minister of agriculture that “the fleet is in a critical condition. The figure for physical wear and tear is approximately 80%, and most of the ships are obsolescent.”

Even more suprisingly, as far back as July 2000, less than three months after his first inauguration, Vladimir Putin was already in command of his fishing facts: “We need to modernise the ports, to upgrade the ships and the processing facilities.”

Thus, from the beginning of his reign, the president has known that the fishing fleet needs upgrading, and that the state has to find a way of supporting the process. But in 16 years absolutely nothing has been done.

In 16 years absolutely nothing has been done.

It’s only now that the government, with its back to the wall, is preparing a law intended to promote the upgrading of the fleet; the plan is to grant extra fishing quotas for ships built in Russian shipyards. A draft law is being actively pushed by the Kremlin, but there are plenty of sceptics in the industry: firstly, if anyone is to be rewarded with additional quotas, those quotas have to be taken away from someone else; secondly, since Soviet times the Russian dockyards have mainly worked on public contracts, so the fishermen have had to buy their ships abroad. “If the Russian dockyards actually agree to work with the fishermen, they will quote very high prices and very long construction periods. For that money we could commission two foreign ships and do it in half the time,” says the chairman of the board of directors at a large fishing company.

The sad state of the fleet is not the only thing that has been exercising the best minds in the Kremlin, when it comes to the fishing industry. They have also spent some considerable time discussing the low-grade processing of Russian fish for export.

In a 2000 speech, the president posed a very pertinent, albeit rhetorical question: “Why are bioresources loaded from ship to ship and sent abroad? For many reasons, including the excessive red tape attaching to any procedures that happen right here. In Russia we need about three days to offload fish on shore, whereas in Busan and the nearest ports of South Korea they can do it in 3-6 hours.”

The president was still thinking about fish in a 2007 speech to the State Council: “We are still selling raw fish, and quite cheaply, but then we overpay for imported seafood.”

Fast forward to 2015, and the State Council again heard something similar – clearly, not much had happened between 2007 and 2015: “Processing the documentation for a vessel with a catch of fish takes a few hours in foreign ports, but in Russian ports it’s more like 24 hours. A few years ago it was even longer, but although we have improved, it still takes too long … Fish is mostly exported frozen, but with a low degree of processing, which means other states not only receive the best kinds of fish but can generate employment, thus developing their economies and processing industries, which is where added value is created.”

While document processing times might have been reduced, there is still considerable hassle to be faced when a ship reaches the dock. In 2014 a fisherman from the Far East told a Moscow journalist that “Open season is declared on us as soon as we appear in port. Do you know how many inspectorates the state has managed to produce for us, its own fishermen? 13! The vets, for instance, are looking for e-Coli, though this is in principle a physical impossibility in sea fish. It subsequently becomes clear that there is no e-Coli, of course, but by then the cargo has spent two weeks in port, and the fish has not reached the shelves of shops in Moscow or Pskov. Payment of a bribe will solve things straight away, but 13 inspectorates means as many bribes, which I, as a businessman, then have to pass on to the customer by putting up prices.”

When it comes to fish, no one can doubt the president’s understanding of what needs to be done

When it comes to fish, no one can doubt the president’s understanding of what needs to be done: in August 2007, he spoke to the State Council about his vision for fish farming. “Most experts consider that the future lies in farming fish, other marine animals and plants. We have not only to make up lost ground, we have to introduce the most contemporary ways of fish breeding and advanced technology.” The then agriculture minister confirmed that in 2007 Russia had farmed “only 110,000 tonnes” of fish and seafood, but that if the necessary government support were put in place this figure could be doubled by 2012.

Yet, by the time of the next ‘fish’ State Council in October 2015, Russia was producing only 160,000 tonnes of farmed fish, whereas the figure for China was 60 million tonnes. It was Ilya Shestakov, head of the Federal Fish Agency, (and son of Putin’s old friend  and childhood judo partner Vasily Shestakov) who told the president that the eight years had not, in fact, seen a doubling of the figures: “Acquaculture production in Russia is, unfortunately, currently only 3.5% of the overall volumes of caught and farmed fish, whereas in the rest of the world the figure is somewhat closer to 50%.”

It is clear why acquaculture has failed to develop: running a high-tech business under the unblinking gaze of greedy supervisory bodies requires more management time and determination than simply setting out to sea.

Adding value to raw materials is something that the president is always talking about; on timber, for example: “the key issues are to settle the production of added-value processed timber;” and on the iron and steel industry: “our iron and steel industry must be given a new image as regards quality, and our production should create added value.”

Fish, timber, steel … they all suffer from what is wrong with the Russian economy as a whole – bureaucratic restrictions, under investment, the monopolisation of the market that prevents entrepreneurship, and corrupt ministries, not to mention the president’s friends, mean that the economy as it is can only be based on the sale of raw materials.

In such conditions, modernising the archaic, cowed and statist Russian economy, whereby a fish processing company, like the factory in Shikotan (whose hapless owner even now is being grilled by the authorities), might be able to compete at an international level, is a complete impossibility.

Not even the Russian president can prevent the waves from reaching the shore, for the investment climate is not at the president’s beck and call – it can only be achieved by wholesale structural reform; and if it has not happened in 16 years under his watch, it is not going to happen. Until then, the Russian fishing fleet might be better off dropping anchor and waiting for the storm to pass.

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