ECONOMY
6. WHERE HAVE ALL THE FISH GONE?
SOURCE: Frode Nilssen and Geir Honneland, Institutional Change and the Problems of Restructuring the Russian Fishing Industry, Post-Communist Economies [http://www.tandf.co.uk/journals/carfax/09668136.html], Vol. 13, No. 3, September 2001, pp. 313-30.
The authors analyze the changes which have occurred in the fishing industry in the north-west of Russia during the 1990s as a result of privatization.
At the end of the Soviet period, 450 fishing vessels were based in northwestern Russia, mainly at the ports of Murmansk and Arkhangelsk. All belonged to the conglomerate "Sevryba" [Northern Fish], which also controlled onshore processing and other support facilities. "Sevryba" was in turn subordinate to the Ministry of Fisheries in Moscow.
Although "Sevryba" has been formally preserved as a private joint-stock umbrella company, the northwestern fishing fleet has been divided up among several medium-sized fishing companies. A few new small companies have also appeared outside the old framework.
The early 1990s saw an enormous shift away from fishing for the home market in favor of fish exports, which were previously at quite a low level. The fish that used to go to the Russian consumer are now sold for hard currency -- mostly in Norway and in lesser quantities in Denmark, Britain, Spain, and Portugal.
A second shift concerns the species that are fished. In place of the variety of species previously fished (cod, flatfish, herring, sardine, mackerel, etc.), there is now an almost exclusive concentration on cod.
Why have Russian fishing companies abandoned the home market? And why do they no longer fish anything but cod?
The first reason has to do with the cost of fuel. Following the sudden lifting of state controls on prices in January 1992, the price of fuel rose 50-fold in the space of three months. It became much cheaper to deliver fish caught in the Barents and Norwegian Seas to Norwegian ports than to take them back to Russia. For the same reason vessels stopped venturing into more distant waters in search of non-cod species.
Fish could be sold in foreign ports at higher prices and on more favorable terms of payment. Foreign customers paid up straight away, while cash-starved Russian customers usually had to be given credit. Ships' officers and fishermen received a share of the proceeds from sales abroad in the form of an untaxed "currency allotment." Foreign ports also provided a higher level of services for both crew and vessel.
By not calling at Russian ports, vessels are able to avoid costly and time-consuming red tape. Companies also avoid paying the heavy tax imposed on vessels which have been purchased or upgraded abroad, equal to 25 per cent of the amount invested.
The cut-off of supplies to the home market has led to high unemployment among land-based workers dependent on the fishing industry. Onshore fish-processing facilities now operate at only a small fraction of their capacity.
Some countermeasures have been attempted. The fishery authorities have promised several times that companies delivering their catches to Russian ports will be favored in the distribution of cod quotas. But this is far from sufficient to outweigh all the disincentives to supplying the home market.
Next Article