Required Report - public distribution

**Date:** 9/30/2003

**GAIN Report Number:** RS3033

**Russian Federation**

**Fishery Products**

**Annual**

**2003**

**Approved by:**

![](media/image1.wmf)Allan Mustard

U.S. Embassy

**Prepared by:**

Mark Petry and Marina Muran

**Report Highlights:**

Russian commercial fishery catch is expected to decrease by five percent
in 2003 due to a reduction in total allowable catch (TAC), depletion of
certain fish stocks and the poor condition of the fishing fleet.
However, fisheries production is forecast to rebound in 2004 due to the
positive changes brought about by the new government plans to eliminate
quota auctions and positive plans for modernizing the fishing industry.
Russia remains a net exporter of fish and seafood products, but
high-value imports are growing. Domestic consumption of seafood products
is expected to decline slightly because of reduced supplies, higher
prices, and competition from other animal proteins.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Annual Report

Moscow \[RS1\]

\[RS\]

**Table of Contents**

[Production 3](#production)

[Wild Catch 3](#wild-catch)

[Aquaculture 3](#aquaculture)

[Table 1: Fish Catches and Seafood Production in Metric Tons, 1999-2002
4](#table-1-fish-catches-and-seafood-production-in-metric-tons-1999-2002)

[Groundfish 6](#groundfish)

[Salmon 7](#salmon)

[Crab and Crabmeat 7](#crab-and-crabmeat)

[Fish Roe 7](#fish-roe)

[Consumption 8](#consumption)

[Trade 8](#trade)

[Opportunities for U.S. Exporters 9](#opportunities-for-u.s.-exporters)

[Policy 9](#policy)

[Issue on Quotas 10](#issue-on-quotas)

[Caspian Sea Status 10](#caspian-sea-status)

[Regional Focus -- Russian Far East (Primorskii Krai and Kamchatka)
10](#regional-focus-russian-far-east-primorskii-krai-and-kamchatka)

[Table 2. Production, Supply, and Distribution of Groundfish, MT
14](#table-2.-production-supply-and-distribution-of-groundfish-mt)

[Table 3. Production, Supply, and Distribution of Salmon, MT
15](#table-3.-production-supply-and-distribution-of-salmon-mt)

[Table 4. Production, Supply, and Distribution of Crab and Crab Meat, MT
16](#table-4.-production-supply-and-distribution-of-crab-and-crab-meat-mt)

[Table 5. Production, Supply and Distribution of Fish Roe, MT
17](#table-5.-production-supply-and-distribution-of-fish-roe-mt)

Executive Summary

Total fisheries production is estimated to decrease by five percent in
2003 due to the depleted fish stocks in Russia's Exclusive Economic Zone
(EEZ) and the poor condition of the fishing fleet. An estimated 70
percent of Russian fishing vessels are considered below standard and
this is taking a toll on industry efficiency. However, fishery
production is forecast to increase in 2004 due to positive moves to
restructure the industry and increased activity in non-Russian fishing
zones. The salmon catch exceeded expectations in 2003 due to unusual
weather conditions but groundfish production was lower than forecast due
to reduced cod landings.

# Production

## Wild Catch

According to the Russian Statistics Committee, the Russian catch in sea
fisheries (wild catch) amounted to 3.3 million metric tons in 2002, down
ten percent from 2001 (see Table 1). Sources at the State Fisheries
Committee (Goskomrybolovstvo) also announced that wild catch during
Jan-Jun 2003 reached 1.5 million metric tons, down six percent versus
the same period of 2002. Official sources state that the main reason for
the drop in wild catch was a reduction in quota for 2003 of more than
400,000 metric tons. Goskomrybolovstvo has not yet released the official
allowable catch levels for 2004, but many experts believe that they will
not deviate significantly from 2003.

Other reasons cited for the decrease in 2003 were the reduction of basic
fish stocks in the Russian Exclusive Economic Zone (EEZ), combined with
a drop in catches per unit, and the poor conditions of the Russian
fishing fleet. According to trade sources, 70 percent of the fishing
fleet, approximately 3,800 vessels, is below standard due to lack of
maintenance. In addition, most of these vessels are specialized and not
appropriate for catching far-eastern species such as herring, flounder,
and other species from the Pacific Ocean. Foreign vessels play a major
role in harvesting resources in the Russian Exclusive Economic Zone and
are often blamed for contributing to reduced fish stocks. In the first
half of 2003, licenses were granted to 864 foreign vessels, including
those from Japan, China, Korea, Norway, Lithuania and Ukraine.

According to the scientific chief at the State Fisheries Committee,
Russia is only catching 72 percent of the fish it is entitled to and
could increase its fish catch by 25 percent (by 1 million tons) if the
country's existing stocks were used more effectively. Such an increase
could come from exploiting species currently not fully utilized and
reducing the illegal catch.

(Note: Data provided in the Production, Supply, and Distribution Tables
of this report may differ from official Russian statistics because they
also include estimated data provided by trade sources on production and
unreported exports. These additional data reflect more accurately the
real situation and outlook of the fishing industry.)

## Aquaculture

In the absence of reliable government data for aquaculture production in
the Russian Federation, industry sources estimate total fish farm
production in 2003 to be approximately 90,000 metric tons, up two
percent from 2002. It is also estimated that nearly 80 percent of fish
farming comprises common and silver carp species. Production of other
species is insignificant. However, there are some new initiatives with
varieties of salmon in northwest Russia and in the Russian Far East,
where 100 natural basins are suitable for fish farming, but most of the
projects lack financing. Moreover, there are 20 farms in the Far East
that cultivate high-value seafood products, like scallops, sea urchins
and shellfish for export to Japan and China. Experts forecast a
continued increase in production of around three percent per annum in
the short term, reflecting optimistic prospects for economic growth.

The diversity of fishing reservoirs in the Russian Federation offers a
strong opportunity for developing different production methods. Current
development of aquaculture is concentrated in three main areas: ponds,
industrial (artificial bodies of water), and ocean farming in pens.
Government and private enterprises are developing new technologies to
assist producers to improve production yields and reduce the cost of
production. Some of these projects are joint ventures with foreign
companies. However, output growth has been tempered by the following
factors: a) demise of former agricultural support policies; b)
difficulties of the farm-restructuring and enterprise-privatization,
which creates an uncertain legal status of farm ownership; c)
environmental degradation of inland waterways through industrial, urban,
agrochemical pollution; d) occasional shortages of imported feedstuffs;
e) shortage of investment capital for restructuring, maintenance, and
for investment; and f) lack of new distribution and marketing channels,
for both lower and higher priced aquaculture products.

# Table 1: Fish Catches and Seafood Production in Metric Tons, 1999-2002

+---------------------+-----------+-----------+-----------+-----------+
| Product             | 1999      | 2000      | 2001      | 2002      |
+---------------------+-----------+-----------+-----------+-----------+
| **Fish and other    |           |           |           |           |
| fish products:**    |           |           |           |           |
+---------------------+-----------+-----------+-----------+-----------+
| Total catch         | 4,050,535 | 3,776,362 | 3,620,522 | 3,257,632 |
+---------------------+-----------+-----------+-----------+-----------+
| including:          |           |           |           |           |
+---------------------+-----------+-----------+-----------+-----------+
| inland catch        | 203,421   | 393,370   | 272,581   | 273,762   |
+---------------------+-----------+-----------+-----------+-----------+
| including in:       |           |           |           |           |
+---------------------+-----------+-----------+-----------+-----------+
| fresh basins        | 165,706   | 263,073   | 210,284   | 218,636   |
+---------------------+-----------+-----------+-----------+-----------+
| catch in Russian    | 2,615,187 | 2,444,237 | 2,464,125 | 2,065,471 |
| economic zones      |           |           |           |           |
+---------------------+-----------+-----------+-----------+-----------+
| catch in 200 mile   | 682,308   | 633,307   | 666,508   | 663,939   |
| zones of foreign    |           |           |           |           |
| countries           |           |           |           |           |
+---------------------+-----------+-----------+-----------+-----------+
| catch in open ocean | 286,166   | 230,591   | 217,677   | 254,460   |
| areas outside of    |           |           |           |           |
| 200 mile zones      |           |           |           |           |
+---------------------+-----------+-----------+-----------+-----------+
| **Catch by fish     |           |           |           |           |
| varieties:**        |           |           |           |           |
+---------------------+-----------+-----------+-----------+-----------+
| Herring             | 474,831   | 499,363   | 402,839   | 314,602   |
+---------------------+-----------+-----------+-----------+-----------+
| Sardine             | 15,733    | 11,811    | 3,544     | 9,108     |
+---------------------+-----------+-----------+-----------+-----------+
| Sprat (kil'ka &     | 157,961   | 149,478   | 96,392    | 69,232    |
| salaka)             |           |           |           |           |
+---------------------+-----------+-----------+-----------+-----------+
| Saury               | 4,608     | 13,698    | 35,884    | 44,302    |
+---------------------+-----------+-----------+-----------+-----------+
| Lancet fish         | 10,165    | 10,777    | 22,242    | 23,705    |
+---------------------+-----------+-----------+-----------+-----------+
| Mackerel            | 73,726    | 75,031    | 62,519    | 82,144    |
+---------------------+-----------+-----------+-----------+-----------+
| Sea perch           | 21,752    | 32,948    | 46,620    | 47,609    |
+---------------------+-----------+-----------+-----------+-----------+
| Jack mackerel       | 38,981    | 50,296    | 25,118    | 41,695    |
+---------------------+-----------+-----------+-----------+-----------+
| Plaice              | 85,154    | 106,461   | 114,139   | 88,177    |
+---------------------+-----------+-----------+-----------+-----------+
| Halibut             | 204,504   | N/A       | 28,722    | 27,625    |
+---------------------+-----------+-----------+-----------+-----------+
| Sturgeon, total     | 836       | 539       | 622       | 491       |
+---------------------+-----------+-----------+-----------+-----------+
| Coregonus, total    | 7,735     | 10,728    | 9,987     | 9,260     |
+---------------------+-----------+-----------+-----------+-----------+
| Salmon, total       | 170,382   | 206,194   | 224,458   | 191,694   |
+---------------------+-----------+-----------+-----------+-----------+
| Cod fish, total     | 1,972,093 | 1,685,916 | 1,729,274 | 1,386,922 |
+---------------------+-----------+-----------+-----------+-----------+
| including: cod      | 316,153   | 299,650   | 322,112   | 283,453   |
| (theragra)          |           |           |           |           |
+---------------------+-----------+-----------+-----------+-----------+
| chalcogramma (lat.) | 1,425,485 | 1,140,896 | 1,120,889 | 831,179   |
+---------------------+-----------+-----------+-----------+-----------+
| haddock             | 32,675    | 28,642    | 40,060    | 40,598    |
+---------------------+-----------+-----------+-----------+-----------+
| Total sea products  | 151,935   | 183,916   | 149,949   | 158,805   |
| and crayfish        |           |           |           |           |
+---------------------+-----------+-----------+-----------+-----------+
| including crayfish  | 149,084   | 177,397   | 144,249   | 147,479   |
| and mollusks        |           |           |           |           |
+---------------------+-----------+-----------+-----------+-----------+
| Crabs               | 49,872    | 51,985    | 46,903    | 41,904    |
+---------------------+-----------+-----------+-----------+-----------+
| > Shrimp            | 13,501    | 32,366    | 17,782    | 12,210    |
+---------------------+-----------+-----------+-----------+-----------+
| > mollusks          | 85,709    | 93,045    | 79,560    | 93,361    |
+---------------------+-----------+-----------+-----------+-----------+
| **Fish; food        | 2,628,282 | 2,994,830 | 3,056,642 | 2,961,362 |
| products, including |           |           |           |           |
| canned products**   |           |           |           |           |
+---------------------+-----------+-----------+-----------+-----------+
| Non-canned fish     | 2,468,873 | 2,808,621 | 2,843,303 | 2,740,699 |
| food products       |           |           |           |           |
+---------------------+-----------+-----------+-----------+-----------+
| Fish, live          | N/A       | 349,628   | 343,915   | N/A       |
| (excluding herring) |           |           |           |           |
+---------------------+-----------+-----------+-----------+-----------+
| Fish frozen         | 1,762,261 | 1,502,919 | 1,675,293 | 1,661,025 |
| (excluding herring) |           |           |           |           |
+---------------------+-----------+-----------+-----------+-----------+
| Fish chilled        | N/A       | 100,176   | 104,919   | N/A       |
| (excluding herring) |           |           |           |           |
+---------------------+-----------+-----------+-----------+-----------+
| Fillet frozen       | 133,884   | 117,858   | 92,667    | 49,441    |
| (excluding herring) |           |           |           |           |
+---------------------+-----------+-----------+-----------+-----------+
| Salted herrings     | 26,442    | 32,144    | 33,354    | 34,420    |
+---------------------+-----------+-----------+-----------+-----------+
| Herring, all types  | N/A       | N/A       | 407,124   | 372,966   |
| of processing       |           |           |           |           |
+---------------------+-----------+-----------+-----------+-----------+
| Smocked fish        | 24,808    | 23,576    | 26,579    | 28,683    |
| (excluding herring) |           |           |           |           |
+---------------------+-----------+-----------+-----------+-----------+
| Fish dries and      | 6,741     | 8,418     | 9,133     | 9,971     |
| dry‑cure            |           |           |           |           |
+---------------------+-----------+-----------+-----------+-----------+
| Spicy and marinade  | 3,059     | 1,613     | 2,424     | 2,478     |
| products            |           |           |           |           |
+---------------------+-----------+-----------+-----------+-----------+
| Culinary products   | 7,551     | 8,170     | 11,608    | 16,818    |
+---------------------+-----------+-----------+-----------+-----------+
| Balyk products      | 942       | 1,114     | 1,284     | 1,641     |
+---------------------+-----------+-----------+-----------+-----------+
| Food, feed, and     | N/A       | N/A       | 187,895   | 163,807   |
| technical products  |           |           |           |           |
+---------------------+-----------+-----------+-----------+-----------+
| Caviar, total       | 27,759    | 25,985    | 28,034    | 21,652    |
+---------------------+-----------+-----------+-----------+-----------+
| Including sturgeon  | 28        | 24        | 24        | 24,5      |
+---------------------+-----------+-----------+-----------+-----------+
| salmon              | 6,358     | 6,526     | 6,120     | 5,674     |
+---------------------+-----------+-----------+-----------+-----------+
| Fish and sea        | 2,522     | 3,248     | 2,801     | 2,472     |
| animals fat         |           |           |           |           |
+---------------------+-----------+-----------+-----------+-----------+
| Fish feed meal      | 136,394   | 116,187   | 98,399    | 66,636    |
+---------------------+-----------+-----------+-----------+-----------+

Source: Russian State Statistics Committee

Note: Official data does not match FAS estimates as noted above and is
provided for comparison purposes only. Some numbers in this table may
not add due to rounding.

# Groundfish 

The groundfish catch is forecast to increase by six percent in 2004,
reflecting a likely increase in the fishing quota, new investments in
the fishing-fleet, and expected higher catches outside the Russian
Exclusive Economic Zone due to the implementation of fisheries
agreements. The groundfish category in Russia consists basically of the
following species: cod, haddock, pollock, and ocean perch. Cod has
traditionally held by far the largest share within this category with
catches in both the Atlantic and Pacific regions.

The decline in groundfish catch in 2003 is mostly attributed to a sharp
decline in cod and pollack catch due to problems with issuance of
quotas, depletion of stocks, and other restrictions derived from
international agreements on catch quotas, such as in the Baltic sea.

# Salmon 

Post forecasts salmon catch to increase by nearly seven percent in 2004
because of the expected higher catch of salmon from the Russian Far East
(RFE), which is responsible for the largest share of total salmon
landings.

Salmon catch in 2003 is estimated to increase over 13 percent due to an
unusually hot summer in Russia's Far East, which prolonged the salmon
season. In addition, there was a significant increase in the harvest of
pink (humpback) salmon, mostly in the Sakhalin region. According to
trade sources, the Sakhalin region received an industrial quota for
90,375 metric tons of salmon species this year, of which 85,531 metric
tons was of the pink species (Oncorhynchus gorbuscha).

The salmon fishing industry in Russia's Far East has recorded stable
growth over the past three years, but faces a major problem with
poaching. According to trade sources, unreported fishing in the region
remains significant and linked to organized criminal groups.

According to trade sources, in the first half of 2003 salmon breeders
released into RFE waters about 500 million Pacific and Atlantic Salmon
fingerlings and ten million silver salmon fingerlings, twice as many as
expected. The breeding programs are already showing results and are
expected to help to increase the fish stocks in the coming years.

# Crab and Crabmeat

Government Resolution #1270-P of September 2002 increased the fishing
quotas for rare types of crab by allowing an additional catch of 220 MT
of blue crab, opilio crab, shellfish and trumpeter fish in the North of
Okhotsk sub-area of the Far Eastern basin. This additional allocation
was aimed for scientific research. However, most crab was harvested not
by scientists, but by commercial companies and sold for about \$10
million dollars. The Resolution also raised by 40 percent (9,000 MT) the
2003 Total Allowable Catch (TAC) for crab.

In the North Okhotsk Sea, 100 percent of the TAC for crab was harvested
in 2002 and 92 percent of the TAC was harvested in the West Kamchatka.
However, only 76 percent of the total Russian TAC for crab was caught
because of the poor conditions of fishing fleet, catch inefficiency, and
unfavorable fishing conditions. Post forecasts crab catches to increase
only by one percent in 2004, mostly driven by firm export demand.

# Fish Roe

Russia is home of eleven species of sturgeon and among the most
important are the Russian, Siberian, Amur, Beluga, Kaluga, stellate, and
sterlet. These are economically important to the country because of the
extremely high value of sturgeon caviar and have traditionally been the
object of commercial fishing and exportation. It is estimated that 70
percent of the world's sturgeon stocks originates from the Caspian Sea.
The resources of this basin are split among five countries.

Sources at the State Fisheries Committee (Goskomrybolovstvo) reported
that scientific research organizations from Russia, Azerbaijan,
Kazakstan, Iran and Turkmenistan conducted joint investigative
expeditions last year to study the status of sturgeon species and other
biological resources in the Caspian. The results have noted positive
changes in sturgeon stocks. The number of beluga sturgeon in the
Northern Caspian increased by 2.3 million (23 percent), while Russian
sturgeon increased by 16 percent and stellate sturgeon by 28 percent. In
addition, the quantity of mature fish spawning at the Volga and Ural
river mouths was up in mid-spring, indicating higher than expected
populations. Scientists are recommending that the International Caspian
Fishery Commission increase sturgeon species fishing quotas for the
Sea's littoral states in 2004.

According to the Commission, Russia has the right to harvest 453 metric
tons of sturgeon in the Volga delta. Russia exported more than 50 metric
tons of black caviar in 2002, 10 MT more than expected.

# Consumption

Overall consumption of fishery products in the Russian Federation is
estimated to decline in 2003 as a result of higher market prices owing
to reduced fish supplies, competition from other animal proteins (mostly
from attractively priced poultry products), and higher prices for
imported seafood products due to higher import costs. Local consumption
trends are forecast to remain largely unchanged in 2004, unless an
improvement in fish prices versus meat products increases the
competitiveness of seafood products.

Market research indicates the majority of the population are consuming
high fat food, although a growing number of Russian consumers are
turning to fish for a health-conscious alternative. However, any major
increase in consumption will largely depend on the strengthening of the
Russian economy and increased consumer income.

Also, there is a growing niche for sales of further processed products,
such as gourmet fish products, mostly in the HRI and catering sectors.
This is largely due to economic growth, lower volatility of the exchange
rate, higher consumer income, a booming tourism sector, and new
marketing channels.

# Trade

The Russian Federation became a net exporter of fish products after the
devaluation of the ruble in 1998. The Russian State Customs Committee
reported total Russian seafood exports passing through Russian customs
was \$383.5 million in 2002, 1.5 percent less than in 2001. During
Jan-Jun 2003, Russia exports of seafood products were valued at \$156
million, nearly eight percent above the same period last year. The main
reason for the increase is attributed to higher exports of black caviar
and other high value seafood products. Japan, China, Korea, and the
United States continue to be the top markets for Russia seafood exports,
while Norway and Finland are the major suppliers of fish products to
Russia.

Unreported exports continue to be a difficult issue for the government
and are estimated at almost thirty percent of the fish total exports.
According to trade sources, underreporting is motivated by attempts to
evade state and federal taxes, customs duties, and accounting for quota
usage. A significant share of the unreported fish catch is in the Far
East, where fishermen harvest in Russian territorial waters but ship the
product directly to other countries (mainly to Japan, Korea and China)
without registering the catch with Russian Customs.

Reduced domestic fish supplies have increased the share of imported
seafood products in Russia. The Russian State Customs Committee reported
total Russian seafood imports at \$311.7 million in 2002, 48 percent
above 2001. It is estimated that during Jan-Jun 2003, imports of seafood
products reached \$138 million, 70 percent more than the same period
last year.

The United States is a major destination for a variety of edible fish
and seafood from Russia. In 2002, the United States imported \$271
million of fish and seafood products from Russia, up 26 percent from
2001, while Russia imported \$11 million of fish and seafood products
from the United States, up 31 percent from 2001, the highest value for
the past 30 years.

Russia imports of fish and seafood products from the United States
represent only two percent of the total value of agricultural, fish, and
forest products imported from the United States. However, Russian
exports of fish and seafood products to the United States account for 62
percent of all Russian exports of agricultural, fish, and forest
products to the United States.

## Opportunities for U.S. Exporters

The Russian market for seafood products is evolving quickly and there is
plenty of room for U.S. exporters despite the fact that Russia is a net
exporter. The Russian HRI sector is now key for demand in many Russian
cities, especially Moscow and St. Petersburg. Opportunities mainly exist
in the marketing of very high-quality and high-value U.S. seafood
products. This also reflects the main trends for U.S. products in
supermarkets that target high-income consumers. U.S. suppliers have the
best opportunity in these sectors with processed salmon products and
fresh/frozen fish of species not native to Russia.

# Policy

Russian officials are currently developing a long-term development plan
for the fishing industry. The plan calls for increasing wild catch up to
5.5 million metric tons by 2020. Although an ambitious target, this
volume represents only half of the Russian seafood production of 10-12
years ago. The plan calls for higher investments in revitalizing the
over-fished Russian Exclusive Economic Zone (EEZ) and making new
investments in the shipbuilding industry in Russia to gain access to the
open ocean and the economic maritime zones of other countries. This is
expected to materialize by increasing maritime cooperation agreements
with other nations. According to Leonid Kholod, the Fisheries Committee
Deputy Chairman, the committee encourages Russian trawlers to return to
the waters of other countries, and to the open seas, particularly the
central Pacific, where a Russian research vessel recently claimed to
have discovered huge fish stocks. Currently, Russia has fisheries
cooperation agreements with Morocco, Mauritania, Angola, Guinea-Bissau,
Sierra-Leone, Mozambique, Madagascar, Korea, Japan, and Norway. Talks
are underway for new agreements with the European Union, Vietnam, Chile,
and Peru.

## Issue on Quotas

According to a new Government Resolution prepared by the State Fisheries
Committee, beginning in 2004 fishing companies will receive catch quotas
according to a new system. The concept of the new regulation is that
fishing quotas in the economic and coastal zones, which account for 70
percent of the Total Allowable Catch (TAC), will be granted to fishermen
for five years for a fixed fee, that will be deducted from their taxes.
The quota volume will be calculated based on average annual catch of
each company between 2000-2002. The State Fisheries Committee will
control quota distribution. Twenty percent of the quotas will be
distributed by special commissions of regional authorities free of
charge. The remaining ten percent will be distributed via international
agreement and for scientific research.

This will be a significant change from the current system, where the
free regional quotas are almost equal to the auctioned volume. The share
given for scientific research would also decrease according to this
plan. This change would mean a strengthening of the central government
authority and a weakening of regional authority in the distribution of
marine resources.

According to Deputy Head of the State Fisheries Committee Leonid Kholod,
the introduction of the new system will allow fishermen to receive
quotas based on a mathematical model and avoid personal judging by
government officials. He also announced that this mechanism would
increase profitability of the fishing industry since quotas will be
distributed for a longer term, allowing fishermen to borrow money more
easily. The abolition of auctions will also restrain price increases for
the right to catch marine resources and increase the "availability" of
biological resources for local fishing companies.

See regional focus for additional information.

## Caspian Sea Status 

A longstanding dispute over the Caspian Sea has finally moved forward.
On May 14, 2003, a tripartite agreement was signed defining the zones of
responsibilities among Russia (19 percent), Kazakstan (29 percent), and
Azerbaijan (19 percent). However, Iran and Turkey both insist on equal
shares in the Caspian Sea and did not sign the agreement. Russia,
Kazakstan, and Azerbaijan agreed that the Caspian Sea should be divided
according to the coastal length of the five countries. Resolution of the
legal status of the Caspian Sea is important to regulate fish catch,
safe research, and exploitation of oil resources under the sea.

# Regional Focus -- Russian Far East (Primorskii Krai and Kamchatka)

Though total output of the fisheries sector in the Russian Far East has
improved in the last two years, an insecure political environment has
led to continued overall industry stagnation. Even more than in the
agricultural sector, companies in the fisheries sector are becoming
increasingly stratified between those that are modern and successful
businesses and those that struggle to remain financially solvent. This
process will be exacerbated by the new proposal that rewards companies
for their catches over the past several years rather than through market
competition. However flawed, the government proposal is probably better
suited to strengthening the sector than the existing auction process.
The repeal of the auctioning process and speculation regarding the
nature of the policy replacing it are the most pressing issues in the
industry in the fall of 2003. Though illegal fishing and export remain
serious problems in the RFE, it appears that recent measures are a step
in the right direction in terms of combating this menace that continues
to undermine the entire Russian fishing sector.

Production and Policy Environment

The fisheries sector in every country is complicated by the fact that
the government is continually involved in redistributing a valuable
resource in order to maintain two competing but mutually dependent
forces: long-term sustainability of fish stocks and industry. By most
measures, Russia continues to struggle with both. In the last six years,
the Russian Far East's total allowable catch (TAC) has decreased by over
25 percent and the industry continues to struggle. Moreover, government
policy has fostered corruption in the distribution of fishery resources
and not prevented illegal fishing (if not encouraging it).

Total Allowable Catch in the Russian Far East, 1997-2003 (1,000 Tons)

  ---------- ---------- ---------- ---------- ---------- ---------- ----------
  1997       1998       1999       2000       2001       2002       2003

  4,409      4,630      4,537      4,240      3,921      3,145      3,257
  ---------- ---------- ---------- ---------- ---------- ---------- ----------

The TAC of the Russian Federation is divided into four categories:
foreign countries (5.5 percent in 2003), scientific quotas (8.1
percent), quotas to be sold at auction (42.1 percent), and industrial
quotas (43.7 percent). Quotas to foreign counties are allocated in
accordance with Russia's international agreements and form the only
category that is not subject to change. Scientific quotas are allocated
to regional institutes for the purposes of research and to ensure
accurate evaluation of the marine ecosystem and resources. The largest
category, industrial quotas, is distributed free through
representational councils to companies in that region. In reality, the
region's governor has significant influence in distributing these
quotas, (though subject to approval by Goskomrybolovstvo) which has led
to clear conflicts of interest and corruption. It is through this
process that many see a distinction between companies that are "in" or
"out" of favor. Last, quota auctions have taken place from 2001-2003,
but are currently likely to be eliminated in 2004.

The Ministry of Agriculture (which includes Goskomrybolovstvo) and the
Ministry of Economic Development and Trade (MEDT) have proposed to
eliminate auctions in favor of a fixed distribution of these resources
on the principal of historic usage. Essentially, this category plus some
of the current industry quota would be distributed in proportion to the
volume of quota a company bought over the period of the auctions
(similarly to the meat import TRQs). There would be some cost, but
payment would be based on actual catch rather than on the right to fish
as is done under the auctions (which is a problem if the fish aren't
caught). This system would be in place for five years. As the policy
section notes, the rough structure of the proposed system would be the
following: five-year historical allocation (70 percent of TAC), regional
allocation (20 percent), scientific and foreign nations (ten percent).

While almost all RFE companies agree that auctions could not work due to
the high cost and the up-front payment for resources that may not
actually be there (caught), many complaints and worries are voiced about
the proposal. The principal objection is that this new system would cast
in concrete the status quo in terms of resource allocation as it was
under the auctions. Large companies don't like this because they have
money but can't grow bigger; small companies will not be able to
purchase large shares under the auctions and essentially will be
permanently locked out of the industry. Most feel that the auctions led
to a quickening of the industry's demise, and locking in the results or
distortions of this process seems inappropriate to most. Second, no one
thinks that giving the central government even more power over
fisheries, a sector they believe is poorly understood by Moscow
bureaucrats, can lead to better decision making. Last, regional
officials clearly see an opportunity to increase their influence
slipping away and are in favor of administering this system at the local
level.

While most seem resigned to following Moscow's dictates on the
elimination of the auctions, the central government is universally a
source of scorn for the RFE fishing industry. It is widely considered
that the federal government (mainly Goskomrybolovstvo, but also the
Ministry of Natural Resources) has repeatedly shown that the fishery
industry is just another natural resource where budget implications
outweigh industry management. This is clearest through the maintenance
and increase of federal involvement in resource allocation and ensuring
that proceeds of their distribution contribute to the federal budget. It
is frustrating to industry and local government that hundreds of
millions of dollars flowed to Moscow through auctions, or will under the
new system via tax revenue, and almost none is returned through a
coherent government policy toward industry development (programs to
reform the deteriorating fishing infrastructure and fleet). For example,
Kamchatka cannot realistically reform its own fishery sector if none of
the quota rents go to the local level (e.g., industrial quotas are
supposed to be free and the auction proceeds went to the federal budget)
and the industry itself makes up almost all economic activity (57.3
percent of total industrial output and 48 percent of all jobs). In order
to cope, Kamchatka has been requiring proof of participation in social
causes by fishing companies before distributing the free industrial
quotas.

The political nature of the distribution of the resources has also
helped to add confusion to the industry. As the industrial quotas are
essentially set through a series of political battles (i.e., last year's
battle between then Goskomrybolovstvo head Yevgeniy Nazdratenko and
Primorskiy Krai Governor Sergey Darkin) and the auction policy has
changed almost every year, hardly any business can plan more than one
year in advance. Due to the cost of equipment, industry investment is
seriously below what it would be under a long-term government fisheries
policy.

Goskomrybolovstvo has also come under criticism for micromanagement. Any
time the situation changes and the existing distribution for species or
location is unsuitable, regional officials must appeal to Moscow for
changes. Permission from Moscow often takes months, by which time the
opportunity is missed. For example, last year an enormous salmon run
greatly exceeded permissible catch levels and many fish were simply
wasted when they perished in the rivers. Though the Governor of
Kamchatka issued a special resolution to expand the catch, several
crucial weeks were lost because Goskomrybolovstvo would not make a
decision on the matter.

The last issue under discussion by the central government is
privatization of the research centers, which provide the estimates of
Russia's allowable catch. Many of these institutes are already partially
privatized, yet they still receive the free scientific quotas as a way
of financing the high costs of researching the fisheries. These
institutes already sell the fish they are "researching" and are accused
of researching the most profitable fish more often than the less
profitable and inflating fish stocks as a way of preserving their own
quota. While few question the scientific expertise of the researchers,
privatizing these institutes would appear to only increase the already
worrying conflict of interest and further increase one of the last
fairly objective parts of Russian fishing policy, estimation of fish
stocks.

While illegal fishing will remain a problem, there is a sense in the
industry that recent measures are decreasing the scale somewhat. Actions
include satellite tracking of fishing vessels and increasing the power
of the enforcement agencies.

# Table 2. Production, Supply, and Distribution of Groundfish, MT

  --------------- --------------------- ---------- ---------- ---------- ---------- ---------- ---------
  **PSD Table**                                                                                

  **Country**     **Russian                                                                    
                  Federation**                                                                 

  **Commodity**   **Groundfish,                                          (MT)                  
                  Whole/Eviscerated**                                                          

                  2002                  Revised    2003       Estimate   2004       Forecast   UOM

                  USDA Official \[Old\] Post       USDA       Post       USDA       Post       
                                        Estimate   Official   Estimate   Official   Estimate   
                                        \[New\]    \[Old\]    \[New\]    \[Old\]    \[New\]    

  **Market Year                         01/2002               01/2003               01/2004    MM/YYYY
  Begin**                                                                                      

  Beginning       440000                440000     447000     440000     0          305000     (MT)
  Stocks                                                                                       

  Total           2500000               2300000               2180000    0          2310000    (MT)
  Production                                                                                   

  Intra-EC        0                     0          0          0          0          0          (MT)
  Imports                                                                                      

  Other Imports   500000                620000                650000     0          650000     (MT)

  TOTAL Imports   500000                620000     0          650000     0          650000     (MT)

  TOTAL SUPPLY    3440000               3360000    447000     3270000    0          3265000    (MT)

  Intra-EC        0                     0          0          0          0          0          (MT)
  Exports                                                                                      

  Other Exports   2070000               1960000               200000     0          206000     (MT)

  TOTAL Exports   2070000               1960000    0          200000     0          206000     (MT)

  Domestic        795000                840000                865000     0          890000     (MT)
  Consumption                                                                                  

  Other Use/Loss  128000                120000                100000     0          100000     (MT)

  TOTAL           923000                960000     0          960000     0          990000     (MT)
  Utilization                                                                                  

  Ending Stocks   447000                440000                305000     0          215000     (MT)

  TOTAL           3440000               3360000    0          3270000    0          3265000    (MT)
  DISTRIBUTION                                                                                 
  --------------- --------------------- ---------- ---------- ---------- ---------- ---------- ---------

# Table 3. Production, Supply, and Distribution of Salmon, MT

  --------------- --------------------- ---------- ---------- ---------- ---------- ---------- ---------
  **PSD Table**                                                                                

  **Country**     **Russian                                                                    
                  Federation**                                                                 

  **Commodity**   **Salmon,                                              (MT)                  
                  Whole/Eviscerated**                                                          

                  2002                  Revised    2003       Estimate   2004       Forecast   UOM

                  USDA Official \[Old\] Post       USDA       Post       USDA       Post       
                                        Estimate   Official   Estimate   Official   Estimate   
                                        \[New\]    \[Old\]    \[New\]    \[Old\]    \[New\]    

  **Market Year                         01/2002               01/2003               01/2004    MM/YYYY
  Begin**                                                                                      

  Beginning       9000                  9000       9000       8015       9000       10000      (MT)
  Stocks                                                                                       

  Total           210000                200000     210000     225000     0          240000     (MT)
  Production                                                                                   

  Intra-EC        0                     0          0          0          0          0          (MT)
  Imports                                                                                      

  Other Imports   3500                  4015       3500       4100       0          4500       (MT)

  TOTAL Imports   3500                  4015       3500       4100       0          4500       (MT)

  TOTAL SUPPLY    222500                213015     222500     237115     9000       254500     (MT)

  Intra-EC        0                     0          0          0          0          0          (MT)
  Exports                                                                                      

  Other Exports   100000                95000      100000     112000     0          125000     (MT)

  TOTAL Exports   100000                95000      100000     112000     0          125000     (MT)

  Domestic        104000                102000     104000     105115     0          109100     (MT)
  Consumption                                                                                  

  Other Use/Loss  9500                  8000       9500       10000      0          10000      (MT)

  TOTAL           113500                110000     113500     115115     0          119500     (MT)
  Utilization                                                                                  

  Ending Stocks   9000                  8015       9000       10000      0          10000      (MT)

  TOTAL           222500                213015     222500     237115     0          254500     (MT)
  DISTRIBUTION                                                                                 
  --------------- --------------------- ---------- ---------- ---------- ---------- ---------- ---------

# Table 4. Production, Supply, and Distribution of Crab and Crab Meat, MT

  ---------------- -------------- ---------- ---------- ---------- ---------- ---------- ---------
  **PSD Table**                                                                          

  **Country**      **Russian                                                             
                   Federation**                                                          

  **Commodity**    **Crab and                                      (MT)                  
                   Crabmeat**                                                            

                   2002           Revised    2003       Estimate   2004       Forecast   UOM

                   USDA Official  Post       USDA       Post       USDA       Post       
                   \[Old\]        Estimate   Official   Estimate   Official   Estimate   
                                  \[New\]    \[Old\]    \[New\]    \[Old\]    \[New\]    

  **Market Year                   01/2002               01/2003               01/2004    MM/YYYY
  Begin**                                                                                

  Beginning Stocks 1800           1800       1800       1800       0          1900       (MT)

  Total Production 92000          92000      0          97000      0          99000      (MT)

  Intra-EC Imports 0              0          0          0          0          0          (MT)

  Other Imports    500            500        0          450        0          300        (MT)

  TOTAL Imports    500            500        0          450        0          300        (MT)

  TOTAL SUPPLY     94300          94300      1800       99250      0          101200     (MT)

  Intra-EC Exports 0              0          0          0          0          0          (MT)

  Other Exports    71000          71000      0          74700      0          76000      (MT)

  TOTAL Exports    71000          71000      0          74700      0          76000      (MT)

  Domestic         20000          20000      0          21150      0          22000      (MT)
  Consumption                                                                            

  Other Use/Loss   1500           1500       0          1500       0          1300       (MT)

  TOTAL            21500          21500      0          22650      0          23000      (MT)
  Utilization                                                                            

  Ending Stocks    1800           1800       0          1900       0          1700       (MT)

  TOTAL            94300          94300      0          99250      0          101200     (MT)
  DISTRIBUTION                                                                           
  ---------------- -------------- ---------- ---------- ---------- ---------- ---------- ---------

# Table 5. Production, Supply and Distribution of Fish Roe, MT

  --------------- --------------------- ---------- ---------- ---------- ---------- ---------- ---------
  **PSD Table**                                                                                

  **Country**     **Russian                                                                    
                  Federation**                                                                 

  **Commodity**   **Fish,Urchin                                          (MT)                  
                  Roe/Caviar,Livers**                                                          

                  2002                  Revised    2003       Estimate   2004       Forecast   UOM

                  USDA Official \[Old\] Post       USDA       Post       USDA       Post       
                                        Estimate   Official   Estimate   Official   Estimate   
                                        \[New\]    \[Old\]    \[New\]    \[Old\]    \[New\]    

  **Market Year                         01/2002               01/2003               01/2004    MM/YYYY
  Begin**                                                                                      

  Beginning       9000                  9000       9000       9000       0          8900       (MT)
  Stocks                                                                                       

  Total           51500                 52500      0          53200      0          54265      (MT)
  Production                                                                                   

  Intra-EC        0                     0          0          0          0          0          (MT)
  Imports                                                                                      

  Other Imports   1300                  2300       0          2000       0          1800       (MT)

  TOTAL Imports   1300                  2300       0          2000       0          1800       (MT)

  TOTAL SUPPLY    61800                 63800      9000       64200      0          64965      (MT)

  Intra-EC        0                     0          0          0          0          0          (MT)
  Exports                                                                                      

  Other Exports   16500                 17400      0          17800      0          18520      (MT)

  TOTAL Exports   16500                 17400      0          17800      0          18520      (MT)

  Domestic        23200                 23700      0          23600      0          23650      (MT)
  Consumption                                                                                  

  Other Use/Loss  13100                 13700      0          13900      0          13900      (MT)

  TOTAL           36300                 37400      0          37500      0          37550      (MT)
  Utilization                                                                                  

  Ending Stocks   9000                  9000       0          8900       0          8895       (MT)

  TOTAL           61800                 63800      0          64200      0          64965      (MT)
  DISTRIBUTION                                                                                 
  --------------- --------------------- ---------- ---------- ---------- ---------- ---------- ---------