Gleb Frank has been mentioned in every piece of news about fishery in the last six months. The former Minister of Transport’s son has recently become virtually the only owner of Russkaya Rybopromishlennaya Kompaniya (“Russian Fishery Company”). Now, he is getting ready to seize the whole industry; his family has his back.
The government was changed several days ago; swamp full of public officials was profoundly disturbed. It is unlikely heads of ministries and institutions are afraid of losing their jobs; almost all newly appointed people are old-timers. Meanwhile, being “acting” this or that used to let officials do a wide range of things; it is the new government that will have to deal with all unpopular decisions. Plus, it will be hard to blame mistakes and blunders on miscommunication between agencies.
A lot of people were glad to take advantage of the confusion. The government worked a lot despite the May holidays. Lots of news on an upcoming May 15 meeting held by Presidential Aid Andrey Belousov was published on the Internet. It should have been about the fishery industry. Belousov was going to cancel the existing rules for quotas distribution and fishery practices. It is worth mentioning that Federal Fishery Agency officials did not want anyone to know about their meeting. However, the media was not the main adversary; they mainly did not want the fishery industry players to know about it.
Presidential Aid Andrey Belousov. Photo: Sergei Savostyanov / RIA Novosti
However, Belousov did not show up for the meeting. Federal Fishery Agency deputy head Petr Savchuk held the meeting instead. This meant it was not as high level anymore, so it is unlikely something as groundbreaking as the mentioned changes was introduced. It is no surprise the Federal Fishery Agency is indecisive. The idea of reintroduction of auctions scares the industry players, including fishermen, oligarchs, governors, and members of the former government. They all have one thing in common; the memory of how such auctions used to be held.
The existing rules, or the “historical principle”, meant that those who had fished in a certain area were more likely to be allowed to fish there again. Such an approach ensures the industry development. The majority of developed countries employ this principle. Russia introduced it in 2004.
Prior to 2004, fishing quotas used to be sold at auctions. They would be bought by those who had more money, usually financial industry players. They would simply sell fish and seafood abroad as soon as possible and grab as much money as they could. Fish-canning plants were out of work. The unemployment rate in Kamchatka, Sakhalin, and other cities dependent on fishery skyrocketed. The fishery industry soon attracted a lot of criminals due to easy profits. It all led to Magadan region Governor Valentin Tsvetkov being shot dead in Moscow. It may have been due to a conflict over crab fishing quotas between him and some businesspeople. Crabs are worth much more than even the most expensive fish species. Businesspeople profited significantly off of selling crabs in the early 2000s.
Late Magadan region Governor Valentin Tsvetkov
The murder scene
Tsvetkov’s scandalous murder forced federal officials to reform the industry.
That is when the historical principle was introduced. Initially, quotas would be issued for five years; pouching died down some, shipbuilding and fish processing experienced revival. Then, quotas would be issued for 10 years. Finally, the number was increased to 15 years in 2016. Many people became billionaires in recent years off of fishing. This includes Aleksandr Verkhonsky, a former senator from the Sakhalin region; Sakhalin region Governor Oleg Kozhemyako’s family; Kamchatka senators Valery Ponomarev and Boris Nevzorov; some other high-ranking officials. Who is the person who managed to push the Federal Fishery Agency towards going against interests of such powerful lobbyists and trying to reintroduce the auction system?
Give me a crab!
The answer to the second part of the questions is quite straightforward – auctions are the better option for new players with lots of money. A new crab fishing market player appeared a year ago – Maksim Vorobiev and Gleb Frank’s Russkaya Rybopromyshlennaya Korporatsiya (RRPK).
Turnif controlled by RRPK won six auctions for crab fishing rights for 2.4 tons. Maksim Vorobiev and Gleb Frank paid 10.3m rubles ($168.6m) for it. It is worth mentioning that last year, Turnif fished only 1/3 of its quota but got caught illegally reselling its quotas. Subsidiaries of RRPK have to cover their tracks because RRPK had quotas for a certain type of crab that could only be processed in Russia. However, there is no need to use loopholes anymore. The government lost interest in the crab species as soon as RRPK entered the industry. It is no longer mandated the species be processed only in Russia.
This is no surprise if you are familiar with the reach backstory of RRPK. Maksim Vorobiev and Gleb Frank are related to members of the government. Maksim Vorobiev is the brother of Moscow region Governor Andrey Vorobiev. Gleb Frank is former Minister of Transport Sergey Frank’s son and Gennady Timchenko’s son-in-law. RRPK became the largest Russian fishery industry player thanks to its founders’ family tree. That is why Turnif’s rivals got nervous when it bought the crab fishing quotas. They had a reason for that, as it turned out.
Maksim Vorobiev, brother of Moscow region Governor Andrey Vorobiev
In the fall of 2017, it became obvious that RRPK was not satisfied with the second place anymore. Someone reportedly sent Vladimir Putin an anonymous letter asking to reform the fishery industry, which rang the alarm for the other industry players. Despite anonymity, it is easy to guess who the authors are. They asked the President to dismiss the historical principle and reintroduce quotas for crab fishing. They also suggested dismissed investment quotas (allocated if you promise to build crab fishing vessels in Russia). Belousov was tasked with entertaining the proposal.
Sovereign of the Seas
The industry players were outraged. The following organizations and individuals protested: National Association of Fishing Companies and Fish Exporters; National Union of Industrialists and Entrepreneurs; Deputy PM Arkady Dvorkovich who called the idea “nonsensical”. In an attempt to calm down the unrest someone even tried saying the letter was written by the FSB that began curating the industry. This did not help.
The issue would not be solved, however. Another letter was sent to the president. The letter was signed by RRPK. They asked for the same thing mentioned in the first letter and promised to build a modern crab fishing vessel.
This makes it obvious both letters were written by RRPK. However, Maksim Vorobiev and Gleb Frank had different visions, according to the industry players. Maksim Vorobiev did not like the idea of aggressively taking over the market.
He may have quitted RRPK due to the letters sent without his consent. Gleb Frank was not upset about it; he became the owner of 89.95% of the RRPK stock and keeps sabotaging the industry.
The Federal Fishery Agency keeps entertaining the idea of reintroduction despite it being detrimental to the industry. Federal Fishery Agency head Ilia Shestakov is an old friend of the Franks. His deputy Petr Savchuk is friends with Frank Junior since he used to be the head of the Far East arm of RRPK. This means there is no hope of the idea of reintroduction fading away. It is obvious what will happen to the industry then.
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