By John Helmer, Moscow
The privations of war and the taste for oysters don’t usually go in the same direction. Two years into the new war, the problem now for Russian oyster farmers is that if they aren’t careful, they may harvest not just plenty of home-grown oysters to replace imports within a year or two. They may also produce far more oysters than Russian consumers can afford to eat. If that happens, it will be the Russian oyster farmers and investors along the Black Sea shore who will suffer.
In the last years before World War I, Russian oysters were an export trade. An estimated 12 million oysters, mostly from Crimea, were shipped to Paris and other European cities. Oystermen say the lower salinity of Black Sea waters, compared to the Mediterranean and Atlantic coasts of France, make the Russian shellfish less salty, tastier with champagne. Three wars destroyed demand, as well as the cool stores and fast transportation from Russian coast to European market on which the oyster business depended.
Then in 1947 Soviet Navy torpedo boats based in the Sea of Japan brought to the Black Sea in their ballast water the rapa whelk. That predator mollusc began eating the oysters of the region towards extinction. It was the same extinction which the Revolution had decided for the oyster-eating class of Russians. Not many fish-eating Russians regretted either.
During the post-war Soviet period, oyster consumption was minuscule, limited to resort hotels and restaurants on the coasts of the Black Sea and Sea of Japan. Demand for imports didn’t pick up until wealth and conspicuous consumption accelerated in Moscow and St Petersburg in the mid-1990s. At peak between 2012 and 2014, Russians were quaffing 5 million oysters — about 4.4 million imported from abroad; 300,000 from the Black Sea region, and another 300,000 from the shores of Primoriye.
The French and British, by comparison, eat about 500 million and 230 million oysters annually. The species of oyster are different. The West Europeans farm and eat Ostrea edulis; the Russians, Ostrea taurica; the Japanese, Crassostrea gigas; the Americans on the Atlantic seabord, Crassostrea virginica; the Chileans and New Zealanders, Ostrea chilensis.
For the first 20 years of post-Soviet Russia very small numbers of fresh, expensive oysters reached up-market Russian restaurants from France. Larger volumes landed of relatively cheaper, cooled or frozen mussels. Then there was a take-off.
Philip Owen (right), head of the food and farm broker, Volga Trader, explains how the oyster and mussel market expanded on the conviction that Russia had crossed a prosperity threshold, and wouldn’t be looking back. “I looked at mussels around 2012. The European Union (EU) was not the main source of mussels. That is Chile. The Chileans invested quite a bit in promotion of their oysters and mussels.From memory, Year-1 was less than a container; year-2 was three, and then it exploded. The world’s biggest mussel farm is at Tauranga, on the North Island of New Zealand. I tried to interest the New Zealanders in the Russian market, but they wouldn’t put up any money. The Chilean mussels started with one warehouse and a few local shop chains. Then it got to be big business quickly. Prawns arrived at the same time. EU shellfish turned up later.”
In 2013 and 2014 Russian imports of these shellfish hit peak, with most of the volume shipped from Pacific Ocean states. Russian customs data aggregate oysters with mussels, and their recorded import total in 2013 and 2014 was rising at a fast rate between 35,000 and 50,000 tonnes. One tonne of oysters counts about 12,500 shells; in the peak years, 2013-2014, imports of oysters were reported by industry sources to have been running at about 120 tonnes or 1.5 million shells. The bulk of the shellfish imports in this table were mussels.
The Russian ban of August 2014 on EU imports of food products was modified a year later, by mid- 2015, in order to allow importation of oysters and mussels for seeding the Russian farms on the Black Sea shore.
Since then the combination of rising prices, on account of rouble devaluation; falling Russian incomes; and increasing domestic tourism to the Black Sea shore from Crimea down to Sochi, has helped push consumption and production of both oysters and mussels. Russian experiments with different types of oysters has also established that the Pacific species, Crassostrea gigas, does better in the Black Sea than Ostrea edulis or other French or English types.
This year, according to Krasnodar administration estimates and those of Maxim Kryukov, a senior executive at Courchevel, one of the largest oyster and mussel farms near Sochi, upwards of a million oysters (80 tonnes) are likely to be harvested. The number in Crimea is expected to be about 3 million (240 tonnes). At the same time, countrywide, Russian consumption of fish has been falling sharply from mid-2014. Consumption of oysters and mussels went down more than proportionally – by 45% between 2014 and 2015 for the Top-5 import countries, according to the table.
Still, according to Kryukov and to fishing industry estimates, by the end of this year the Russian oyster harvest will be approaching half the expected volume of oyster imports. If fresh investment can be attracted and more tracts of the sea licensed for farming, the consensus forecasts are that within one or two more years Russian oyster production will feed the entire domestic market; that’s 100% import substitution.
The policy of the fisheries administration in Moscow, the Federal Agency for Fishery (Rosrybolovstvo), as well as its regional branches and the governments of Crimea and Krasnodar, has been to try drawing new investment into fish farming, particularly into shellfish.
Ilya Shestakov (right), head of Rosrybolovstvo, inaugurates Moscow Fish Week, May 13-22, 2016
By auctioning areas of shore water for 25-year leases, the federal and regional governments have tried to bid up the value of investment. So far, some press reports claim, the auctions have allocated about 2,000 hectares. These auctions may be encouraging rapid growth in Russian oyster production, but they have also caused trouble and controversy.
Since February 2015 Sergei Kulik, a long-established oyster and mussel farmer at Katsiveli – between Sevastopol and Yalta, on the southern tip of Crimea – has been unable to renew his expiring 10-year lease. Rosrybolovstvo has been insisting on an auction at which Kulik must bid against the competition. Kulik argues that as the only industrial-volume producer on Crimea, and one of the few in western Russia, with $2.5 million in investment already spent, he is entitled to exclusive lease renewal and preferential terms. Kulik has made his case in more than dozen regional and national media, including Novaya Gazeta and US Government radio. Click to view a third example.
In recent weeks, Kulik claims to have won the support of Alexei Ulyukaev, the federal Minister of Economic Development; and Boris Titov, the federal ombudsman for small business. Ulyukaev has personal homes and family business interests in Crimea; Titov is the owner of the large Krasnodar vineyard and wine business known as Abrau-Durso. For more details of Titov’s plan for winegrowing in Crimea, and his commercial interests, read this.
According to Kulik (below left), the real reason he is unable to renew his lease is that his oyster farm is the target of an asset raid by the Russian Black Sea Company (aka Crimean Seafood), owned by Dionysius Sevastyanov and his brother-in-law, Robert Stubblebine. Stubblebine (right), a US national who has lived in Russia for more than 25 years, was one of the founding shareholders in Yandex, and he remains an employee of the company in Moscow still.
Kulik won’t respond without advance approval for articles containing his direct quotes. Stubblebine has been reported by Komsomolsya Pravda as saying: “I do not know who Sergei Kulik is. I have no relationship to Crimea, and I have lived in Moscow for a long time. My relatives and I don’t have any company. It’s some kind of mistake.” This week he refused to respond to all enquiries.
At their present standoff, Kulik is on course to produce between 1.5 and 2 million oysters by the end of this year; Russian Black Sea Company, about 3 million oysters. On present calculations by regional fishery experts, an investment into an oyster farm of Rb15 million ($230,000) per year, plus annual production costs of Rb35 million ($540,000) per year will break even within two years, with sales revenue of Rb50 million ($770,000), at a wholesale price of Rb100 ($1.50) per oyster. Sevastyanov and Stubbledine have announced much larger investment and production targets than Kulik. He has responded by accusing them of not knowing what they are doing.
In Sochi Kryukov calculates that soon, for each oyster and mussel Russians will buy to eat, two oysters, two mussels will have to find an export destination. So, either the price must fall to encourage more domestic consumer appetite; or else the Russian producers will have to invest in export facilities, including refrigerated storage, road and air transport. These are far more expensive than the outlays required so far for farming.
A second controversy has been even sharper than Kulik’s battle with Stubblebine. This is unfolding 500 kilometres east on the mainland coast at Cape Idokopas, near Gelendzhik, between Novorossiysk and Tuapse. It is here in auctions last December and March of this year that the Azov-Black Sea Territorial Department of Rosrybolovstvo awarded several sea areas for farming the Pacific oyster (Cassostrea gigas), the Mediterranean mussel, two varieties of sturgeon, and a species of mullet. Almost a thousand hectares have been leased. The lease award price paid has been reported at Rb2.4 million ($36,000). Lease terms require annual production after three years of start-up of between 6,000 and 7,000 tonnes, counting both fish and shellfish.
This is no ordinary fish farm, according to reporting last week by the RBC newspaper group in Moscow. For the report charges the aquaculture leases are part of the same scheme of ownership of the palatial compound which has been constructed on the top of the cliffs. RBC intimates that the sea leases are intended, less to produce oysters and mussels, and more likely to screen the shore installations and beach from observation or approach from the sea.
MAP OF THE OYSTER-MUSSEL LEASES OFF CAPE IDOKOPAS COMPOUND
ILLUSTRATION OF THE SHORE COMPOUND INSTALLATIONS
No misconduct by Rosrybolovstvo or the new leaseholders is charged in the RBC report on the oyster and mussel lease bids. But by reporting links between names of the individuals involved on the sea and on the hill, together with their personal, official or commercial relationships, the report refers back to earlier publications by RBC and many other Russian media. Dating back to 2010, these claim that the compound was built as a seaside palace for President Vladimir Putin. Up to $1 billion has been reported for the cost of construction, and up to $350 million for the sale value of the building, associated facilities, the exclusive-use beach, and the land.
Putin has denied involvement or interest in the resort. But a number of his friends and their kin, together with officials of the presidential property administration, or their wives, relatives, friends and business associates have been identified at various stages of the purchase, design, construction, financing, resale, and management of the development at the compound. Nepotism is the obvious wrongdoing alleged. But despite the accumulated dossier of investigative reports, evidence to substantiate the allegations of embezzlement of state funds and other financial crimes has fallen short. Here is a summary. Guilt by association is plentiful; so is the claim of the US Government radio that there has been a coverup by state officials to protect Putin.
The RBC report of the seaside oyster project makes no allegation of wrongdoing, but it implies the project is part of the same scheme of wrongdoing on the cliff top.
Missing from the investigation reported so far is the consensus of experts on oyster cultivation. They agree that the seawater for oyster farming must be rich in the algae oysters consume, and clean of human waste. In the siting of the proposed oyster beds off Cape Idokopas, experts advise that whoever is living in the compound on the hill must make sure to defecate in an easterly direction. If sewerage is allowed to flow westward – that is, into the sea – then microorganisms will wash back towards the oysters as they grow in their beds, and they may die. Or if not the oysters, anyone imprudent enough to eat them.