By John Helmer, Moscow
In crowded city life, crabs – plural – meant an invasion of lice into warm body parts covered by hair. For readers who are virgins or who have had Brazilian waxing and can’t imagine running into the crabs, the illustration shows the little fellows in the hair of the head. In fact, a case of the crabs usually meant the pubic hair. Rubbing intimately was the way you got the crabs.
Gleb Frank (lead image, left), owner of the Russian Fishery Company, his father Sergei Frank (centre), chief executive of the state shipping company Sovcomflot, and Gennady Timchenko (right), Gleb’s father-in-law, financier of his businesses, and candidate to take over Sovcomflot when it’s privatized, have been rubbing each other intimately. They know where the crabs are and how to catch them. That’s because they are planning to create an oligopoly of the Russian crab industry, and dominate the Russian crab trade with the United States. That is, if the US Government, in defence of its crab fishermen, doesn’t hit the two Franks with the same sanctions as have already been imposed  on Timchenko because of Timchenko’s other association; that’s with President Vladimir Putin. He discussed the Frank crab-catching plan in a Kremlin meeting on December 14  last year.
In the newest version of the US sanctions law against Russia, introduced in the US Senate on February 13 , Gleb Frank, Sergei Frank and Sovcomflot are potential targets, not only because they are “family members of persons [“political figures, oligarchs, and other persons that facilitate illicit and corrupt activities, directly or indirectly, on behalf of the President of the Russian Federation, Vladimir Putin”] that derive significant benefits from such illicit and corrupt activities”; but also because they are “entities operating in the shipbuilding sector of the Russian Federation.”
Crab (and other) fishing is defined in Russian law as a strategic industry; foreigners are excluded from control investments without a protracted approval process which is generally unfavourable to them — unless they are Russians operating with dual nationalities and offshore registrations for their companies .
In 2017, according  to the state statistics agency Rosstat, the total value of Russian fish exports was $3.29 billion. Crab (crustacean) exports comprised $949 million; that’s 27%. In 2018, the total export value dropped to $2.05 billion; the crab value dropped to $551 million, still 27% of the aggregate. In other words, crabbing is the single most profitable business in the Russian fish market.
Russia is the world’s third largest exporter  of frozen fish; China leads, the US comes second. The direction of the Russian fish trade is mainly to South Korea and China, each of which takes one-third of the catch. The Netherlands takes another 20%, followed by Japan with 6%. The first three consuming countries don’t consume as much Russian fish as they buy; mostly, they process the fish and repackage it for trade to consuming countries. The US, for example, imports less than 1% of Russian fish exported directly ($18 million in 2017 and 2018). However, the US is a big consumer of Russian fish which has been processed and re-exported from China. That’s a big bone of contention in the current trade arguments between the US and China. US fishing companies want to reduce the Chinese share of the US import market; if they succeed, that will impact Russian fish exporters, led by the crabbers.
US figures for crab show that domestic Alaskan supplies have been dwindling while the volume of imported Russian crabs has been growing. The future for the Alaskan crab is growing worse , and the catch may be halted altogether for three years. The future for Russian crab exports, both live and frozen, is thus set to grow. The catch quotas for Russian crabs are growing too.
US CRAB MARKET, ALASKA VERSUS RUSSIAN IMPORTS
(in metric tonnes)
Source: https://www.undercurrentnews.com/ 
Administratively, the annual quotas for the crab catch are set by Rosrybolovtsvo (Rosryb), the federal Russian Fishery Agency, which is a branch of the Ministry of Agriculture. Its director since January 2014 is Ilya Shestakov, the son of a long-time St. Petersburg friend of President Putin’s. The reputation of Rosryb is not high among commercial fishermen; it is lower among amateur fishermen and sport anglers. For the suspected corruption at Rosryb in the new fishing licence programme for anglers, read this .
Source: https://www.undercurrentnews.com/ 
Rosryb’s policy has been to fix the new year’s crab quotas according to the catch figures submitted by the crabbers for the previous years. If they can’t catch at least half their quota in the preceding two years, their quota is cut. This is what Rosryb and the industry call the historical policy. However, this is about to change. Starting later this year, if legislation drafted by the government is accepted without change by the State Duma, half the crab catch will be auctioned to investors bidding the largest sum of money. This is a scheme which is fiercely contested by the industry because it is understood to be the idea of Gleb Frank and his financial backer, Timchenko.
On April 4, the first reading of the proposed law is due to be debated in parliament. The new scheme was drafted last year, and pushed through the government ministries and prime ministry in semi-secrecy, according to later press reports . There was then a television promotion of the scheme last December. This was so obviously paid for, it triggered angry recriminations from the fishing industry. The auction scheme “will lead to losses for the companies and coastal regions of more than 250 billion rubles by the end of 2020,” declared German Zverev, head of the All-Russia association of fishery enterprises, entrepreneurs and exporters.
Zverev (right) is reluctant to answer questions about Frank and Timchenko. Asked what explanation  he gives for the failure of Frank’s company to report a crab catch last year of not more than 25% of its quota, he refuses to say. There is speculation in the industry that under-reporting of the catch points to unloading of cargoes offshore and out of sight of the Russian tax authorities. In 2017 the Russian Fishery Company  (RRPK is the Russian acronym) paid Rb10 billion ($172 million) for its first crab quota; the sum far exceeded the company’s financial capacity at the time and is believed in the industry to have been provided by Timchenko. But Frank reported a catch of only 22% of quota that year; the figures for 2018 are not yet available.
The financial results reported by Frank are unclear and unaudited. One set of reports shows that in 2016 his sales revenue amounted to the equivalent of $17.4 million; bottom-line profit, just $1.5 million. In 2017 sales grew to $38.7 million, but costs to $39.9 million, so the bottom-line appears to have been loss-making . The company website publishes a presentation  by Alexei Mashchenkov, chief financial officer, in London in September 2017 which presents a picture of much larger revenues and earnings since 2013:
Source: http://www.russianfishery.ru/ 
Gleb Frank and Mashchenkov were asked to clarify the last two years of financial results and to explain how the company paid Rb10 billion for its 2017 crab quota. They did not reply. Industry sources suspect the difference between the reported financials is accounted for by the chain of offshore companies and multiple books through which Frank and Timchenko run their trade and dividends.
In his London presentation Mashchenkov included the crab quota payment of 2017 in this projection of the equity value of Russian Fishery Company, and hence its pitch for investment and debt financing in the international market. Mashchenkov’s chart and Frank’s ambition aim to double the value of the company in five years. They acknowledge that half of this growth is dependent on the growth of prices for pollock and other fish. They also expect to take over Russian fishing companies currently competing with them in the market “with M&A activities being the main driver for the industry consolidation.”
Source: http://www.russianfishery.ru/ 
A source in the fishing industry comments: “The crab quota scandal is a kind of time bomb. Crab is an export commodity and a large foreign currency flow is anticipated by Gleb and Co. But US sanctions can ban the exports. If that happens it will make all crab quota changes senseless. Plus, growing public attention can throw the spotlight on other businesses connected with the Timchenko-Frank family.” The US Treasury announcement  of the Timchenko sanctions in April 2014 named more than a dozen companies he controlled, including Aquanika, a water and beverage producer where Gleb Frank has been an executive ; and Transoil, a railroad oil transportation concern, where Gleb Frank’s wife, Ksenia Timchenko (right), is employed .
The source adds: “Frank senior looks like he is afraid of the growing publicity around the Frank name. He’s spent considerable effort to neutralize publications about himself in Moscow. Wisely, he’s understood, I think, that the crab fight will require huge resources of his relative [Timchenko] to defend the Gleb project. Maybe there won’t be enough money to protect Sergei Frank’s position in the privatization [of Sovcomflot]. Maybe in Timchenko’s financial interest, he will have choose which one to sacrifice — senior or junior.”
Warning of the “crash of the fishing industry”, the mass-audience daily Moskovsky Komsomolets (MK) reported  on March 21 that “a [crab] quota at electronic auction will most likely be won by the large Russian companies whose foreign operations risk new western sanctions. As a result, the officials who are standing up for the auctions will strike a knock-out blow to the entire fishing economy of the country.” The newspaper identified the two Franks, Sovcomflot, Timchenko and the United Shipbuilding Corporation (also under US sanction) as the group trying to consolidate the crab and other fish catches under their control. “Such risks are very real, and they depend on the international, geopolitical circumstances which are not subject to [Russian] control and regulation. As a result, all industrial production of crab can suffer.”
Versiya followed on March 25  with a direct attack on the Franks and Timchenko, accusing them of making “a legal mockery of fishermen”, and charging the Duma with making Gleb Frank the “crab king”:
Source: https://versia.ru/ 
The newspaper reported that unusual secrecy has been adopted by the government to push the new crab quota scheme through. “It will mean a complete redistribution of the market, including pollock, cod and other popular fish species in Russia. No other explanation can be found for the actions of our officials.” Frank’s company is already the leading Russian producer and exporter of pollock, and a major producer of herring.
Source: http://www.russianfishery.ru/  The Mashchenkov paper projects a substantial growth of its market share for pollock. “Company already benefits from the largest quota allocation of pollock fishing in Russia (total 1.8 ml tons in 2017) -- 1/3 of pollock quota is still fragmented (100+ entities) presenting opportunity for further volume growth.”
“World practice,” Versiya correspondent Alexei Privalov wrote, “shows that auctions are rarely used as the basic principle of quota distribution. The result of auctions is always the same: the murder of competition, the concentration of resources in one hand, and as a consequence, the decline in the efficiency of the industry. If all this happens in our country, who will lead this ‘fish Gazprom’?”
Privalov described the complicated offshore chain of companies through which Gleb Frank, identified as a permanent resident of Switzerland, controls his Russian holding, including Rsea Holdings of Cyprus and Kudu Capital in the British Virgin Islands. RRPK also lists a Singapore trading entity and branches in Germany, China, Korea, and Japan. “What will happen,” Privalov asked, “if a fish monopoly controlled by Gleb Frank is created in Russia? If today the money earned in the crab industry goes to the construction of ships and factories, as well as to the provision of work and wages to tens of thousands of residents of coastal regions, then tomorrow these funds may well end up in the accounts of foreign banks.”
The newspaper quoted  Alexei Binetsky, a Moscow lawyer: “I’ve read the crab law. Honestly, I’m amazed at the cynicism. I feel sorry for the fishermen. I can’t believe lawyers would write something like that. [It’s a] a non-legal document. There are no transitional provisions, no compensation or other legally binding provisions – a gap in the gap. It is clear now why the secrecy and such haste. It is not a law, but only the semblance of one!” The Russian Fishery Company’s head office in Moscow was asked to respond; it refused.
At Sovcomflot Sergei Frank is suffering from problems more serious than crabs. The company’s latest financial report , audited by Ernst and Young, shows the company, one of the world’s largest tanker operators, was in the red for two years in a row; in the five years since 2013 Sovcomflot has lost $198.2 million. The new report also reveals that Frank’s 14-year long litigation in the London courts may cost another $90 million in costs, damages and penalties. So far, according to the company’s reports for earlier years, $147.6 million has been set aside to pay the London court awards against Frank. Legal costs for Sovcomflot are buried in the company’s administrative expense accounts; they are estimated by London lawyers to have reached another $50 million. The story of the Sovcomplot, Frank’s lawsuits against his predecessors in the Russian shipping business, Dmitry Skarga, Tagir Ismaylov (Ismailov), and Yury Nikitin, has been told here . The verdict of the British courts has been that Frank acted with “impropriety”; his testimony was “dishonest”; his litigation “vindictive”.