TED Case Studies

Caviar Trade

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          CASE NUMBER:         221 
          CASE MNEMONIC:      CAVIAR
          CASE NAME:          Caviar Trade

A.        IDENTIFICATION

1.        The Issue

     The phrase "Champagne wishes and caviar dreams" may be a
foreshadowing of the future, as dreams may be the only place
people will be able to get caviar or, more specifically, premium
caviar.  The fish which produces the luxury food is found
primarily in the Caspian Sea which at this time is undergoing
growing pains as newly independent nations compete for a market
share in the caviar business.  These new competitors are helping
to cause major over-fishing in the Caspian and not allowing
enough fish to live to repopulate.  By not having quotas, catch
limits or regulations, the sturgeon fish which produces caviar,
are being caught in the Sea before they have a chance to spawn. 
The result is less and less fish to repopulate the waters.

2.        Description

     Caviar trade has become a convenient way to obtain money in
the countries bordering the Caspian Sea.  Russia, Iran, and the
newly independent nations of Kazakhstan, Azerbaijan, and
Turkmenistan border the Caspian Sea, the world's largest lake. 
The surface area of the lake is over 374,000 square kilometers
with 80 to 90 percent of the world's sturgeon living within the
lake.  Sturgeon are the species of fish that produce "one of the
great symbols of luxury and ostentation" or, more commonly
referred to as caviar.  There is a problem concerning this large
lake and the nations that surround it.  The sturgeon in the lake
are being fished to extinction because "sturgeon are now seen as
hard currency with fins."  Not enough fish are being left in the
sea to reproduce and once the sturgeon are gone, so is the money
from producing caviar.

     From the point of view of Russia, caviar has been it's
treasure since Peter the Great in 1672.  Fifty royal fishermen
were commissioned to keep the royal court swimming in sturgeon. 
The Bolsheviks kept the tradition up in 1917 by creating a state
caviar monopoly.  Until recently, only the Soviet Union and Iran
had control of the Caspian Sea and agreements between them kept
the sturgeon population at an acceptable level in order to
preserve the treasure.  Now, Kazakhstan, Azerbaijan, and
Turkmenistan are involved in the life of the Caspian.  Russia has
become only one player in five and their prize is being plundered
without regard for the future.

     "Each of these newly independent states has it's own
economic problems, and each seems to have decided.  Any fish that
swims by my shores is mine...Manufacturing is difficult, and here
a fish swims by that's all ready-made.  All you have to do is
catch it and sell it -- and the more, the better."  This
attitude has allowed the combined countries fisherman to kill up
to 90 percent of the spawning sturgeon before they reproduce. 
The recommended allotment is only  50 to 60 percent.  At the
beginning of the 20th century, over 50,000 tons of fish was
caught each year.  The catch now is less than 5,700 tons.  Russia
has been making efforts since 1962 to preserve the sturgeon
population by banning sea fishing, instead only allowing fishing
in rivers, and releasing over 80 million sturgeon fry into the
Volga river each year.  These precautions had helped slow the
diminishing fish population but independence has seen these
efforts wasted.

     Sturgeon are actually pre-historic creatures that have
survived what dinosaurs could not.  They have more chromosomes
than humans and are able to adapt more quickly to changes but
they are unable to survive "human stupidity."  The stupidity of
humans can be seen in the overfishing, pollution and greed which
exists and is causing the extinction of the sturgeon.  Sturgeon
can live for over a 100 years and do not even reach maturity
until they are at least 18.  Females can reproduce at least
three times in their lifetime, an advantage over salmon which die
after spawning.  Sturgeon have grown to weigh 3,000 pounds each
and even 15 years ago, 900 pound beluga sturgeon could be caught. 
Today, fisherman are lucky to find any of the fish weighing 100
pounds and that do not show signs of disease.

     The sturgeon spawn in rivers but most of the nations
surrounding the Caspian have dammed up their rivers, such as the
Volga, the Terek, and the Kuma, leaving few places for the fish
to go.   Accessible rivers are few and becoming fewer as natural
dams of silt are beginning to bar the way.   Besides blocked
spawning grounds, pollution from the industries along the rivers
and even radioactive sediment from the Chernobyl incident
threaten the lives of the fish (see CHERNOBL case).  To further
this threat, Kazakhstan and Azerbaijan have signed exploration
agreements with oil companies who see the Caspian as being richer
in oil and gas than the North Sea (see CASPIAN case).  Both the
Russian deputy prime minister for economy and the foreign
minister have said that the deal must not go through due to the
ecological damage it would cause.  As it is now, "water
pollution control remains primitive to nonexistent in most of the
Caspian basin."

     The basic problem at this precise moment is not the
pollution but the over-fishing.  Poachers from all the nations
take between 30 to 50 percent of the legal catch.  It is
understandable with caviar being treated like gold in that it is
sold by the ounce.  One ounce can cost upwards of $50 dollars
retail in the United States, depending on where a person buys it,
and one sturgeon can have $500 dollars worth of caviar inside it. 
Quotas on the amount of fish taken each year would be a logical
answer since that had worked well when there was only the Soviet
Union and Iran. "International catch limits -- strictly enforced
-- are the sturgeon's only hope." 

     "Either we agree on rules for catching sturgeon or we
     simply destroy the fish altogether. If we can reach
     agreement with the United States on limiting production
     of nuclear missiles, surely we can reach an agreement
     with other [former Soviet] republics on catching
     sturgeon."

      However, the results of any agreement are questionable from
many experts points of view.  "Even if a quota agreement is
eventually reached, it may prove impossible to enforce because of
the proliferating number of fishing ministries and inspectorates
and the huge profits to be made from the illicit trade in
caviar."

     A Russian fish inspector goes on to say that even if their
where regulations, the possibility of enforcing those regulation
on a business worth millions and millions of rubles is almost an
impossibility.  The fact that the Azerbaijani Mafia controls most
of the illegal caviar trade and wishes to continue doing so lead
law enforcement officials to not want to enforce laws. 

3.        Related Cases

     CASPIAN case
     AZERI case
     BOSPORUS case
     SALMON case

     Keyword Clusters

     (1): Trade Product                 =    FOOD
     (2): Bio-geography                 =    OCEAN
     (3): Environmental Problem         =    Species Loss [SPLS]

4.        Draft Author:  Andrea Quinn

B.        Legal Clusters

5.        Discourse and Status:   DISagree and INROGress

     The five nations fishing the waters of the Caspian disagree
on the amount of fish that should be allowed to be caught.  How
much, where and when are major discussion points along with the
problem of who get to catch how much.  Iran and Russia had
previously had an agreement on the amount of fish that could be
caught and where but new talks between the countries are needed
and so far the talks are in the very basic stages where only
suggestions are made and no binding commitments (see SALMON
case).

6.        Forum and Scope:   RUSSIA and REGION

7.        Decision Breadth:  5
     It has become a regional problem since all the countries are
catching fish and making money from that venture. The extinction
of the sturgeon would effect economically all of the nations
8.        Legal Standing:   TREATY

     A treaty once existed between Russia and Iran on the amount
of fish to catch, where and when.  A new treaty is needed between
the original two and the three newly independent states that are
catching indiscriminately, wherever and whenever they choose.

C.        GEOGRAPHIC Clusters

9.        Geographic Locations

     a.   Geographic Domain   :    ASIA
     b.   Geographic Site     :    Western ASIA [WASIA]
     c.   Geographic Impact   :    RUSSIA

10.       Sub-National Factors:   NO

11.       Type of Habitat:  OCEAN

D.        TRADE Clusters

12.       Type of Measure:   QUOTA

     Saving sturgeon at this time would require that  a quota be
set by the five involved countries on how many fish could be
caught.  Limiting the catch and repopulating the Sea are the only
solutions for the continued life of the species and the continued
money that is being made for the sale of caviar.

13.       Direct vs. Indirect Impacts:   INDirect

14.       Relation of Measure to Environmental Impact

     a.   Directly Related    :    YES  CAVIAR
     b.   Indirectly Related  :    YES  FISH
     c.   Not Related:        :    NO
     d.   Process Related     :    Yes  Species Loss Sea [SPLS]

     The process of catching too many sturgeon and of improperly
netting them is depleting the supply of the fish and leading it
to extinction. "Over 900,000 young sturgeon die each year because
of improper netting." 

15.       Trade Product Identification: FOOD

16.       Economic Data

17.       Impact of Measure on Trade Competitiveness:  HIGH

     The measures needs to save the fish will severely reduce the
amount of money to be made from the fish produce sales in the
short term but allow for money to be made for many years into the
future.

18.       Industry Sector:    FOOD

19.       Exporter and Importer:   RUSSIA and USA

E.        ENVIRONMENT Clusters

20.       Environmental Problem Type:   Species Loss [SPLS]

21.       Name, Type, and Diversity of Species

     Name:          Sturgeon
     Type:          Animal/Chordata/Vert/Fishes/Bony
     Diversity:     NA

22.       Resource Impact and Effect:  HIGH and REGULatory

23.       Urgency and Lifetime:    MEDium and 100s of years

     Two-thirds of the species may be extinct in the next 50
years.  Sturgeon have a natural life span of over a hundred years
but that has been reduced by pollution and overfishing.

24.       Substitutes:   LIKE

     "Alexei's Caviar-Like" is imitation caviar made from a
combination of fish fats, vegetable fats, salt, water, and
natural preservatives and stabilizers.  This product is not only
healthier, with less cholesterol and fat and one-fourth the
calories as real caviar, it is also kosher, which opens up a
whole new market. Real caviar is non-kosher because it comes from
the scavenger fish, sturgeon and lumpfish.  At this time
Alexiei's is only available in Israel.  Besides a substitute,
Russia and Iran have tried to help repopulate the Sea by
releasing millions of fish fry into the Sea.

F.        OTHER Factors

25.       Culture:  YES

     "In Russia, the loss of the sturgeon is as much a cultural
catastrophe as an economic one.  A potent symbol of a once
pristine and bountiful land, the sturgeon remains an important
icon to a people desperate to recapture it's heritage."  The
caviar industry has survived for centuries and has become part of
Russia's identity. It is one of the few product of Russia that
carries a feeling of luxury and distinction.  To lose the ability
to sell caviar is like not being able to sell Vodka anymore.  The
fishermen in all five nations would also lose their whole way of
life.

26.       Trans-Border:  YES

     The issue spans across five nations.  Russia, Iran,
Kazakhstan, Azerbaijan, and Turkmenistan are all directly
involved in the issue of sturgeon depletion in the Caspian Sea. 

27.       Rights:   YES

     With the sturgeon fished to extinction, the caviar industry
in the Caspian Sea region would die and through many people into
poverty.  It would also force a totally new way of life on the
fishermen who would be out of a job. 

28.       Relevant Literature

"Affordable Caviar." Popular Science 242/3.  March, 1993. 
"Black Caviar From Overseas?"  RusData DiaLine - BizEkon News.
     August 5, 1994. 
Berman, Phyllis and Dana Wechsler.  "King Caviar."  Forbes.
     142/ 11.  November 14, 1988, 46.
"Caspian Consortium Seals Deal;  Focus:  Kazakhstan."  Petroleum
     Economist 61/1 (January 1994),  32. 
"Caspian Sea Legal Move."  East European Markets.  October 28,
     1994.
"Confronting the Challenges of Caspian Seismic Survey; Part II."
     Offshore.  October, 1994, 29. 
Efron, Sonni.  "Column One; A Caviar Crisis in the Caspian;
     Poachers, Smugglers and Cash-Hungry Former Soviet
     Republics Are Devastating the Supply of Precious Roe." 
     Los Angeles Times, Saturday, August 28, 1993, A1.
"Environment: Independent Fund Urged for Global Development."
     Inter Press Service. Saturday, January 14, 1995. 
George, Dev. "Kazakh Caspian Seismic Project Facing
     Environmental." Offshore. June 1, 1994, 24. 
"In Brief:  Floods Threaten Caviar Source."  The Independent. 
     Thursday, December 22, 1994, 4.
"Iranian Caviar Production Hits New Low."  Agence France Presse.
     October 17, 1994. 
Karey, Gerald. "Regulation & The Environment."  Platt's Oilgram
     News 72/ 99.  May 23, 1994, 3. 
"Kazakhstan To Receive Environmental Aid Totaling $62 Million 
     From US, World Bank."  The Oil Daily 44/10 (January 14,
     1994), p. 3.
Lloyd, John. "Russian Proposal For Caspian."  Financial Times.
     Tuesday, September 27, 1994, 3.
Mendes, Joshua. "Caviar 101."  Fortune 127/7.
     April 5, 1993, 128.
Neale, Greg. "Plundered Seas at Crisis Point."  Sunday Telegraph.
     Sunday, January 29, 1995, p. 11.
"Official Says Pollution, Excessive Fishing Responsible For Fall
     In Beluga Catch."  BBC Summary of World Broadcasts.
     Tuesday, October 25, 1994.
Ryckman, Larry. "Soviet Demise Spans Struggle For Caviar."
     Chicago Tribune.  Sunday, August 9, 1994, C8. 
"Scientists: Sturgeon Population On Wane."  Proprietary to the
     United Press International, July 28, 1994, BC Cycle.
"Seas: Pollution, Over-fishing Plague Marine Resources."
     Greenwire. January 26, 1995.
"Uzbekistan: No More Caviar."  The Economist 333/885.
     October 15, 1994.
Verbin, Anatoly. "Russian Caviar Area Faces Pollution Threat."
     Reuters, Limited.  Sunday, July 25, 1993, BC Cycle.
Yudin, Pyotr. "Police Teams Seize Fishy Fortune in Black-Market
     Caviar."  The Moscow Times.  October 12, 1994.

                          References