The issue of
timber-export duties may very well sour Russia's
relations with Finland
or foreign investors soon.
The Government is
nearing a decision on whether to raise round-timber export duties or keep the
current rates, Prime Minister Vladimir Putin announced at a Government
Presidium meeting on October 19.
Current duties of
15 euros per cubic metre may reach 50 euros starting January 1, 2010. Moscow has already responded to Helsinki's request once by opting not to
introduce restrictive timber-export duties starting January 1, 2009.
So, should
timber-export duties be raised or not? Clearly, this is a difficult question
for Russia.
On the one hand, the relevant decision concerning restrictive timber-export
duties meets the interests of foreign and Russian investors who have either
already built or are currently building timber-processing facilities in Russia.
The Industry and Trade Ministry has already approved 75 high-priority
investment projects worth 429.7 billion roubles in this sphere. Eight
facilities have been commissioned and over 16 billion roubles invested. Current
duties could prove detrimental for these enterprises because their investment
programmes stipulate for higher duties.
On the other hand,
Finland, Russia's main importer of timber, has not yet
made the final decision on laying the Nord Stream gas pipeline, which will link
Russia with Germany via the Baltic Sea,
in its territorial waters. This strategic pipeline would pump natural gas
bypassing Belarus and Ukraine.
"The Finnish
side's well-known stance has not changed," Putin's spokesman Dmitry Peskov
said. He went on to say that this would be an especially difficult decision
because Russia and Finland shared
comprehensive mutual interests. Earlier, Finnish Prime Minister Matti Vanhanen
asked Mr Putin to hold off on raising the duties. It's quite possible that the
final decision will come after the Third Russian-Finnish Forest Summit this
Sunday, where Mr Putin and Mr Vanhanen are scheduled to meet.
Deputy Industry
and Trade Minister Andrei Dementyev indicated that the timber-export duties
issue was no longer a problem.
"The Finnish side
is likely to ask questions on the matter. But I'm almost certain that the issue
has already lost its urgency, including with our Finnish colleagues," Mr
Dementyev told the paper.
He pointed out
that the export-oriented Finnish timber industry had become less competitive as
a result of falling demand on global markets. "The slump exceeds our own
decline considerably. Unfortunately, no feedstock is required when ready-made
products can't be sold," Mr Dementyev said. According to him, Finnish
colleagues were well-aware that the relevant 2007 decision to raise export
duties would gradually be implemented.
Nevertheless, the
Government Commission on Foreign Trade Protection Measures in Customs and
Tariff Policy, headed by First Deputy Prime Minister Viktor Zubkov, suggested
retaining the current round-timber export duties in 2010. The Commission cited
reduced demand for Russian round-timber and argued that it was pointless to
create additional export barriers.
On October 19, Mr
Putin told a Government Presidium meeting that the current economic and
financial crisis was no reason to renounce principled decisions adopted
earlier, and that this would run counter to the policy aimed at reducing the
raw-materials dependence.
And yet there is
another problem. Previous plans to raise timber-export duties and state support
for the agriculture sector hindered Russia-EU talks on Moscow's accession to the World Trade
Organisation (WTO).
Andrei
Biryukov
