Prime Minister Vladimir Putin said Sunday that Russia would extend a moratorium on planned timber export duties for another year, easing the risk of new trade tensions with neighboring Finland and the European Union.
The pledge drew a warm but cautious response from Finland, which had previously threatened to make the hike an issue for Russia’s long-running World Trade Organization accession talks.
“We still have differences on [the export tariffs]. … But Finland believes that Russia’s place is in the WTO,” Finnish Prime Minister Matti Vanhanen said during his address to a timber industry forum in St. Petersburg, Interfax reported.
Russia had planned to raise export duties threefold from 2009 to boost its own timber processors but had already delayed the move a year ago, following pressure from both Brussels and Helsinki, which feared damage to the European processing sector.
“Today, I can say that this moratorium will remain in effect for the next year,” Putin said, shortly before meeting Vanhanen to discuss the topic.
“I think it’s possible to continue the moratorium in 2011 as well, but this decision will have to be based on the economic situation,” Putin said during the meeting.
Vanhanen urged Russia to cancel the duty hike altogether, but he welcomed Putin’s decision to delay its introduction. “We are satisfied with the decision to freeze the raw timber duty for two years,” he told reporters after his talks with Putin.
Vanhanen said Finland would likely issue permission for the construction of Russia’s Nord Stream gas pipeline in its territorial waters following an environmental check. “We hope it will be done before the year’s end,” he said.
The pipeline is to be built under the Baltic Sea to carry 55 billion cubic meters of gas each year from Vyborg to the German port of Greifswald if it receives approval from several countries surrounding the Baltic, including Finland.
Nord Stream will be built on time, while another Russian-led gas pipe, South Stream, will be completed “very quickly,” Putin said in response to a question from reporters, Interfax reported. He raised eyebrows last week by saying another Russian-led gas pipeline, South Stream, may come online before Nord Stream.
Putin’s decision on raw timber export duty appeared to encourage Finland to back the Nord Stream project.
Russia has one-fifth of the world’s forests and is its largest raw timber producer.
In the past 15 years, Russia has earned some 7 billion euros ($10.5 billion) from its timber exports to Finland, according to the Lesprom timber network.
The government announced in 2006 that the export duty on raw timber would be increased more than threefold to 50 euros per cubic meter in 2008. The move was supposed to spur exports of processed timber with higher added value and lead the country away from exporting cheap rough wood.
In November 2008, Putin delayed the increase by nine to 12 months.
Russian media reported last month that the government was discussing further delays after the economic crisis made it impossible to build domestic processing facilities quickly.
Putin said in his address to a timber industry forum that the moratorium gave foreign processors more time to build plants in Russia but it would not stay in place indefinitely.
“We will still do it, but we will not do it stupidly … as the situation will change, you have time to calmly prepare,” he said.
Putin also said he was hoping Russia and Finland could cooperate on timber in third countries, using “Finland’s authority as the world’s largest player on the timber market,” Interfax reported. The projects would focus on using biotechnology and nanotechnology in the timber industry, he said.
Speaking at the same summit, Industry and Trade Minister Viktor Khristenko invited Finnish industry to invest in his country’s Far East. “Finnish investors in the forestry industry are already in China,” he said, Interfax reported. “Maybe they would be interested in being in our Far East, especially since the infrastructure is already in place.”
(Reuters, Bloomberg, AP, MT)