The next raise in the export duty on Russian lumber to Finland has been postponed at least until the autumn of 2009, Russian Prime Minister Vladimir Putin announced Tuesday after a meeting with Finnish Prime Minister Matti Vanhanen. Most in the Russian forest industry are pleased with that decision. Only large lumber producers will suffer from the move, since raising the duty to a prohibitive ˆ50 per cubic meter of wood would allow them to force smaller competitors off the market.

The Russian prime minister motivated the decision on lumber duties as the salvation of the Finnish economy. “In world economic crisis conditions, reducing the volume of supplies of our products to Finnish enterprises could lead not only to reductions in their production, but to job reductions,” he stated.

In 2006, Putin criticized Russian lumber policy for allowing raw material to go out of the country for further processing. In response, the government prepared a number of measures, one of which was an immediate increase in the export duty from ˆ2.50 to ˆ4 per cubic meter of unprocessed coniferous wood, with 30-percent annual increases in the duty on conifers, birch and aspen, hardwoods and rare woods. In July 2007, the duty was raised to ˆ10 per cubic meter, and in April 2008 to ˆ15.

The duty was to rise to a prohibitive ˆ50 per cubic meter on January 1, 2009. The Russian lumber industry was supposed to begin developing its processing capacity in 2007 using foreign investment. Duties on finished wood products were reduced and tax benefits were granted for the period of the construction of processing facilities.

Before the increases in the Russian export duties, Finland bought 16-18 percent of Russian lumber exports. China bought 53-60 percent of them. Finnish companies say that the higher Russian duties led to the closure of several cellulose plants in Finland. Russian experts predicted that Russian lumber would rot in Russia unexported. Between January and August of this year, Russia exported 8.4 million tons of lumber to Finland, compared to 18.2 million tons in the same period of last year.