July 11, 2008 (the date of publication in Russian)

Alexei Chichkin


Finland is angry at Russia for its reluctance to serve as its raw material appendage

Surprisingly, the civilized European state of Finland is officially insisting that Russia cancel its recent decision to elevate customs duties for timber exports. These demands – also officially – are supported by Sweden. Moreover, the two countries raised the issue at the recent Russia-EU summit in Khanty-Mansiysk, urging Kremlin to envisage the customs policy more attentively.

Russia has raised the customs duties for export of lumber from 4 to 10 euro for 1 cub. m since July 1. Since January 1, 2009, they are going to be elevated to 50 euro per 1 cub. m. Thus, purchase of lumber will become unprofitable for the Scandinavian neighbors.

This change is not surprising. Russia has got its own objective economic interests which it is now committed to protect. Moscow intends to increase procession of timber by its own industrial facilities, and correct the situation when, according to official estimates of the Russian Forestry Agency and the Ministry of Economic Development, around 60-70% of the annual Russian imports of timber items was produced from its own raw materials.

For many decades, Russian lumber was shipped to Scandinavia for cheap while duties were symbolic. According to Finnish and Swedish media, stable profitability of the two nations' timber industry was at least by 40% provided with cheapness of Russian timber.

No wonder that Russia would not like to serve as a raw material appendage of its neighbors any longer. However, its justified measures aroused a squall of protests, addressed to the European Commission and the World Trade Organization.

Finland's Prime Minister Matti Vanhanen complains directly to EC Chairman Jose Manuel Barroso. At the same time, Finland is going to undertake countermeasures, introducing, particularly, export duties for goods imported into Russia across the territory of Finland, in order to compensate the losses of Finnish pulp producers.

Besides, Finland's Foreign Trade Minister Paavo Vairinen has made clear that the reduction of tariffs for export of lumber should serve as one of the conditions of Russia's entry in WTO. Still, Timber Industry Minister Anne Brunila believes that the Finnish side should find a more appropriate solution, searching for new sources of timber at home or in some other countries.

Sweden's Trade Minister Eva Bjorling still prefers diplomatic measures to acts of vengeance. In its turn, the EC has not yet threatened to block Russia's entry in WTO in case the duties are not lifted.

Scandinavian countries are likely to be even more dissatisfied with the planned reduction of Russian transit of goods across Finland in favor of the domestic transport network of the North-West. In fact, the relevant losses may comprise 13-15% of Finland's budget revenues.

It is noteworthy that the Russian side does not complain of the increase of average prices of Finnish and Swedish goods and services, exported to Russia, which comprised 20-25% within the last three years. Moscow has not issued any addresses to the European Union or WTO on this subject.

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