OPERATION FOCUS ISSUE 26 FEBRUARY/MARCH 2012


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Chris Cann chris@internationalforestindustries.com


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2 International Forest Industries | FEBRUARY/MARCH 2012


EDITOR’S COMMENT WTO entry has uncertain consequences However, there are


incredible wealth of forests within its borders.


R


A colleague sometimes speaks of a flight he took from the Amur Oblast in Southeastern Russia back to the United Kingdom: he was in awe of the forests that he flew over, which he said seemed never ending. Incredibly, some statistics indicate that forest growth is actually outpacing harvesting, meaning Russia’s Timber Bank is still swelling. The result of this huge resource is that


Russia was quite comfortably the world’s largest exporter of roundwood for many years. This is still the case but the margin has fallen away since the introduction of dramatic export duties on log exports in 2007. Russia’s recent acceptance into the World


Trade Organisation is therefore likely to have meaningful consequences on the global forestry sector, much as the new export duties proved big news when they were introduced. Most press and analytical coverage about the milestone has been positive. For a start, there will be a cap on the export duty, which is will bring it down significantly from current levels. Secondly, Russia will be able to trade with partners with whom it previously had little or no relationship – the most significant of these will be the world’s largest economy, the US.


These consequences should allow


Russian logs to be traded more freely in the international market, reversing the trend of the last few years and then some. But the effect that most interests me is


relates to the Russian wood processing sector, which the export duties were meant to encourage. The question is: will inclusion in the WTO outweigh the benefits, or protection, provided by the duties and help Russian add value to their natural resources in-country? Operating under this international umbrella should surely give more investors the confidence to invest the millions needed to develop the new sawmills that the country’s forests can easily service with raw material.


ussia is correctly referred to as the Timber Bank by many within our industry purely based on the


cultural issues to consider. Will signing up to the WTO erase the layers of corruption and bureaucracy for which Russia is infamous and that keep many investors at bay? In truth, it may be the case that the only way to really get companies investing in the Russian wood processing sector is to truly give them little alternative – such as with the export duties. The level of large scale development in


Russia in recent years has grown significantly. This could easily be put down to the export duties, and no doubt the Government would attribute such investment to its own policies, but it could also be part of a greater trend away from Western countries and into the developing world. If history is to be trusted, the free market will be the judge of how significant Russia’s entry into the WTO really is and, in that regard, it is probably worth following the reaction of the industry, in particular, vertically integrated forestry companies that own both wood resources and have sawmilling assets.


These companies will be the first to take


advantage of any operational changes available following the implementation new regulations once the WTO goes into full affect.


After all that, you’re probably battling to decide whether I feel the news of Russia’s admission will prove to be a boon for the forestry sector or whether it makes little or no difference. If that’s the case then I’ve probably left you with an accurate summary of my feeling right now. It is unclear. It is far too large a resource and the implications within Russia are too complicated to understand at the issue of a press release. It will take time to see how this news will affect all players and whether Russia’s forests will become more accessible for the greater industry and, just as importantly, whether it will assist in helping Russia develop a wood processing sector that reflects its Timber Bank. Like you, I’ll be watching with interest.


Chris Cann Editor


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