One of the biggest trade spats between Russia and Finland in recent times has developed over Moscow’s decision to impose export duties on raw timber of US$15/m3 on 1st April this year, followed by a raise to US$50 next year, to promote its own wood processing and paper industries.

The dispute has promoted a strong response from the Finnish government, which has stated that it will support the paper industry, possibly through special funding derived from Russian transit traffic.

Finnish Minister for Foreign Trade and Development Paavo Väyrynen warned that if Moscow proceeded with plans to raise its tariffs on wood exports next year then “the transit fees could be raised.” And he added: “A sustainable solution to wood tariffs has to be found as part of Russia’s WTO membership negotiations.”

Russia’s response was that the wood tariff issue cannot be separated from the WTO negotiations as had been suggested in Finland’s compromise proposal. Funding to compensate the Finnish paper industry for the tariff hike could be drawn from Russian transit trucks if a model could be developed that is in line with international agreements and EU regulations.

The consequences of the dispute would be felt particularly among Finnish ports, although the Russian Baltic ports and the inland logistic connections could be unable to support a sudden growth in paper export traffic, particularly for labour-intensive and skilled stevedoring operations required for sto-ro traffic.

Ports such as Rauma and Kotka would undoubtedly lose traffic as the Russian paper manufacturing industries grow at the expense of the Finnish mills. In the short term Kotka and Hamina could also be affected by the imposition of a road tariff on Russian trucks, which could favour more direct routes to the Russian market.

However, Russia’s recent incursion into Georgia has overshadowed this dispute as some western countries have called on Russia’s proposed WTO membership to be re-examined and possibly vetoed as part of a package of sanctions, thereby negating the threat of this argument being employed in the wood tariff dispute.

While it was hoped to have an agreement in place by the end of the summer, it now seems likely that this will be postponed pending an internationally acceptable conclusion of the Georgia crisis. That may force Finland to impose transit tariffs on Russian traffic in the short term.