Production by the Russian timber industry rose by 2.6% last year, according to RF Goskomstat, the state statistic committee. However, at the same time harvesting was down 2.2% on 2000, to 87.2 million m3. Industrial wood volumes fell by 2.4% to 77.7 million m3 while saw log production was down by 4.2%.

The first two months of this year were also rather unstable for the timber industry as production was down 0.1% on the same time last year. For the paper industry it was a different story: cellulose production was up 13.5% on 2001, paper production rose by 2.2% and board production saw growth of 15.2%.

Timber export revenue for 2001 reached US$4.3bn, but the Russian government believes the potential is much higher. Yury Kukuyev, chief of the state forest service Goslessluzhba, says the figure could be as high as US$70bn. The figures given by Miron Tatsun, chairman of Russia’s timber association, are even higher: export revenue could be US$100bn, he says.

Mr Tatsun considers it realistic that, by 2006, exports could amount to US$19-20bn a year if the industry receives state support, especially in terms of an improved taxation system, credit and investment policy. He hopes that stable world prices for wood and wood products will attract the government’s attention to the industry’s problems.

In turn, Yury Kukuyev declared that achieving export potential is impossible because Russia lacks the modern plants to produce environmentally-friendly products. In addition, logging volumes would have to increase up to 500 million m3 per year in order to achieve better export results. Meanwhile experts say it will be necessary to invest up to Rb50bn a year in the infrastructure in order to harvest 300-400 million m3 of wood.

The problem of investment in the Russian timber industry was highlighted during the Russian-Finnish ‘wood summit’ which took place in Moscow on March 1. Prime minister Michail Kasyanov outlined the government’s intention to stimulate foreign investment. Russia, he said, is very much alarmed both by low level of investments and by the structure of timber exports, where round timber still dominates.

Mr Kasyanov also promised to establish a package for regulating the timber trade to exclude, in particular, the possibility of the use of specially created one-day firms by unfair exporters. Today there are about 30,000 businesses in the Russian timber industry, and only 3,000 of them are large-scale or at least middle-scale enterprises.

The industry’s key problem is outmoded plant and technologies. As the prime minister says, Russia’s timber industry needs modernising to the tune of US$10bn but neither the state nor industry has the funds.

And hopes for foreign investment are rather groundless: for instance, the total sum of Finnish direct investments to the Russian timber industry was just US$66.2bn over five years. Russia is not attractive to foreign investors because of the absence of unified legislation in the Russian Federation and complicated bureaucratic procedures when transferring capital across the border.

These issues are supposed to be discussed during a special meeting the government is holding on the timber industry but observers believe the central issue will be the rebirth of a federal timber ministry.

The idea has gained momentum as the industry’s inefficiencies have been discussed widely but there are still many opponents to the strengthening of the state’s role in the industry. Some names mentioned as the most probable candidates to be the head of such a ‘wood’ ministry are Yury Kukuyev, chief of Goslessluzhba, and Alexander Belyakov, chairman of the State Duma committee on natural resources. The functions and authorities of a special wood federal service are still unclear.