VLP Group: draft of the Russian Federal Government resolution submitted for public review contradicts measures implied by president Putin’s instructions

Official press release from Group Vologodskiye Lesopromyshlenniki:

At present, the government’s draft resolution “On Determining Railway Checkpoints at the Border of the Russian Federation for exporting goods of the HS Code Group 4403 of the Combined Commodity Nomenclature of Foreign Economic Activity of the Eurasian Economic Union and on Amendments to the Russian Federal Government’s Resolution No. 521 dated 15 July 2010” is under public review.

It should be remembered that, whereas President Putin’s instructions of 06.11.2020 concluding the meeting on decriminalization of the forest industry called for measures aimed at banning the export of the non-processed and roughly processed timber of coniferous and high-value deciduous species since 1 January 2022, the proposed ban did not cover the exportation of low-value deciduous timber, particularly birch pulpwood, the production of which in deciduous woodlands significantly exceeds domestic demand. However, the proposed draft of the resolution directly contradicts the President’s instructions.

In particular, the draft resolution provides for a single railway checkpoint in Northwest Russia at the Lüttä station on the Russian – Finnish border. It is located away from the established optimal routes for round wood export: the use of it will lengthen the transport leg from exporters in the Vologda region to consumers by 2500 km (2.1 times) of which 1750 km in Russia and 750 km in Finland. This will make railway deliveries economically inefficient; moreover, practically impossible as this checkpoint sits on a single-track railroad, is not adequately equipped and lacks traffic capacity. Moreover, the draft resolution does not allow the use of adequate checkpoints for shipments of birch pulpwood by water despite the fact that a number of harvesters are located by waterways on the Volga-Baltic system with no railroad infrastructure.

The draft, therefore, de facto aims to terminate exportation of birch pulpwood, although over 4 million cubic meters of birch pulpwood lacking domestic demand are annually exported to customers in Northern Europe from European Russia.

“This draft resolution of the Federal government will irreversibly lead to a significant decrease in round wood harvesting on the whole, – believes Andrey Konoplev, CEO of the VLP Group, the largest logging company in the Vologda region. –  Harvesting volumes in primarily deciduous woodlands will drop thereby decreasing the availability of birch veneer logs. The resulting general reduction of harvesting will inevitably tighten supply of coniferous sawlogs and all other assortments naturally harvested together in mixed forests. Expert assessments suggest the reduction of about 2.5 million cubic meters in wood procurement in the Vologda region (15% of the total annual harvest) of which 0.8 million are birch veneer logs. Logging in the Northwestern Federal District as a whole can fall by 7 million cubic meters including up to 2.3 million cubic meters of birch veneer logs and up to 1.5 million cubic meters of coniferous sawlogs. Moreover, this will affect railway and water transport companies, alongside various small and medium-size businesses that provide logistical services for wood processing companies.

Therefore, the consequences of adopting the proposed draft will have a negative effect on businesses in the entire industry and their partners: loggers, processors, builders, railway operators, manufacturers and suppliers of harvesting machinery and processing equipment, materials and tools, even businesses in other sectors”.