Thursday, April 06, 2006

Putin in Syktyvkar and Russian Timber


I've always maintained that Russian resources and material assests extend far beyond petroleum. In fact, I think it would be a huge mistake for Russia to only develop petroleum exports and would result in relatively jobless economic growth. One of Russia's more impressive assets (in my opinion) that is severely underutilized is its timber industry. I'm impressed that VVP thinks so as well, I give him a big thumbs up for these statements and observations:

During one of his meetings with cabinet members, Putin had sharply criticised the work of the timber industry complex of Russia. He ordered the ministers to promptly create conditions for woodworking in the Russian Federation. “We need conditions that would stimulate timber processing right here, on the territory of Russia, and the measures to achieve this end should be really vigorous,” the president stated. “Are we to drag out everything here for years to come? Haven’t we been discussing this problem since 1999? But nothing has been done so far, not counting idle talks,” he chastised the government. “Immense quantities of timber are being continuously shipped abroad and nothing has been done to stimulate its processing on the territory of the Russian Federation,” Putin stressed. He drew the cabinet’s attention once again to the impermissibility of lobbying the interests of exporters. “They care only for their own economic interests, while you should think of the interests of the Russian people,” Putin told the ministers.

It is worth noting that during the July 2003 meeting in Petrozavodsk on problems of the country’s timber industry complex Putin had already instructed the cabinet to tackle this problem. “Regulation of customs tariffs is one of the instruments to make effective use of our timber resources,” the president said at that time. “It is being proposed to consider the problem of lowering the export duties on thoroughly processed timber products and, vice-versa, to increase the duties on unworked timber,” he stated, explaining that the differentiation could be even more detailed. “Everybody agrees that this is correct, but, unfortunately, nothing or almost nothing has been done so far,” Putin stated.
I've been less than impressed with how Russia's timber industry is currently used and developed. Mostly raw timber is sent to other countries. I actually have an aquaintance who works for a US timber company - he's travelled to Vladivostok many times and it is one of their suppliers for certain raw timber products. Believe it or not, one of Russia's top wood-related exports is charcoal (CHARCOAL!) some of which is used in cosmetics, but much of it is just burned. Finished wood products should be a real growth area for Russia - beyond just IKEA. There are reasons for stalled development of Russian industry, such as timber - for the part of the US in it, Jackson-Vanik and WTO membership play a part (although I suspect that WTO membership will hurt Russia in other areas of the economy, most notably agriculture, where other nations are more efficient).

I have a friend who lives in Syktyvkar - apparently Putin's arrival there was quite a big deal and most of the city, all the roads and the city center were shut down. She complained that she couldn't even take the bus home from work. For comparison, when Bush comes to New Hampshire, it barely registers a blip on the public radar. It pays to be both President and super-star celebrity.
Update April 7 - More can be found on this topic on Kommersant.
The president lamented that the round timber is exported and processed abroad. “Our neighbors earn billions of dollars on the processing, pay taxes and raise pays there while we are still exporting round timber,” the president sounded indignant.

Vladimir Putin also spoke on the illegal felling claiming that “whole countries buy our timber illegally.”

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