Putin says Russia will delay wood export duty hike

Prime Minister Vladimir Putin said Sunday that Russia will further delay the introduction of a higher export duty on raw timber that has deeoply worried neighboring Finland.

Putin told an international meeting of forest producers in St.Petersburg that Russia will maintain the duty freeze because of a slump in demand amid international economic crisis.

"We will extend the moratorium on raising the export duty on raw timber to 2010," Putin said, adding that the freeze also may be extended into 2011.

Russia is the world's largest raw timber producer while Finland imports 80 percent of logs from Russia. In the past 15 years, Russia has gained some euro7 billion from its timber exports to Finland, according to Lesprom timber network.

Russia's government announced in 2006 that the export duty on raw timber would be increased more than three-fold to euro50 per cubic meter in 2008. The move was supposed to spur exports of processed timber with higher added value and lead the country away from exporting cheap rough wood.

Last November, Putin paid heed to Finland's pleas and delayed the hike by twelve months.

He said Sunday that Russia remains committed to the introduction of higher duty on raw timber when market conditions allow that as part of the government efforts to diversify industrial production.

"Like any other country, Russia can't be satisfied with the role of raw material supplier," Putin said. "Russia is interested in using its natural resources in the most efficient way possible."

Finnish Prime Minister Matti Vanhanen urged Russia to cancel the duty hike altogether. He told Sunday's meeting that his country believes that the higher duty will be harmful for the timber processing industry and Russian-Finnish ties.

"It's in the interests of our cooperation to have raw materials, machinery and other products move freely across the border," Vanhanen said. "The high export duty will make raw timber too expensive for us."