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Russian President Dmitri Medvedev on June 30 accepted Finnish President Tarja Halonen’s invitation to visit Finland in the near future. Medvedev did not, however, budge on a proposed Russian timber export tariff increase — a move Finland says will wreck its paper and pulp industry. Finland has suggested that in response it might impose a tariff on goods transshipped to Russia through its territory, which account for a significant chunk of Russian imports.
This row could set Russia and Finland on a collision course, dragging EU-Russian relations down as well.
Former Russian President Vladimir Putin imposed the timber tariff to force Scandinavian paper and pulp producers to move their production into Russia. Russia is the world’s largest exporter of cut logs, but is not a significant producer of pulp and paper. Developing such an industry would be a great economic boon for northwestern Russia.
Russia announced in July 2007 that the tariff would be raised from $7 to $15 per cubic meter, with an increase to $75 set to take effect before the end of 2008. Finnish papermakers buy more than 10 million cubic meters of timber a year from Russia, and the new tariffs have cost the industry more than $785 million. The industry accounts for more than 10 percent of the gross domestic product of Finland, which produces more than 15 percent of the world’s paper.
Unlike most of Russia’s relationships with its European neighbors, Russia and Finland have a long history of mutual, if grudging, respect forged through episodes of bitter rivalry. Finland endured 105 years of Russian rule and fought a brutal war at the beginning of World War II to stave off a Russian invasion. Russia suffered enormous causalities in the Russo-Finnish, or Winter War, while Finland lost 9 percent of its territory — including its then-second-largest city, Viipuri (now the Russian city of Vyborg) — in the subsequent peace treaty.
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