Russian Prime Minister Says Moscow to Impose Tariffs on Wood Exports

Helsinki, Finland, 29 May 2007 --(AP)-- Russia will not back away from plans to impose tariffs on its exports of wood, but will continue talks on the issue with the European Union, Russian Prime Minister Mikhail Fradkov said Tuesday.

Fradkov made the remarks on a visit to Finland, whose economy would be among the worst affected by the tariffs. Finland, home to major paper and pulp producers UPM-Kymmene Corp. and Stora Enso Oyj, imports about 20% of its raw wood from Russia.

Russia intends to use the tariffs to encourage more investment at home in processing wood rather than exporting the raw material.

That export tariffs on wood are sure to be adopted, Fradkov told reporters, but he did not say when. Talks on this subject will continue.

Fradkov, who spoke after meeting Finnish Prime Minister Matti Vanhanen, said Moscow welcomes more investment from abroad to develop Russia's wood processing industry as well as foreign pulp and paper mills in the country.

Fradkov said Russia had improved conditions for foreign business, including adopting new legislation on investments from abroad. The aim is to move from raw material exports to wood processing on Russian territory, he said.

Fradkov also hinted that in talks with the EU, Moscow could offer to cut import tariffs on high-tech goods from the 27-nation bloc.

Vanhanen said Finland is very concerned about Russian plans to impose tariffs on its exports of raw wood.

The decision would negatively influence the Finnish economy and would harm bilateral cooperation in the forest industry, he said. Vanhanen also said such a decision would be in conflict with commitments made by Russia for joining the World Trade Organization.

Russia is Finland's largest source of imports -- mostly raw materials -- and its third-largest export partner. Total Finnish-Russian trade reached USD 19 billion last year and Finnish investments in Russia reached USD 3 billion.