The global downturn has put Russia's forest industry in a difficult situation. All the measures adopted so far have been aimed the increasing of the timber working in the country. However, in the period, when investors can’t afford any expenses, the only thing that can support the timber industry - is an export. The only problem is that foreign wood-consumers, which were convinced that the forest should be processed in Russia, have found over the past few years new suppliers.

Russia is the third country in the world after the United States and Canada in the volumes of timber. In 2008, we had cut down 163 million cubic meters of timber. About half of this amount accounted for Irkutsk, Vologda, Arkhangelsk Oblast and Krasnoyarsk Krai. About 70% of timber harvested in Russia remains on the processing, the rest - going abroad. Two years ago the government declared war against “roundwood logs”. In July 2007, export duties on timber have been raised from four to ten euros per cubic meter; in April 2008, there have been the second growth - up to 15 euros. The main increase was planned for January 1, 2009 - the duty on the export of round wood was supposed to climb to a record 50 euros per cubic meter.

RF Government had expected, making the export of timber unprofitable, to stimulate wood processing in Russia. In the past year, according to the Federal Customs Service (FCS), there were exported only 22.5% of timber harvested in the country. To make it easier to develop the wood processing in the country, the Government has developed a mechanism for priority investment projects in the forestry sector. To implement the project cost from 300 million rubles, an entrepreneur can get raw material - forest fund on preferential terms: without the auction, and all for half the price. According to the plans of Ministry of the Industry and Trade, by 2020 the export of unprocessed timber should have been reduced to the level of 2007 in ten times, up to 5 million cubic meters.

However, the idea has fulfilled only in a half. Entrepreneurs focused only on the export of roundwood started to leave the branch. However, new refining capacity has not earned due to the crisis. As a result, according to the Union of Timber Industrialists and Exporters of Russia, in 2008, felling of timber decreased by 20%. in Russia

Then the government started extreme measures: Prime Minister, Vladimir Putin at a meeting with his Finnish counterpart Matti Vanhansen stated that the imposition of protective duties of 50 euros will be postponed until January 1, 2010. Vanhansen supported: it is impossible for a year to build a sufficient number of pulp and paper mills and timber processing companies in Russia.

But it did not help. As noted by Lesprom network, traditional country-importers of Russia's timber (China, Finland, Japan - they accounted for more than 80% of all volumes), given Russia's policy aim to reject the export of roundwood, faced to other suppliers. For example, the Canadians, as it is noted in the reports of Ministry of Economic Development. Finland too, which the sharp decline in Russia's imports were threatened with the loss of 8-20 thousand jobs in the wood processing enterprises, began to build its own logging. As a result, according to the FCS, in the first half of the export of unprocessed timber from Russia declined by more than twofold, to 10.6 million cubic meters, compared to the same period in 2008.

The declines in harvesting continue also. In the first half of the 2009 there has been cut almost 15% less than last year, by the Union of Timber Industrialists and Exporters, and for the year there will be reduction of another 20%, experts predict. The reduction will be significant, according to the large timber companies: Ilim group, Titan and Vologda Lesopromyshlenniki

The fact is that there is an obvious parallel decrease of the wood demand inside the country. According to the Ministry of Economic Development, the production of pulp and paper industry in Russia during the seven months of this year decreased at 25,3%, the production of boards decreased at 37,7%, and the production of plywood fell at 29,2% in Russia. About 45% of timber production is exported, and it is often not competitive on the world market, reports the Ministry of Economic Development.

The modernization of wood processing enterprises of the complex or building new plants would help to solve the problem. But foresters are too high-risk borrower. The Director of Finance of the Arkhangelsk Pulp and Paper Mill (the second mill in optional rates in Russia) says that his company may borrow loans no less than under 15%, and this is too much. As a result, the company had to halt its program of modernization worth 300 million euros.

Ilim Group had to cut at 20% its investment program that worth $ 2 billion due to the crisis: the company has decided to postpone the construction of facilities for the production of packaging paper.

In such a situation the government decided to take the extreme measures: to postpone the protective duties on the export of logging for another year, until January 1, 2011. The representatives of timber branch say that raise tariffs now is to kill the industry completely, because the gap between the rising taxes and the development of the processing is normally a year and a half, but in global downturn grows from two to four years. The only problem is that buyers may not return to Russia's suppliers, who so often change their priorities.