Russian wood tariffs could threaten economic viability of Saimaa Canal

Wood tariffs among issues to be discussed at Prime Ministers' meeting

Mikhail Fradkov

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The Finnish Maritime Administration fears that Russia's imposition of export tariffs on raw timber could sharply hurt the profitability of the Saimaa Canal, which passes through Russian territory, and links Finland's Saimaa waterway with the Gulf of Finland.
      The impact on the viability of the Saimaa Canal is just one of the problems that Finland could face as a result of sharp rises in the price of Russian wood. The issue is to be discussed in talks between Finnish Prime Minister Matti Vanhanen (Centre) and Russian Prime Minister Mikhail Fradkov, who arrived in Helsinki on Tuesday for a visit.
      Markku Mylly, Director-General of the Finnish Maritime Administration, says that Russia's plans to raise tariffs on raw timber came as "quite a surprise" in the middle of negotiations on the extension of the lease of the canal.
      "Imports of raw timber and exports of the chemical forest industry comprise 75-80 per cent of traffic on the canal", Mylly says.
      "If they are significantly reduced, the economic viability of the canal will collapse completely."
     
The first tariffs are to come into effect in July, and they will be raised by degrees. According to the forest industry, high tariffs will bring wood imports from Russia to a complete halt.
      The likely result would be for wood to be imported from further away than the neighbouring country. Mylly says that this would mean that larger vessels would have to be used, which would not fit into the canal.
     
The wood tariff question complicates negotiations on an extension of the lease on the canal. The present lease expires in 2013, and Finland and Russia have been sparring over a new treaty for a year and a half.
      Minister of Transport Anu Vehviläinen (Centre) says that she is optimistic about the future of the canal. According to Vehviläinen, the canal has a great significance for the industry of the Saimaa region, and its use needs to be considered in the long term. She feels that short-term treaties would not be a good idea.
      Harri Pursiainen, Chief of Staff at the Ministry of Transport and Communications, is heading the negotiations on the canal issue. He says that agreement has been largely reached on practical questions; only the lease payment remains to be resolved.
      The Finnish state does not want to pay more for the use of the canal than it is doing now. The lease is EUR 300,000 a year, and the state contributes about EUR 10 million a year to the costs of the canal.
      One third of the transport on the canal comprises imports of raw timber from Russia. Pursiainen says that the impact of the tariffs needs to be carefully considered.
      Russia is confident that the treaty will be signed. Sergei Aristov, canal delegate on the Russian side, said in the winter than he expects the papers to be signed already this year.
     
The locks on the canal have been used heavily this spring, because the Finnish forest industry has been trying to import as much timber as possible before the tariffs take effect.
      Hundreds of jobs are dependent on the Saimaa Canal. At least at the office of the Finnish Maritime Administration at the Mustola lock there is confidence in the future.
      "Whenever some goods have been left out, there is always something new to replace them", observes canal chief Seppo Kykkänen.
      He says that biological fuels and the export of construction materials to Russia could bring new business to the Saimaa Canal.
     
The wood tariff issue, as well as transport and energy questions, are to be high on the agenda when Prime Ministers Vanhanen and Fradkov meet in Helsinki on Tuesday.
      Johan Schalin, Vanhanen's special aide on international matters, says that Vanhanen plans to underscore the importance of trade in wood for the Finnish economy, and to see if it might be possible for Russia to relent somewhat on the planned import tariff issue.
      On Monday, Green MP Heidi Hautala called for taking up the rights of the Russian opposition and non-governmental organisations. Schalin noted that Vanhanen brought up these matters with President Vladimir Putin in the autumn, and that discussions with Fradkov generally focus on economic matters. However, he said that the issues mentioned by Hautala have not been ruled out.
      Other topics include trade and investments, as well as cooperation with border officials and rescue services. The Prime Ministers are also to discuss bilateral relations between the EU and Russia.
      Prime Minister Fradkov will also meet with President Tarja Halonen.


Previously in HS International Edition:
  Väyrynen demands discussion of wood tariff dispute at EU-Russia Summit (18.5.2007)
  UPM to start lay-off talks following shortage of birch logs (16.5.2007)
  Minister Väyrynen: Russia seeks solution for wood tariff dispute (11.5.2007)
  Professor says wood tariffs could be payback for Finnish rejection of undersea cable (16.2.2007)
  Russian export tariff could end timber imports into Finland (12.2.2007)

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