Finns Threaten Trade Measures

APA policeman standing near a summit sign Thursday in Khanty-Mansiisk.
HELSINKI -- Finland said Thursday that it was considering counter-measures against Moscow in a dispute over wood tariffs that threatens to delay both Russia's WTO membership and a partnership deal with the EU.

But a Russian source close to the country's World Trade Organization accession talks said retaliatory transport tariffs proposed by Finland might contradict international trade law.

The source cited a rule that he said requires international cargo tariffs to match domestic equivalents and be based on actual costs. The source said state subsidies would make Finnish products subject to trade restrictions.

Then-President Vladimir Putin imposed export duties on raw timber in 2007 to promote the development of the country's wood-processing industry -- a move Finland has said would force plant closures and cost up to 16,000 jobs.

Finnish Foreign Trade Minister Paavo Vayrynen said Russia should agree on a solution to join the WTO and warned that Helsinki might impose a tariff on goods transported across Finland to Russia to compensate its paper makers.

Finland is as large a trading partner with Russia as the United States. Russia is hungry for cars, televisions and machinery, meaning transit routes through Finland, Latvia, Lithuania and Estonia are clogged with trucks.

"A sustainable solution to wood tariffs has to be found as part of Russia's WTO membership," Vayrynen told a news conference in Helsinki ahead of an EU-Russia summit expected to mark the start of new talks on a strategic partnership deal.

Vayrynen's comments sent Finnish paper stocks higher, including those of world No. 1 paper and board firm Stora Enso.

Finnish Prime Minister Matti Vanhanen wrote a letter to Jose Manuel Barroso, president of the European Commission, saying Finland expected the timber duties to be discussed thoroughly and with a sense of urgency at the summit.

Russia, the largest economy still outside the WTO, has been negotiating to join since 1995.

The European Union, which negotiates with Russia on Finland's behalf, says Russia's decision to increase export duties for timber breaches a 2004 bilateral WTO deal, which will only be made public after Russia's accession to the group. Russia denies it.

"I hope our partners understand why these export tariffs were introduced and why we will continue to apply them," the Russian source said.

"We had enough meetings with our colleagues from Finland to outline possible ways of solving the problem."

Russia, a key source of wood for Finnish paper producers, increased wood export duties by 50 percent in April to 15 euros ($23.50) per cubic meter, the first step in a series of increases which will hit 50 euros per cubic meter by 2009.

Finnish paper makers buy more than 10 million cubic meters of timber per year from Russia and the new tariffs have cost the industry more than 500 million euros ($783 million).

Vayrynen said he did not fear losing customers at Finnish ports and transport firms if a new tariff is imposed because the route to Russia is already firmly established.