b'Russian invasion of Ukraine sparks conflicted outlook for forest productsRUSSIAN INVASION OF UKRAINE SPARKS CONFLICTED OUTLOOKFOR FOREST PRODUCTSBy George Lauriat, AJOTSeptember 23, 2022 | Published originally in AJOT Issue #745W hen Russian tanks rolled into Ukraine on February 24th,According to Observatory of Economic Complexity (OEC) in an uneasy quasi-war instantly become an all-out shooting2020 Russias forest product exports hit $8.44 billion and conflict, triggering a cavalcade of unforeseen consequences notranked 4th in the world [but ranked first in lumber exports], only for the warring parties, but the entire world.while it imported $697 million in forest products and ranked Among the unforeseen economic consequences of the221st. More specifically, Russia is also ranked as the top Russo-Ukrainian War was an uprooting of the global forestexporter of softwood lumber, which is used in the construction products trade. Besides the direct combatants, the Ukraine andindustries. The OEC reports that the principal export markets for the Russian Federation, the conflagration includes Belarus (andRussian lumber are China ($3.08 billion), Finland ($593 million), non-combatant ally of Russia) in the trade fallout.Uzbekistan ($429 million), Egypt ($386 million) and Japan And from the lumber and forest product perspective both($369 million). On the other hand, most of the forest product the Forest Stewardship Council (FSC) and Programme for theimports came from Belarus ($244 million), China ($127 million), Endorsement of Forest Certification (PEFC) have labeled allGermany ($58.8 million), Poland ($46.1 million) and Portugal timber from Russia and Belarus as conflict timber, chopping($35.2 million). interest from global buyers interested in purchasing lumber fromAnd it looks like Russias forest product exports grew either country. substantially since the OEC numbers came out. WRQ in their The Great Unfriending2021 estimates pegged Russia at over $12 billion in 2021, with imports of around $2 billion.Nearly immediately after the invasion of Ukraine, economicSo, why is a major forest exporter like Russia importing sanctions spurred by the United States began being levied atclose to $700 million worth of forest products in the first place? Russia, and on March 11th the G-7 and EU (European Union)Simply put, Russia doesnt manufacture a great deal of forest announced joint actions. These culminated in the application ofproduct for export. On the other hand, countries like China, a broad range of economic sanctions designed to strangle theFinland and Germany do manufacture a plethora of forest Russian economy. products ranging from paper and pulp to furniture, plywood, and In March Moscow began its own retaliatory unfriendingflooring which are exported globally and even to Russia. by introducing tariffs and bans of its own. High on the list ofWhich was part of the motivation behind the Association of exports banned for sale to the unfriendly West was woodFurniture and Woodworking Enterprises of Russia request to the and forest products. Russia has paired these export bans withRussian government to establish tariffs up to 60% on imported import tariffs (reportedly as high as 60% for Western countries,furniture and other wood products from unfriendly countries as opposed to 10% for friendly nations) on imported woodwhile subjecting pro-Russian countries to a 10% duty. In a recent products.story, FurnitureToday attributed Russia-based wood analyst Russias reaction is somewhat a non sequitur, as buyingLesprom as the source of the market information. Lesprom said Western imports is crippled both by actual bans and financialthis move would enable Russian manufacturers to compete transaction restrictionsSWIFT system lockoutimposed bywith foreign manufacturers in the domestic marketearning Western financial institutions. Equally, Western nations havean additional $813 million in revenue on a 10%-12% growth in banned the purchase of Russian products in an effort to chokerevenue. off funding for Moscows war effort. Of course, the irony is that China is among the pro-Russian Also lost in all the geo-political fallout was the notable factimporters. And while European nations like Germany, Finland that Russia applied the anticipated log export ban beginningand Poland have had some market penetration into Russia in January of 2022. The log ban had its biggest impact onbefore the advent of hostilities, Beijings geo-political position neighboring China which according to Wood Resource Quarterlyvis-a-vis the Ukraine War, as Moscows most necessary friend, (WRQ) saw log exports drop from 800,000 m3 in the 4Q/21 toopens the door for a potential increase in imports, such as only 80,000 m3 in the 1Q/22 with customs data showing nomanufactured wood products and items like furniture from the imports at all for March and April 2022.factory-nation. The drop in housing construction in China and But Moscows moves inadvertently illustrate just how crazilya slowing GDP reducing domestic demand, historically has convoluted the global trade in forest products is.triggered an increase in Chinese exports to bolster the economy. For example, take Russia. It is no surprise, that RussiaHowever, given Chinas problems with the US (and the West with vast expanses of forest land, is a major lumber exporter. 18'