AMUR-HEILONG RIVER BASIN
Key issues in timber trade
Related maps, pictures, links
The International Workshop on Sino-Russian Timber Trade in September 2006 addressed the Baikal Economic Forum and other stakeholders in the Russian Far East, Siberia, and China . The workshop highlighted three concerns:
1) ”Booming log trade between Russia and China: China has become the number one importer of timber products in the world over the past seven year, and Russia has become the number one supplier to China, supplying approximately 26.4 million m 3 (or 50 percent) of China's total timber product imports. The majority of Russian timber exports to China are unprocessed (90 percent of Russia log exports are to China ), prompting the Russian government to impose log export taxes in 2006;
2) Uncertainty about the Russian forest resource base: Only a small amount of commercially valuable timber remains within economically accessible zones. Degraded forests dominate today's forest landscapes, which are increasingly susceptible to fire and other agents of damage, due in part to poor logging practices. At current harvest rates, the Russian Far East could be logged out in 20 years. The large capacity processing industries developing on the Chinese side of the border could be left with little raw material input.
3) Uncertainty over the legal status of timber exports: Estimates of the extent of illegal logging in Siberia and the Russian Far East range from 15 to 70 percent, depending on the definition and methodologies used. Recent research tracking an illegal Russian log sold at the border for US$140 per m 3 shows that bribe-takers and foreign middlemen take the majority of the profit ( Figure on distribution of benefits ) with little or no revenue generation for local government and communities. This illegal trade results in higher prices and reputation risk for China-based entrepreneurs, especially those wishing to invest in Russia or to re-export to environmentally sensitive markets in Japan , Europe and North America.
Figure 1. Percentage benefits from the sale of 1 m 3 of illegally harvested Russian timber (price = US$140/m 3 at the Russia-China border) (adapted from: Stakeholder Statement to the Baikal Economic Forum, September 2006, New Scientist 2006)
Russian Timber Exports – how much is too much?
The southern parts of eastern Siberia and the Russian Far East are the main timber producing regions exporting roundwood to China , Japan , USA , and the Republic of Korea . Large-scale investment began only in the late 1960s when the Japanese government and some of Japan 's largest corporations orchestrated a series of long-term agreements with the Soviet government that provided Japanese technology and low-interest government loans in exchange for raw materials.
Although beneficial for Moscow and Japan and selected corporations, these long-term agreements reinforced the extractive orientation of industries by facilitating the export of raw materials rather than manufactured goods. In the process, the agreements restricted opportunities for the RFE to make structural economic changes.
Figure 2. Main consuming countries of Russian raw logs in Asia-Pacific in 2002 by volume (After D. Smirnov 2004,Report at TRN Conference)
From 2001 Japan has conceded this role of key trade-partner to China where markets are more elastic with respect to prices and timber quality. The China timber market was totally reorganized following the 1998 government reform of the Chinese forestry system and this reorganization led to significant harvest restrictions. The timber harvest in China declined 30 percent from 68 million m 3 in mid-1996 to 48 million m 3 in 2003. Wood products imports to China, in round wood equivalents, were 82 million m 3 in 2003, or 1.7 times higher than domestic timber production (Sun et al. 2004).
For the past eight years Russia , like other timber exporting countries, faced China 's rocketing demand for wood (Figure 3.) and Russia is now the top timber product supplier by volume to China . In 1997, Russian timber product imports were 970,000 m 3 RWE valued at $93 million. By 2002, import volume had risen to 15.8 million RWE, with a value of $1.06 billion, and three years later has risen another 70 percent surpassing 25 million m3.
Figure 3. Russia supply of forest products to China (Source: Sun, Katsigris & White 2003, Forest trends report)
Timber trade in Southern Russian Far East
The RFE forest sector has almost always focused on forest product markets in adjacent countries, and first of all on timber markets. Since the 1990s the RFE forest sector has sold almost all its product abroad. Table 1. below shows very high export quotas (exports as a percent of total production) for round logs and lumber: 86 percent for both products. Lumber quotas are not high (24 percent) because 2/3 to 3/4 of the lumber is used domestically.
Table1. Timber exports from the RFE (Sheingauz 2006)
Sources : Amurskaya Oblast Statistical Yearbook (2003); Primorsky Krai Forest Industry (2004); Statistical Yearbook of Evreiskaya Autonomous Oblast (2004); RF Customs Committee, 2005.
Driven by market demand, the composition of export species evolved rapidly from 1998-2003 ( Table 2 ). During 1998-2003, export volumes of birch round wood increased 13.5 times, for aspen and poplar - 28.5 times, and for linden – 128.6 times. The percentage harvested of ash, oak, birch, linden and aspen was higher than their representation in mature forests, meaning that these species are being depleted. The drop in Korean pine exports is tied to the decrease in its volume in regional forests where it is harvested as an associate species in what are the most productive mixed forests in southern RFE (Sheingauz 2006).
The timber deficit in China has forced China to rapidly increase its imports of RFE timber ( Table 3 ). Export volumes from RFE increased 9.3 times in five years (1998-2003). China not only imports most of the timber exported from the RFE, it also buys the majority of the most valuable tree species. China is the primary purchaser of species that are either limited or banned from harvest in the RFE. 81,000 m 3 of Korean pine, 5,000 m 3 of Manchurian walnut and over 300,000 m 3 of lime were exported to China in 2003, which is 64 percent, 88 percent and 97 percent of total export for each of these species, respectively.
The primary destinations for Russian timber are the northeastern provinces of China where forests are similar to the forests in the southern RFE and where local timber mills and end product consumers are experiencing raw material shortages.
Table 2. Species of round log exports from the RFE, and mature timber in natural forests, percent (Sheingauz 2006)
Table 3. Importers of RFE timber in 1998, 2000 and 2003 (Sheingauz 2006)
Note. Totals in Table 3 differ slightly from data in previous tables due to discrepancies in declarations.
Source: RF Customs Committee materials, 2005.
China-Russia cooperation in wood processing
The percentage of foreign investment in the RFE forest sector seem to be insignificant. Khabarovsky Krai is an exception, with two large timber joint ventures (“Arkaim” and “Sovgavan-Les”) and three foreign companies owned by the Malaysia-China company “Rimbunan Khidzhau”. In 2003 they produced 17 percent of the Khabarovki timber production total.
There are also several small Chinese saw mills in Khabarovsky Krai. Despite their small production, Chinese funded timber companies have also become an integral part of the forest sector in Evreiskaya Autonomous Oblast in recent years. Probably, most Chinese investment escapes official reporting because it is based on barter-deals without signed contracts. The Chinese provide Russian contractors with equipment under conditions to repay costs and interest in timber over three to five years, and with only a slight allowance for price fluctuations, with all production going to the investor. As taxes on exported roundwood rise sharply in 2006-2007, Chinese investment in processing on Russian territory is growing.
In recent years many concerns have been raised about plans for Chinese government organizations and multinational corporations to invest heavily in Russia 's pulp and paper industry. Asia Pulp & Paper (APP) has conducted negotiations with administrations of a number of forest provinces in Siberia and the RFE to invest USD1.35 billion in pulp mills. Chinese investments are conditional based on the issuance of long-term timber concessions. While Russia is willing to allot such concessions in remote and undeveloped areas in Siberia, China investors usually have no interest in such concessions because of lack of roads.
A recent promise from China leaders to jointly develop processing in Russia, could have negative environmental and social impacts. In Citinskaya Province heated debate began in 2003 over an obscure pulp mill "Amazar/Mogocha cellulose plant" project. Some 1.5 million m 3 of logs would be processed locally for the production of 300,000 m 3 of quality timber and 400,000 tons of quality paper pulp. According to estimates of local experts there is not sufficient quality or quantity of timber supply in the area for a large cellulose plant. Excessive logging to supply such a plant would probably lead to negative changes in forest ecosystems bordering steppe areas. There is also no local workforce to operate the proposed plant and of 1,500 proposed workers, 1,200 would come from China . To date development has been limited to intensified logging near the confluence of the Argun and Shilka Rivers and construction of a bridge to move logs across the border. This leads local observers to believe that the proposed "cellulose plant" is a front for more intensive export of round timber. Similar tentative plans for a cellulose plant and a preliminary agreement exist for the Khor (Chord) River watershed in Khabarovsk Province.
Map collection: Land use and agriculture
Frequency of fires in tiger/leopard habitat in Southern Primorsky Province by WCS
Density of cropland in China in 2000 (by Liu 2005)
Cropland change in China in 1990-2000 (by Liu 2005)
Notheast China irrigation (by F.Lasserre)
Map collection: Forestry
Map collection: Oil & gas
Map collection: Transportation
Northeast Asia Transportation ( TumenNET GEF project map)
GIS: Political geography, railroads and pipelines
GIS:Forestry impacts on Korean Pine forests
Agricultural development in Northeast China
Agricultural development in Eastern Mongolia
Russian agricultural land and production in RFE-tables
Major human-induced impacts on forest ecosystems of RFE (table)
Other land-use issues:
Nature tourism in the Amur/Heilong River Basin