Belarus’ government looks for ways boost its domestic forestry market

Belarus’ government looks for ways boost its domestic forestry market
By bne IntelliNews September 14, 2022

In spring this year, when the West’s sanctions regime against Belarus was heavily intensified due to Belarus’ participation in Russia’s invasion of Ukraine, Belarusian strongman Alexander Lukashenko acted as if Western sanctions would barely affect Belarus. However, these sanctions are slowly but steadily having significant effects on all Belarusian industries and Belarus’ import-substitution response to the sanctions has caused a major restructuring of the domestic market.

The Baltic ports have for a long time been of significant importance to landlocked Belarus. Lithuania’s port of Klaipeda has handled significant amounts of Belarusian wood products. According to Belarus’ PM Roman Golovchenko, “Lithuanian wood processing plants perform further processing and export the final product to other countries in the EU.”

However, in 2022 EU countries have been prohibited from importing Belarusian wood products classified under HS chapter 44 (Wood and articles of wood; Wood charcoal) and the Forrest Stewardship Council (FSC) also chose to suspend all trading certificates for Belarus.

Instead of making its way through the Baltic ports, Belarusian Deputy Minister of Forest Management Vladimir Krech said back in March that Belarusian wood would be exported through China. In the same statement, he also admitted that this detour would decrease the profitability by 80%. The lack of an FSC certificate stopped Belarusian furniture from being exported to the EU market, but it also negatively affected Belarus exports to China since some Chinese producers also require the certificate.

Belarusian officials prefer to play down the negative effects of Western sanctions and attempt to make out that the Minsk government’s import-substitution programme is running smoothly. However, its reorientation towards the domestic market quite obviously requires a major restructuring of the market, with losses in profitability and heightened administrative costs hanging over the heads of regional governors.

On September 5, Belarusian Deputy Prime Minister Piotr Parkhomchik told state Belarusian media that Belarusian forest companies would attempt to exploit the EU’s energy crisis by exporting pellets to the EU market.

Parkhomchik thought that “there will be private companies that will build bridges so that the products we produce could enter the European market,” perhaps with the hope that the EU would reconsider its sanctions on Belarusian products classified under HS chapter 44 in light of its energy crisis. Compared to Belarus' First Deputy Prime Minister's statement on finding a new paying agent for Belarus’ Eurobonds, Belarusian officials may also be hoping that Western companies will find ways to circumvent the existing sanctions to loosen the sanction’s pressure on the country.

Simultaneously on September 5, Kerch also announced “updated rules for the sale of wood will simplify the mechanism for obtaining it for individuals” in accordance with Lukashenko’s presidential decree on August 22, which simplified “the procedure for the sale of industrial timber for individuals.”

The updated rules will allow individuals to purchase up to 70 cubic metres of roundwood for the construction, reconstruction and overhaul of residential buildings provided that the individual has submitted an application confirming the start of construction and ownership of real estate which are subject or construction or repair. Moreover, the wood will be sold at below market prices.

In fact, state Belarusian media are encouraging the sale of wood products, citing the Kopyl forestry company as a good example which had implemented a 15% sale on firewood with an additional 50% discount for pensioners. The same article mentions Kopyl’s product diversification into wicker baskets, wooden hangers for towels and clothes, phone stands, cutting boards, birdhouses, including DIY set-designs in a positive way.

This new way of marketing domestic forest products, as well as the decision to lower prices on industrial timber and other wood products, is a direct result of Western sanctions.

According to Kerch, "during the implementation of the action plan to find alternative markets against the background of the imposed sanctions by the collective West, as well as to stimulate sales of wood and products from it in the domestic market, the Ministry of Forestry has taken a number of actions.”

If a government encourages industrial export products to be sold at below market price to individuals, it’s a sign that it is having major problems with offsetting its exports. While of course beneficial to the average Belarusian wishing to build a home, it’s a clear sign that Western sanctions are working and are having a significant effect on Belarus’ domestic market.