Forestry in Russia

• 1. Introduction

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  Russia's forests cover more than a fifth of all the world's wooded land, making Russia the single largest forest country on Earth. That is a staggering inheritance. With a total forest area exceeding 885 million hectares as of 2015, representing 45 percent of Russia's entire land surface, the country holds a stock of wood estimated at 82 billion cubic meters. Those numbers place Russia in a category of its own. Yet for all that natural wealth, Russia's share of global trade in forest products stands at less than 4 percent. How does a country that owns more trees than anyone else on the planet remain a modest player in the markets where wood is bought and sold? And what is happening inside an industry where only a quarter of everything harvested actually ends up as a finished product? The answers reach from the forests of Siberia all the way to the politics of export duties, the rise of plastic packaging, and the slow erosion of newsprint.

• 2. A Giant with Modest Returns

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  Russia's timber industry is valued at roughly 20 billion dollars per year and ranked as the second largest producer of industrial roundwood as of 2022. Within Russia's own economy, the sector sits seventh in terms of overall industrial production and fifth among national exports. Timber accounts for approximately 75 to 80 percent of everything the forest industry sends abroad. Those numbers suggest a sector of real weight. Yet a 2012 study jointly conducted by the Food and Agriculture Organization of the United Nations and the Russian government found that the potential of Russian forests is substantially underutilized. For a long time Russia was the principal supplier of raw wood to Europe. By the end of the 1980s the USSR ranked second in the world in wood exports, trailing only the United States. After the economic upheavals of the following decade, Russia's position slipped to somewhere between sixth and seventh place worldwide. Compounding the difficulty, academics as recently as 2023 raised concerns that too little reliable data about the industry had been made publicly available. All data is scheduled to be consolidated into a national forest inventory accounting system by 2025.

• 3. What the Forest Produces

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  Russian forests are divided by the state into four main categories: waterproof forests, field protection forests, reserve forests, and recreational forests. In reserve zones, workers are permitted only to conduct sanitary felling, removing trees to improve the overall condition of the stand. Forests where selective cutting is allowed cannot exceed the volume of growth in any given year. Only in operating forests is clearcutting permitted. The trees themselves are mostly coniferous: pine, spruce, larch, and cedar dominate the landscape. The industry built around these forests divides into four branches. The logging industry harvests timber directly. The wood industry applies mechanical and chemical-mechanical processing, covering plate, furniture, and lumber production. The pulp and paper industry handles the chemical side, turning wood into pulp, paper, and cardboard. Finally, the wood chemical industry produces charcoal, rosin, and turpentine. These four branches operate together as the forest complex, with logging considered the foundational direction that the others depend on.

• 4. The 2008 Crisis and Its Numbers

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  July 2007 brought a significant turning point when the Russian government raised export duties on roundwood by 20 percent, followed by a further 25 percent increase in April 2008. According to the analyst group Lesprom Network, those rises eroded the competitiveness of Russian companies on world markets. The timing proved brutal. In the second half of 2008 the global economic crisis caused construction volumes to fall sharply in Japan, China, and Western Europe, slashing demand for wood at precisely the moment Russian exporters were already under pressure. Russia's overall timber volume that year fell by 14.4 percent compared to the year before. Production growth in wood specifically reached only 1.4 percent; in pulp and paper, the figure for publishing and printing was a mere 0.8 percent. The industry's financial results reflected the damage. Total revenue for the 50 largest companies, as published by the magazine Lesnaya Industriya, came to 216.34 billion rubles, equivalent to 2.93 billion US dollars. The 10 largest companies alone accounted for more than 70 percent of that revenue. Total net profit for the Top 50 reached 6.26 billion rubles, or 84.8 million US dollars. Zelenodolskiy plywood plant stood out with a profitability ratio of 17 percent, the highest among the group.

• 5. Recovery and Standout Performers

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  By the close of 2008 the average profitability ratio across the Top 50 companies had fallen to 0.7 percent. A year earlier that same figure had been 9.0 percent. Woodworking companies fared slightly better than pulp and paper firms, posting profitability of 5.7 percent compared to 4.9 percent. Only four companies in the entire Top 50 reached double-digit profitability that year. United Panel Group distinguished itself as the fastest-growing company in the sector, with revenue of 3.04 billion rubles, roughly 41.3 million US dollars, up 89.5 percent. Ilim Group posted the largest net benefit of any company in 2008 at 1.67 billion rubles, or 22.7 million US dollars, while also carrying the highest total revenue in the Top 50 at 37.92 billion rubles, the equivalent of 515 million US dollars. In the first quarter of 2010, as conditions stabilized, exports of softwood lumber from Russia increased by 11 percent, with export prices rising 6 percent. The leading exporters of sawed timber that quarter included Lesosibirsk LDK, a company belonging to Segezha Group, along with Ust-Ilim Timber Processing Plant, Novoyeniseysk LHK, Sawmill-25, and Svir Timber.

• 6. Where the Wood Goes

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  China receives the largest single share of Russian lumber exports. In the first quarter of 2010, China held 19 percent of total export volume, more than any other destination. Beyond China, Russian lumber moves to Egypt, Uzbekistan, Japan, and Iran. Russia's forest industry also connects deeply with the economies of Northern European countries and with the industrial networks of Eastern and Western Siberia and the Russian Far East, where timber intersects with fuel and metallurgy sectors. Pulp and paper exports follow a slightly different geography. Northern Europe and Eastern Siberia represent the two biggest destinations for those products. The cities of Arkhangelsk, Syktyvkar, Krasnoyarsk, Bratsk, Ust-Ilimsk, Irkutsk, Svetogorsk, Balakhna in the Nizhny Novgorod region, Amursk, Perm, and Solikamsk are among the most prominent production centers for raw wood materials. The largest enterprises combining all stages of timber processing operate in Arkhangelsk, Syktyvkar, Asino in Tomsk, Krasnoyarsk, Lesosibirsk in Krasnoyarsk region, Bratsk, Ust-Ilim, and Komsomolsk-on-Amur.

• 7. Structural Problems and Wasted Potential

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  Each year the Russian forest industry harvests roughly 0.5 billion tons of biomass. Only 25 percent of that harvest goes toward production. The finished product, once converted, amounts to about 11 percent of the original feedstock. Needles, bark, and twigs are largely discarded, which the industry acknowledges as an irrational use of extracted raw materials. Participants at the St. Petersburg International Forestry Forum in autumn of 2011, specifically those attending under the Forest Club umbrella, identified a cluster of persistent problems. Rising fuel prices weigh on operations. Transport and logistics remain difficult, in part because the commercialization of freight companies serving the forest sector has pushed up the final cost of products. Legal regulation around the auctioning of forest lease rights is contested. There is no coherent framework governing economic relations with foreign buyers. The cost of water and air cleaning systems adds to operating expenses. Investment selection lacks any agreed methodology. Sitting beneath all of this is a structural constraint that has no equivalent in the United States: Russia permits no private ownership of forest land. Instead, companies operate under long-term leases. In the United States, private owners who are not manufacturers hold about 53 percent of the 500 million acres of forest land, while industrialists control only 4 percent and financial investors another 8 percent. That distributed ownership model produces a forest economy generating more than 500 billion dollars in revenue, a comparison that frames Russia's 20-billion-dollar industry in sharp relief.

• 8. Biofuels and Substitution Pressures

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  Russia regulates biofuel development through a state program targeting energy saving and efficiency, with goals running out to 2030. The program sets a target of 4.5 percent of Russian electricity to come from alternative sources by 2020. The journal Lesnaya Industriya has noted that the goals in these documents are not sufficiently clear. By comparison, Norway already generates 67.5 percent of its electricity from alternative sources, while Sweden stands at 50 percent and Latvia at 40 percent. Russia's wood pellet producers export to Central Europe, where Germany, the Netherlands, and the United Kingdom have all increased pellet imports. Brazil, Canada, and the United States each hold large reserves of biofuel feedstocks, positioning them as direct competitors in the European pellet market. Wood also faces substitution pressure from outside the energy sector. The spread of plastic packaging has reduced the demand for paper in general. The growth of the internet has cut consumption of newsprint specifically. Both trends represent a shrinking share of wood and paper products in broader markets, regardless of how efficiently any individual country manages its forests.