Own to the board Kazakhstan – Newspaper Kommersant No. 229 (7430) dated 12/09/2022

Since the end of November, Russian lumber producers have been suffering losses and are forced to reduce production due to the closure of the transit of their products through Kazakhstan to Uzbekistan and Asian countries. Several regions of the Russian Federation are immediately asking the government to lift the ban. Experts consider this route one of the most important amid narrowing export opportunities and low domestic demand.

As Kommersant found out, Russian timber merchants are asking the authorities to remove restrictions on the transit of dry lumber through Kazakhstan to third countries. Corresponding letters were sent to the Ministry of Industry and Trade by the Arkhangelsk Regional Assembly of Deputies and the Vyatka Chamber of Commerce and Industry. The Association of Tomsk Timber Manufacturers and Exporters appealed to the Governor of the region Vladimir Mazur, and State Duma deputies Evgeny Markov and Alexander Spiridonov submitted the issue for discussion by their colleagues on December 8.

The essence of the problem is that now companies have lost the opportunity to transport lumber in transit through Kazakhstan to third countries, including China.

In fact, such a restriction was introduced by the government by a decree of November 24, 2022. The document amended the government decree of July 15, 2010 and established the norms for the passage of dry lumber across the Russian border: now they can only be exported by rail to Belarus through the Russian-Belarusian border, and to Kazakhstan and Kyrgyzstan – through the Russian-Kazakhstani section of the border. The decree prohibits the transit of lumber through Kazakhstan. This fact, noted in the appeals, significantly affects the export of sawn timber to China and Uzbekistan, creating artificial restrictions in the transport corridors of the EurAsEC member countries.

Sources of Kommersant in the market explain that, despite the fact that the actual ban on transit through Kazakhstan was introduced 12 years ago, the timber cargoes of Russian companies were sent along this route without problems in the amount of more than 1 million cubic meters per year, and a significant part of this flow was taken out by road. “But in September Russian Railways and the Federal Customs Service suddenly remembered this document and stopped the export of goods. There was a wild confusion, a noticeable amount of cargo stopped right at the border, and the owners of lumber had to look for options for exporting their goods back, ”says one of Kommersant’s interlocutors.

He explains that, given the reorientation of exports to the east, the route through Kazakhstan was fundamental for manufacturers: the two remaining options for deliveries to Asia – across the border with China and through the ports of the Far East – are more expensive and have limited throughput.

Opinions of timber merchants about the reasons for the ban on transit diverged. Some consider this a mistake that the government made when trying to quickly improve the situation with exports at a critical moment, and assure that it will be corrected in the near future with the support of the Ministry of Industry and Trade. Others see this as an attempt to “make money for Kazakh companies”, through which Russian manufacturers are now forced to register goods for further export. The relevant ministries did not comment on the issue.

At the same time, all industry players are confident that if the ban is not lifted, this could lead to losses for large timber companies and bankruptcy of small producers, since the domestic market for dry sawn timber is very small (only raw sawn timber is in demand in the Russian Federation). At the same time, it is almost impossible to find new markets in the conditions of high competition and the global economic crisis, Kommersant sources say.

Marina Zotova from WhatWood notes that restrictions on supply in general or partial restrictions on modes of transport in the face of narrowed export markets and insufficient capacity of the domestic market negatively affect the revenue of Russian companies. Uzbekistan, for example, ranked second after China in terms of imports in 2021, she recalls. And this year, Central Asia could take over part of the Russian lumber that was destined for Europe. This direction, the expert notes, is becoming one of the most important for companies in the European part of the Russian Federation, for which supplies to Southeast Asia are limited or closed due to high transportation costs.

Olga Mordyushenko