An Austrian company alleged to be illegally exporting lumber out of Ukraine is pushing for the government to lift a ban on wood exports that was enacted to stimulate the country’s domestic sawmill industry.
President Petro Poroshenko announced on Nov. 24 that he would attempt to lift the ban on unprocessed wood, sparking a wave of protests by lumber processing workers, who say that the lifting of the ban will cause the loss of their jobs.
The moratorium has stimulated growth in the Ukrainian wood industry, and has created thousands of new jobs. But it also breaks the EU-Ukraine Association Agreement, which has free trade at its heart. This leaves Poroshenko in a tight spot – European officials are threatening to withhold a 600 million euro loan if Ukraine does not cancel the moratorium.
Illegal logging
The measure comes as Ukraine’s forests are being cut out of existence in what many see as an environmental catastrophe. Government officials argue that regulating the flow of wood out of the country will stem the amount of illegal logging that goes on.
“For Europe, Ukraine is a source of raw materials,” said Volodymyr Boreyko, head of the Kyiv Ecological-Cultural Center. “The president is acting against the national interests of Ukraine.”
The situation exposes conflicts at the core of Ukraine’s move towards Europe: Lifting the moratorium will bring Ukraine into compliance with its agreement with the EU, while stunting the development of its own sawmill industry. Ukraine’s forests will cease to be plundered, but to the benefit of foreign wood processors, rather than local industry.
One of the main European exporters of Ukrainian lumber – Austrian sawmill firm Schweighofer – has pushed for the ban to be lifted through the European Association of the Sawmill Industry (EOS), a Brussels-based lobbying group, which had representatives at the meeting where Poroshenko announced that he wanted to overturn the ban. Schweighofer, which has been accused of illegally smuggling lumber out of Ukraine, is a member of EOS.
Schweighofer says that it complies with all local laws and regulations. Frank Aigner, a company executive, suggested that the Kyiv Post not “exaggerate” Schweighofer’s influence.
David Stulik, a representative of the EU delegation in Ukraine, told the Kyiv Post that the EU “share(s) your desire to protect Ukraine’s natural environment.”
“A ban on all logging (or limited logging), or even access restrictions in a particular protected area, for justified and demonstrable environmental reasons, is perfectly legitimate and acceptable: as long as such a ban or other restrictions apply equally to all,” Stulik added.
“Sustainable development of Ukraine’s forests should be the goal.”
Lucrative lumber
Poroshenko signed the ban into law in July 2015, three months after a bill to impose it was passed by parliament in April of the same year.
Ostap Yednak, a lawmaker with the Samopomich Party who supported the law’s passage, said that the bill was designed to cut down on corruption in wood exports, while chopping away at undersupply in Ukraine’s domestic wood market.
“Before entering parliament, I spent 10 years in the lumber business, and I could see a lot of corruption in the export of logs during (the time of former President Viktor) Yanukovych,” Yednak said. “There was a need for this in order to stop corruption and to give a chance to the Ukrainian wood processing companies to have enough logs for their work.”
Yednak added that the deficit of legal wood on Ukraine’s domestic market increases “demand for illegal logging and illegal timber among domestic producers.”
The ban, as currently instituted, halts wood exports for a total of ten years. The export of most species of wood have already been banned. Pine, Ukraine’s most widespread and lucrative lumber, falls under the ban starting Jan. 1, 2017.
“The moratorium is the first attempt at the level of the Ukrainian state to protect our forests for the future,” said German Taslitsky, head of the Finance Ministry’s customs committee. “I want my children to be able to see the Carpathian forests.”
Heavy lifting
The ban has yet to take full effect, but Sergey Sagal, head of furniture producers association Meblderevprom, said that the moratorium had already had “a positive influence.”
Mykola Popovitch, a sawmill worker in the Chernivtsi oblast town of Drachnytsy, told the Kyiv Post that his mill had gotten more orders since the ban was instituted.
“It helps us make our industry better, we’re processing more wood now because of it,” Popovitch said in a phone interview, before adding that he had joined the national strike in protest of the ban’s lifting.
The numbers tell a similar story.
Viktor Galasyuk, a Radical Party lawmaker who heads the Rada’s industrial policy committee, said at a committee meeting that Ukraine’s wood processing and furniture-making businesses has seen growth of 15 percent since the ban went into effect, citing State Fiscal Service statistics.
Galasyuk added that exports of processed wood products had increased by 11 percent since the moratorium went into effect.
At the same time, widespread corruption in the customs service dampens the policy’s effects.
Businesses that want to export logs for processing across the border in the EU will often smuggle the material across the border by marking it as “firewood,” as a loophole in the moratorium allows firewood to go through.
Galasyuk said “for some strange reason” the export of firewood had increased by 200,000 tons since the moratorium began.
Big wood
One company that has been repeatedly accused of smuggling wood across the border is Austrian company Schweighofer, which has sawmills in northern Romania along the Ukrainian border.
In September, the Kyiv Post found that Schweighofer had concluded contracts with Ukrainian state forestry enterprises that appeared to be illegally cutting down wood.
Schweighofer is the only company to be a standalone member of the European Association of the Sawmill Industry, a lobby that has used its clout to push both Ukrainian and European authorities to end the ban.
Silvia Melegari, EOS’s secretary general, said the lobby “was present” when Poroshenko announced he would try to end the ban.
Though Melegari would not “deny that our companies have been affected,” she disputed the idea that Schweighofer had special influence on the group’s activities.
“No member is more than any other member,” Melegari said. “Ukraine has signed an agreement. In order to get support of the EU, they have to have a free market.”
Stulik, the EU representative, declined to comment on the EU’s links with Schweighofer. But he did made a point that echoed Melegari’s.
“Free trade agreements, which generate economic growth and jobs for both parties, mean equal access to each other’s markets,” Stulik said. “The EU is opening its Single Market to Ukraine, offering massive opportunities to Ukrainian companies, and Ukraine is expected to do the same for the EU.”
For workers like Popovitch, the Chernivtsy sawmiller, that comes as hollow comfort.
“Now, I’m against integration with the European Union,” Popovitch said. “I don’t want to lose my job.”
