Between 2019 and 2022, forest area as a percentage of the total land area of the municipality remained unchanged or even increased in 98.9% of all Latvian municipalities (with the exception of Ķekava and Varakļāni); this is precisely why the lawsuit filed with the Constitutional Court by ornithologists and other non-governmental organisations is incomprehensible.
At the end of February, only a few media outlets, and in quite muted tones, reported on the desperate opinion of Uldis Biķis, Chairman of the Council of one of Latvia’s most influential exporting companies, AS “Latvijas Finieris”, regarding attempts to use state-held instruments to destroy forestry and the timber industry in Latvia, both as a business and as an export sector. Uldis Biķis stated: “It is highly likely that legislators, the judiciary, and the executive branch will make decisions this year to essentially nationalise large private forest territories without adequate compensation to landowners, which in turn will drastically reduce the availability of timber resources for the production of export goods and lead to the bankruptcy of many forestry and woodworking companies in the Latvian countryside.” Uldis Biķis draws attention to the fact that “one of the Green Deal policy documents – the European Union Biodiversity Strategy – contains a requirement (setting) to dedicate 10% of the member states' land territory to strict nature protection by 2030, halting any form of economic activity in these areas. A further 11-30% of the territory must incorporate environmental aspects into economic activity, which will significantly restrict economic activity”.
Moreover, the Constitutional Court is currently examining a claim by the Latvian Fund for Nature, the Latvian Ornithological Society, and the World Wide Fund for Nature, supported by the association “Green Liberty” and the Latvian Organic Agriculture Association, to prohibit the economic use of forest resources of a certain dimension (felling by diameter). If the Constitutional Court supports the right of some non-governmental organisation members to look at slightly thinner trees in the forests that meet their members' aesthetic standard, it will once again reduce the resources available for Latvian forestry. It follows that “in the case of Latvia, it is planned to very rapidly divert up to 250,000 ha of mature, hitherto commercially used forests for nature protection”. If such plans materialise, AS “Latvijas Finieris” is considering the possibility of closing one of its factories, most likely the production facility in Riga. The threat to forestry and the timber industry has two dimensions: one is economic, the other is geopolitical.
One of the cornerstones of the economy
The forest industry is highly significant to the Latvian economy as a whole. In 2022, total exports by the forest industry reached 4.2 billion euros. Approximately 20 thousand employees are engaged in logging, and around 30 thousand in woodworking and furniture manufacturing. Furthermore, considering the industry’s needs for transport maintenance and other services, its (the industry’s) cumulative impact on other sectors is approximately 15% of the total value generated by the industry (GDP). However, the impact of the forest industry on Latvian municipalities varies. To a large extent, this is determined by the amount of forest in the respective municipality. In Ventspils, Ropaži, Valka, Alūksne, and Olaine municipalities, more than 60% of the entire land area is covered by forests. Forests also cover the majority of the area in Saulkrasti, Talsi, Aizkraukle, Ķekava, Cēsis, Kuldīga, Ādaži, Gulbene, Limbaži, Smiltene, Ogre, Madona, Sigulda, and Valmiera municipalities. Conversely, in Varakļāni municipality, forest areas cover only 22% of the entire territory. Forests also cover less than a third of the total area in Līvāni, Preiļi, Dobele, and Jelgava municipalities.
Forests are occupying more and more space
An important question: how have forest areas in Latvian municipalities changed in recent years. According to data compiled by the Central Statistical Bureau (CSP), in the period from 2019 to 2022, forest cover (forest area as a percentage of the total land area of the municipality) decreased in only two municipalities – Ķekava and Varakļāni. In all other municipalities, forest cover remained unchanged or increased. Forest cover decreased in municipalities that make up 1.1% of the total land area of all Latvian municipalities. Municipalities where forest cover remained unchanged or increased account for 98.9% of the total land area of all Latvian municipalities. Knowing these figures, the lawsuit filed by ornithologists and certain non-governmental organisations with the Constitutional Court becomes completely incomprehensible. According to claims by Baiba Vitajevska-Baltvilka, an environmental policy coordinator at the Latvian Fund for Nature**, environmental non-governmental organisations approached the Constitutional Court with the following explanation: “We want to preserve Latvia’s forests for the people of Latvia – for us and for future generations. Furthermore, it is currently extremely important to preserve biological diversity in the forests, as it is necessary for the stability of ecosystems and the regulation of climate change, as well as for the national economy, human health, and well-being.” Good heavens! Those are the non-governmental friends of nature! Fighting to save the forests! All non-governmental ornithologists, please open your eyes! Forest areas in Latvia are increasing! They are increasing! They were increasing without your lawsuit in the Constitutional Court. The Constitutional Court and society are being misled about the true processes in Latvia’s territory! In Alūksne, Cēsis, Krāslava, Ludza, and Olaine municipalities, forest areas increased by two percentage points from 2019 to 2022. Meanwhile, in Aizkraukle, Augšdaugava, Balvi, South Kurzeme, Kuldīga, Limbaži, Mārupe, Ogre, Preiļi, Rēzekne, Salaspils, Saulkrasti, Sigulda, Smiltene, Talsi, Valka, Valmiera, and Ventspils municipalities, forest areas increased by one percentage point from 2019 to 2022. In the remaining municipalities, the forest area remained unchanged.
Threatens jobs in the countryside
To assess the impact of restrictions on the use of forest resources on various municipalities, the industry as a whole, and the entire Latvian economy, we will divide the employees in the forest industry proportionally to the place of resource extraction. This division is sufficiently accurate for logging, but not entirely precise for the processing of forest resources (unfortunately, accurate data on the spatial distribution of processing is not available). Timber is not always processed in the municipality where it was harvested. The distribution of employees shown in the table does not show the employees in the respective municipality, but rather how large a number of employees in the industry is supported by the forest resources extracted in the respective municipality, assuming this number is generally proportional to the total forest area. Consequently, more than 1,000 people could be employed in logging in each of the South Kurzeme, Madona, Talsi, and Ventspils municipalities. In turn, each of these four municipalities provides forest resources that allow for the employment of more than 1,500 people in woodworking and furniture manufacturing from each municipality's resources. In municipalities that are small in terms of area and have a relatively low proportion of forests compared to the total area of the municipality, the number of employees will not be large. In Varakļāni municipality, this could be several dozen, with a total impact on employment in the forest industry amounting to approximately 100 employees. The respective numerical values allow for an approximate calculation of how large the forest industry’s impact is on the total value generated by the municipality. It must be reminded once again that the GDP calculation for the forest industry is carried out according to the place of resource extraction. The CSP has published the 2021 GDP calculation for municipalities, so we can calculate how the municipalities’ GDP would change in 2021 if restrictions on the extraction of forest resources were imposed that year. In 2021, on average, one production employee generated a GDP of 50.5 thousand euros at 2021 current prices (calculations in the 6 February Dienas Bizness article An employee in business generates a lifetime GDP of 1.3-1.9 million, p. 23). If the most unfavourable scenario restricting the use of forest resources had been implemented in 2021 (the most pessimistic scenario provides for a reduction in forest resources available to the forest industry by as much as 50%, if the Constitutional Court believes the demands of non-governmental ornithologists, and European green perversions are adopted in the way most disadvantageous to Latvia), then under such conditions, Ventspils municipality’s 2021 GDP would have been half as much, Balvi municipality’s GDP would have been 39.4% lower, Alūksne municipality’s – 37.6% lower, Valka municipality’s – 34.8% lower, Ludza municipality’s – 27.3% lower, Augšdaugava municipality’s – 26.3% lower, while Krāslava municipality’s GDP would have been one quarter lower. On the other hand, such a scenario would minimally affect the GDP of large cities, Olaine, Ādaži, Ropaži, and Ķekava municipalities, while forest resource restrictions would have had almost no impact on the GDP of Salaspils and Mārupe – the potential impact would be less than 1% of the total GDP. Regarding the impact of various restrictions on Latvia as a whole, the calculation is already much more accurate, because it does not matter where the respective resource is processed or from which point it is exported.
GDP will lose billions of euros
In creating the calculation of losses caused by the reduction in the availability of forest resources, it was assumed that the average employee in the forest industry generates a GDP corresponding to the average GDP generated by an employee in production in Latvia. Although assessments have been published that, for example, in woodworking, one employee generates 20-30% more GDP (over 80,000 euros per year) than the average business employee. Consequently, my calculation is likely the lowest estimate of losses (lost GDP). It was also assumed that by reducing available forest resources by 10%, the number of people employed in the forest industry and the total value added generated by the industry will also decrease by 10%, i.e., the decrease in employment will be directly proportional to the decrease in resource availability. I will remind you that the decrease in future income depends on what the average GDP growth rate will be in constant prices in the coming years.
Volume of losses if average GDP growth is zero
If for the next thirty years the average growth is 0% each year (GDP per capita will not change) and from 1 January 2025 the volume of forest resources available to forestry is 10% less than today, then over the next 30 years it will reduce Latvia’s total GDP for the forestry sector by 3.7 billion euros (at 2023 1st quarter prices), but for the entire economy as a whole (together with woodworking and other sectors – transport, technical maintenance, etc. services) – by 9.8 billion euros. If the volume of forest resources available to forestry is 30% less than today, then over the next 30 years (without GDP growth) GDP losses for forestry will be 11.1 billion euros, and for the economy as a whole – 29.3 billion euros. If the volume of forest resources available to forestry is 50% less than today, then over the next 30 years (without GDP growth) GDP losses for forestry will be 18.4 billion euros, and for the economy as a whole – 48.9 billion euros.
Volume of losses if average GDP increases by 1% per year
If over the next 30 years there is an average GDP growth of 1% in constant 2023 prices, but from 1 January 2025 the volume of forest resources available to forestry is 10% less than today, logging GDP losses will be 4.4 billion euros, and for the economy as a whole – 11.6 billion euros. If over the next 30 years there is a GDP growth of 1%, but the volume of forest resources available to forestry is 30% less than today, logging GDP losses will be 13.1 billion euros, and the economy as a whole will lose 34.7 billion euros. On the other hand, if the volume of forest resources available to forestry is 50% less than today, logging GDP losses will be 21.8 billion euros, and the economy as a whole will lose 58.0 billion euros.
Volume of losses if average GDP increases by 3% per year
If over the next 30 years there is a GDP growth of 3% in constant 2023 prices, but from 1 January 2025 the volume of forest resources available to forestry is 10% less than today, logging GDP losses will be 6.2 billion euros, and in the economy as a whole GDP will be 16.4 billion euros lower. If the volume of forest resources available to forestry is 30% less than today, logging GDP losses will be 18.6 billion euros, and the economy as a whole will lose 49.3 billion euros. If the volume of forest resources available to forestry is 50% less than today, logging GDP losses will be 31.0 billion euros, and the economy as a whole will generate 82.2 billion euros less in constant 2023 prices. The total consequences of a 50% reduction in resources available to the forest industry can be comparable to the total losses of national wealth caused by the economic crisis resulting from the collapse of Parex bank.
Summary of economic losses
If the volume of available forest resources for the next 30 years is 10% less than in 2023, then the total GDP generated by logging over the next thirty years (depending on average economic growth) will be 3.7-6.2 billion euros lower, and Latvia’s total GDP – 9.8-16.4 billion euros lower than if the volume of available forest resources were maintained at the current level. If the volume of available forest resources for the next 30 years is 30% less than in 2023, then the total GDP generated by logging over the next thirty years (depending on average economic growth) will be 11.1-18.6 billion euros lower, and Latvia’s total GDP – 28.3-49.3 billion euros lower than if the volume of available forest resources were maintained at the current level. If the volume of available forest resources for the next 30 years is 50% less than in 2023, then in the next 30 years the total GDP generated by logging (depending on average economic growth) will be 18.4-31.0 billion euros lower, and Latvia’s total GDP – 48.9-82.2 billion euros lower than if the volume of available forest resources were maintained at the current level. The calculations are based on the assumption that fears regarding geopolitical risks in which Latvia might be involved will not materialise. Perhaps the answer to the question of why, specifically at this moment, certain forces are consistently seeking to destroy one of Latvia’s most important export sectors lies in the geopolitical dimension.
Geopolitical dimension
Over the last year, both in Latvia and elsewhere, politicians and military experts have pointed out that Latvia is in a risk zone for possible Russian aggression. In the event of a possible military conflict between Russia and NATO, Latvia and other Baltic states will be the central part of land military operations, and it is assumed (the scenario published by the BBC) that part of Latvia’s territory could end up under enemy control, similar to how part of Ukraine’s territory is currently under the control of Russian occupiers. In Ukraine, the natural and forest resources that were diligently protected were seized by the occupiers. The already quite scarce forest tracts, including protected ones, in the Russian-occupied Donetsk, Luhansk, Zaporizhzhia, and Kherson regions, as well as Crimea, have been taken over by Russian occupiers, who use the forest resources seized in Ukraine to support their aggressive war. In conditions of the risk of an aggressive war, overzealous protection of a resource actually means saving these resources for the needs of a potential aggressor, so that the aggressor can begin to predatory use the saved resources once it occupies the desired territory. In current geopolitical conditions, any actions whose goal or result is the reduction of employment or a significant standard of living in Latvian rural areas (especially those inhabited by national minorities), which causes negative emotions against the Latvian government, are a direct and unambiguous support for the planned aggression against the Latvian state. For the successful progress of aggression, a rift must be created between the government and society. Leaving Latvian rural areas without work, without a livelihood, without the ability to educate children, and significantly worsening the standard of living in rural areas in current geopolitical conditions must be assessed as sabotage, in order to help the potential aggressor reduce counteraction to aggression and reduce the desire to defend the central government. It looks like Putin’s aggressive plans in Latvia are currently being implemented under the cover of green ideas, the Green Deal, and using both well-meaning, useful green idiots as influence agents, and especially – green activists and extremists. Currently, the threat to Latvia’s security is green extremism and the imposition of excessive requirements it implements at all levels of government, including the judiciary and even the Constitutional Court, in order to reduce potential resistance and counteraction in the event of Putin’s aggression. Reasonable suspicions can be expressed that in current geopolitical conditions, green extremists are operating as influence agents for Putin’s aggressive policy.
Cannot ignore reality
Minister of Justice Inese Lībiņa-Egnere pointed out on 29 February that the judiciary must take into account Latvia’s geopolitical conditions and the risks of Russian aggression: “We currently live in complicated circumstances where illegal transport of migrants, espionage, or the disclosure of state secrets are not the only threats to state and public security that we face in Riga or on the border with Russia and Belarus. We must realise that the aggressor states Russia and Belarus are currently devoting significant resources to purposefully increase aggressiveness in Latvian society, including in the regions. This is happening both in the internet environment and by carrying out various hybrid threats, in order to split society and trigger ethnic conflicts. Courts in the regions currently have a significant role in not only locally stopping the spread of aggression, but also guarding the security of our state.” It would not be bad, from the point of view of geopolitical risks, to evaluate in whose interests those who want to forbid Latvian citizens and companies from using the resources that Latvia’s enemies will covet to seize in the event of an armed conflict are operating. Are Latvia’s forests being overzealously protected so they can be seized by Putin’s gangs? Read Uldis Biķis’s cry of despair about the intended changes in the Latvian national economy: “Do not take away my freedom in decision-making! Do not take away my respect for the work done! Do not take away our opportunities to be masters on our own land! In a historical context, such a cry would be self-evident – it is about the occupation of Latvia. Unfortunately, I am forced to shout it today, and many people in Latvia’s forest industry, who do their work with the best of conscience, feel similarly.”
Sources: Central Statistical Bureau and Author’s calculations
The article was first published in the “Dienas Bizness” 2024 edition on 12 March
* https://www.zemeunvalsts.lv/ludzu-cieniet-musu-darbu
** https://lvportals.lv/dienaskartiba/360235-satversmes-tiesa- izskatis-lietu-par-jaunaku-koku-cirsanu- mezos-2024