An interview with Raimonds Cipe, Chairman of the Board at “Dižozols Investments”

Regarding the resources – specifically the timber market – the Baltic market is interesting due to so-called “spot” prices, which essentially mean that timber prices are dependent or subject to various influences and fluctuations. Manufacturers and forest owners do not have long-term obligations; therefore, if demand for a specific timber assortment increases, the price for that assortment rises. At the end of 2018, we experienced record-high prices for all assortments, which were significantly influenced by pulpwood buyers in Scandinavia. As demand falls, so does the price, while forest owners who own stands of harvesting age begin to wonder – whether to cut now or wait. A chain of events forms, which resulted in us “experiencing” May 2019, when the price for certain assortments dropped by as much as 50%. Therefore, I believe we have been living in relative crisis conditions since last May.

The spring of 2020 and Covid-19. Of course, there was no clarity, manufacturers could not claim or forecast anything concrete, and supply chains came to a standstill. Large international companies with extensive experience were also unable to forecast, because: what can you plan or predict if goods cannot be moved from Latvia to Austria, for example? March, April, and May of this year affected many things, prices fell, but by the end of May, both we and others began to understand how to act and how to deal with the situation. At that moment, so to speak, more pragmatic thinking and action began. Currently, we should be looking towards autumn: the period when more pulpwood and fuel wood chips are purchased... September has approached and arrived with promising signs. The volume of timber sold by “Dižozols” is currently not lagging behind last year, thanks to work with new clients and new suppliers. Looking realistically and optimistically, it is clear that everyone in the sector is feeling a drop in turnover, and that influences the market situation.

At “Dižozols”, we are continuing our development path for the third year; we have invested sufficiently in technology (digitalisation). Three years ago, we could sell 10,000 m3 per month; that required four employees to handle all the bureaucratic paperwork. Today, those same four colleagues handle the 70,000 m3 of “necessary” administration and documentation volume.

How does a private company view the phrase “Green Deal” or “Green Pact”, which has become so desirable in sophisticated and “correct” conversations of late and has gained a certain “social significance”?

It is a complicated topic. Since we are part of the industry and our economic activity is directly linked to the forest, there has been, is, and will certainly be much talk and discussion about how much of the burden or mission of nature conservation should be placed on the state sector and how much on the private sector. In my opinion, these are state assets that are actually on the state balance sheet, and the state should “carry the heaviest load”. If we, as private owners, do this for the benefit of the whole society, it should be compensated accordingly. From our own experience, we see: we receive an official invitation to participate in mapping, we are not always around to participate, but habitats, nesting sites, and bird nests are found on our land. From the point of view of a private company and as members of society, we have no objection to nature conservation, but... forestry companies buy forest, buy logging permits, or otherwise cooperate with forest owners. There is a deal, there is an investment, but sometimes there are ill-wishers who hide the fact of an existing or potential habitat. What can you do? The relevant information enters the State Forest Service databases with a certain time lag. If you have invested money and have a concrete plan, but you receive a “dud”: the plans are not realised, and financially there is nothing either. That is not fair!

I do not want to comment on the “Green Deal” background in the media, because the opinions are starkly different and facts do not dominate everywhere; in many places, we read and hear emotions, which can be clearly seen from the outside.

Speaking of compensation or finances: during the Riga City Council election campaign, there were some good plans and good ideas, but very little was said about how to earn money for these good ideas. Because – like it or not – it will be needed!

How to pay for good ideas – we should probably look not only at Latvia but in a broader context. We are part of Europe. If we look at Denmark or the Netherlands (EU member states), there are practically no forests there, perhaps a few parks, nature parks, or the odd plantation forest. They don’t have Latvia’s 53% forest cover! The European “Green Deal” has started, and it is clear that in Germany or France, no one is going to afforest agricultural land. In these countries, agriculture is an industry that is able to defend itself, and it does so with quite harsh means. The burden of the “Green Deal” watch falls on us.

The question is not about “greenness”, but: if other EU countries give us or invite us to take on this duty, and it is known that Europe pays area payments to farmers, why not pay the same to forest owners who agree and reconcile themselves to the fact that there is a protected area in their forest?

We look at the forest as an investment. The forest grows continuously, regardless of the economy, viruses, politics, or “deals”. The forest increases every year; investment in the forest is profitable, but restrictions and prohibitions reduce the value of the forest. If they reduce it, it should be compensated.

How logical is the setting of territorial percentages for nature conservation? If we set a mandatory percentage for something over a certain period, at one point the container will be full and saturation will occur. How sensible is it to “protect percentages” rather than what truly and understandably needs protection for everyone?

I agree, but the compensations I mentioned can solve the situation! For example, if I have 50 ha of forest and I know that once in my life I will earn, say, 200,000 euros from this forest, it is possible to estimate and receive this sum in an equalised manner over a 50-year period. By the way, compensation is paid for Natura 2000 territories. I understand that in the plan I mentioned, we would get large numbers and large sums that would have to be paid, but...

In the European Union, there are member states that have dealt with the consequences of the Second World War more quickly, urbanised faster, developed agriculture, and... realised that nature must be protected after all. And for these countries, it seems too complicated. And... there are some “new” EU member states where this nature is still there and has mostly remained untouched.

Let’s reach an agreement! Everyone would win! Forest property values would rise, and the forest owner would think more carefully and deliberately about what to do with the property. As I mentioned, compensation mechanisms already work in Latvia, they just need to be developed.

Will compensation do anything for the Latvian economy? The forest will grow, the owner will receive money, but activity (economic activity) will not take place...

The money will end up in the owner’s pocket, and they will be able to decide what to do with it: whether it is invested in the property or spent is another question, but it will remain in circulation right here in Latvia.

Have we heard that officials delegated to work in European institutions are addressing or discussing this issue? As far as I know, a compensation working group has been set up here, and the issues are only discussed within the state.

I am not an expert on the subject, but I know that directives or goals come from the European Union without an offer of a compensation mechanism. Internally, in Latvia, talks are happening. By the way, we have enough clients, forest owners, who are not satisfied with the current situation. For example, farmers who, due to various natural conditions, have not had the best few years in some regions of Latvia. The forest has always been a “lifebuoy for a rainy day” for them. A moment comes when you realise: you have to turn to the forest, you go to the State Forest Service and find that everything you planned and saved for a rainy day is now gone with the wind, and you are not allowed to touch it. That is a story (or rather, stories) from real life. I think the statesmen who are in charge of and responsible for agriculture should bring this issue to the fore and push it at the European level. The sooner, the better! If we are discussing the distribution of Covid-19 crisis recovery funds, we can also discuss other issues. The “Green Deal” has been adopted, thinking has been set in motion, the idea must be refined and sold to colleagues in Europe – in my opinion – this is just a matter of action. We must act!

More than a year ago, when talking to “Dižozols” representatives, border forests were mentioned, which are not always well looked after and managed.

A very multifaceted issue! Forest owners, judging by my own experience, can be classified into several categories. You have to look at history, at how our ancestors acquired land properties. The structure of property here is relatively fragmented. In the last twenty years, a portion of forest areas has step by step “consolidated” into the hands (management) of large funds or large forest managers. Those who understand forestry, do it and invest, because the larger the area, the more attention they pay. If the areas are smaller, the owner does not always devote the necessary attention to management; perhaps they lack knowledge or understanding. Such an owner does not plan events for the next 50 years. For example, if there are 1.5 ha of forest on the property, it is unlikely they will invest much work in them; in fact, they will wait for the forest to grow and then harvest it. Whether the forest is replanted afterwards and how that is done is another question. Since European fund money has been available for forest regeneration, owners have been more actively involved in planting forests. By the way, for about three years now, we have seen a problem in the spring: as planting time approaches, getting good seedlings is very difficult or impossible.

What is sadder is that Latvia has not created a system for local capital to acquire forests. It is good that half of the forests belong to the state.

Public knowledge about forests. The further away from the sector you are, if you don’t have friends or acquaintances working in it, the understanding of the forest is strange...

For comparison: before all the Covid-19 restrictions, I was in Finland. A Finnish organisation, analogous to the Latvian Forest Industry Federation, was celebrating its 75th anniversary. At the conference in honour of this anniversary, they spoke about: how to position wood and timber. When talking about climate change, wood is the first saviour! By using wood to the maximum and correctly, the benefits are huge. The Finns work very diligently and carefully on this, they work a lot, clearly formulating the benefits of the sector. Unlike us, who tend to talk quite disjointedly. For example, in a recent discussion about firewood, they forgot the fact that it is the same type of carbon cycle; firewood is not a carbon source found, mined, or taken from somewhere, but carbon accumulated from the atmosphere by these same trees. The Finns have “packaged” everything well, are acting purposefully in the relevant direction, and in Finland, there is no stance that the timber industry and forestry are bad! The Finns understand that it is one of the main export sectors that supports and promotes the country’s welfare. It is also the most export-capable sector for us! If we are talking about balance (green and economic): if so-called green areas are needed, let’s organise the system so that those who have taken care of them are not left completely empty-handed!

In Latvia, one must not forget: if the EU asks us for something, if there are specific requirements, they must undoubtedly be compensated!

So in Europe, a lot has been lost and... Latvia is preserving it for both itself and Europe.

If compensation mechanisms exist and work in Europe, they must be equivalent. They cannot be “nothing” or relatively laughable.

Now, the thought is often voiced that the forest or land “cannot belong to someone”, it should belong to everyone.

I hope communism will not return to us! Those expressing similar views should be answered: what do they expect from a farmer whose rye field someone has decided to hold a meeting in. The farmer will come and chase the gatherers away. Private property is an integral part of a democratic country. If the state, without offering anything in return, starts to intervene and complicate how you can or want to use your property, or how you can derive any benefit from it, it is absurd!