The ruling coalition of the newly elected Riga City Council, which only very recently, so to speak, “received” power in the capital, has issued “marching orders” to both long-term managers of SIA Rīgas meži—Aivars Tauriņš and Juris Buškevics—following a whistleblower report. Listening to and delving into (analysing) the loud statements accompanying this action, it is unclear what will happen to the company's assets. In short, the fate of Rīgas meži is shrouded in thick fog.
How so? It was publicly announced that the Rīgas meži sawmill—and thus the entire further timber processing block—would be assessed for its presence within the company. In other words, they might even “get rid” of it. But perhaps the fate of the Rīgas meži nursery could also be “placed” under evaluation, and perhaps one could consider whether there is any need to be involved in forest management at all.
Why? In every (or almost every) sector in Latvia, there are hundreds of professionals who would operate (read: manage the forests belonging to the city of Riga) with “great and sincere joy”. One only needs to announce a relevant, preferably international, tender, and money will roll into the Riga city wallet, filling and thickening it, and... the council members themselves won't have to bother with it. A bad idea?! But why not?! The main thing is—it's an idea!
Sawmill bombshell
Undeniably, over the last 10 years, Rīgas meži has managed not only to increase its net turnover but has also aimed high in implementing impressive projects that are not to everyone's liking. First of all, the management of Rīgas meži realised that it was “enough” to legally “hand over” profits to other players and decided to keep the “profit centre” within the company, i.e., in the pocket of the Riga municipality. As a result, the Norupe sawmill was established. And even though it processed only 40,000–50,000 m3 of logs per year, which did not account for even 1% of the total processing volume of this raw material in Latvia, in the current conditions of softwood sawlog shortages, even such a small volume is highly desirable.
And what is more... the company's management announced plans as early as 2017 to almost double the volume of sawn timber produced, as well as to build a wood pellet plant with a capacity of 20,000 tonnes per year, which would process wood residues generated during the timber processing process. Such an intention was a way of pouring oil on the fire (or getting into hot water). Since the Riga City Council at that time was controlled by the opposition rivals to the then and current government-forming coalition—Saskaņa and Gods kalpot Rīgai—the involvement of the municipality-owned company in sawmilling, and not just in the sale of roundwood but also in the sale of planks, was put under scrutiny. Although it seems laughable at first that the now-former management of Rīgas meži had to “justify” starting the production of more expensive products to the Competition Council, the State Audit Office had prepared a whole report concluding that Rīgas meži had “expanded its activities and engaged in sawn timber production, which does not comply with the cases established by law where a public entity may carry out commercial activities in the private sector”, as there was no question of eliminating market failures, creating products strategically important for the development of the municipality’s administrative territory, or ensuring national security. (In other words: hand over the raw materials so that others can make maximum profit!)
The public part of these battles could be observed at meetings of the responsible Saeima committee. The calculations of the State Audit Office voiced there were shocking—namely, by selling the sawlogs processed at the sawmill, the company would have obtained much greater funds than by processing the logs into sawn timber and selling them. Mention was even made of a possible lost profit of 3.36 million euros over two years that could have been used for other purposes. Judging by such calculations and conclusions—essentially, forest owners should be called economic idiots for starting to engage in wood processing.
Yes, but it seems these sensational conclusions have not been heard by Swedish forest owners, whose cooperatives own not only sawmills but even pulp and paper mills! It is more profitable to sell roundwood and earn more than to sell planks, after all. But let this rest on the conscience of those voicing the conclusions, especially when in Latvia, all available loudspeakers and trumpets are blaring—we need to produce higher value-added products (in other words, more expensive goods) and export them. Yes, and untreated grain, milk, and even roundwood are exported from Latvia, but neither the State Audit Office nor the Competition Council talks about the need to process these industrial raw materials in Latvia! What does that mean? It means only that political struggles and the desire of institution staff to prove themselves often intertwine with the business interests of “certain people”.
Is it necessary to grow seedlings?
Although at the moment there is no indication that the new, all-inspecting Riga administration might tackle the Rīgas meži nursery and forest management, nevertheless, if the utility of wood processing is being questioned, why couldn't the necessity of the nursery as a structural unit of the company also be subjected to a similar questioning? Fine, they grow them for themselves and sell a few seedlings on the market! But perhaps there is no point in bothering with growing seedlings oneself, when... they could be bought from others in a public procurement tender. Maybe it would work out a penny cheaper (the savings could be directed “to something”, for example, to some critical infrastructure), but the nursery could be sold to “some” interested party, and again there would be money in the budget for “something”. The ravings of a sick politician, citizen, activist...? Not at all! If one can earn less by producing and selling planks than by trading the same roundwood, then the incredibly clever masters of the highest mathematics could surely calculate that the costs of maintaining a nursery are too high relative to the price received for the seedlings, payment, and gain.
Were they managing too well?!
One may like it or not, but the previous management of Rīgas meži achieved double certification for the company. Namely, since the autumn of 2020, the company has had forest management certificates and timber supply chain certificates from both of the two largest forest certification systems—PEFC and FSC. One must take into account that Rīgas meži is one of the largest forest managers in Latvia by managed forest area (approx. 60,000 ha) and obtains about 180,000 m3 of roundwood in its forests every year.
As the income of Rīgas meži has increased significantly over the last 10 years (up to and including 2018), certificates for both certification systems were obtained, the production of products with higher value-added was developed, and the capacity of the nursery was increased.
One must ask: why are the long-term managers of this company being driven out? Legally, everything is simple and correct, as it happened following a whistleblower report, the content of which, however, has not yet really been verified, as this requires a special audit. Thus, in “circumstances of uncompromising rule of law”, management can be dismissed just by relying on a whistleblower report rather than on the verifications mentioned therein. Namely, a shadow of suspicion lies over the Green Classroom project, where 600,000 euros were reportedly invested in one building. Undeniably, the mentioned sum is quite impressive for a single shack. The matter truly “cries out” for a verification of the actual facts. We will impatiently await its results and conclusions.
Timber money for critical infrastructure, not for forests
It is confusing, but one of the new Riga chiefs has already managed to state that they had invited the Rīgas meži managers for a conversation and wanted to talk about “investments in critical infrastructure, but the now-former management of the company presented grandiose investment plans that had little to do with the municipality’s goals”.
There, that's it! Everything is simple! If they had been more “responsive” and “understanding”, they would still be sitting in their chairs. Perhaps... however... it would have been simpler to boldly say—those who are no longer in power in Riga appointed you, we don't want to work with you, so we are dismissing you. The explanation by the person in power that “all the money obtained from logging is also the money of all Riga residents, which we should be investing in the city's needs” is more reminiscent of the time 40–50 years ago, rather than managers who understand the operations of 21st-century capital companies.
Payment for sold timber is NOT the same as profit that can be used as the owners please. If this statement by the capital's leaders is not a random slip of the tongue, it seems that grim times await Rīgas meži, because taking all the money (just so that critical infrastructure can have it) received from selling timber means that nothing will be given “back” to the forest, and about the company that holds two forest certification system certificates, in a moment one will be able to say: ONCE UPON A TIME.