Latvia's security and defence are a shared and strategically important goal for society as a whole. However, the proposal to increase the felling volumes of AS “Latvijas valsts meži” (LVM) from 7 to 9 million cubic metres a year in order to top up the defence budget is not an effective solution if the plan is for LVM itself to sell the timber as roundwood deliveries. Such an approach will produce no real fiscal effect, while at the same time threatening the balance of the market and distorting competition. Instead, it is possible to choose a more balanced path – selling the additional 2 million cubic metres over the next two years at public auctions of standing timber felling sites, much as Meža pētīšanas stacija (MPS) does. This is a solution that would allow national defence to secure considerably greater revenue.
One of Latvia's leading wood-processing companies, “Stiga RM”, has sent an open letter to the Cabinet of Ministers of the Republic of Latvia and other institutions, setting out a detailed rationale and calling for an assessment of options that are financially more advantageous and at the same time more balanced and more sustainable. (The “Stiga RM” open letter)
“In the light of Russia's aggression in Ukraine, investment in defence is extremely important, so if we are talking about a resource that belongs to us all, we have to find the most profitable way of using it. By raising LVM's felling volume to a level that cannot be delivered either physically or in market terms, we risk damaging the timber market, weakening private forestry and selling off Latvia's forests within a short time at an even lower price than the one that already looks utterly inadequate – just under 20 euro per cubic metre, which is what LVM brings into the state budget. Instead, we are offering an alternative – public auctions of felling sites, which would allow the state to obtain greater revenue while preserving the stability of the industry and avoiding negative consequences,” stresses Andris Ramoliņš, Chairman of the Board of “Stiga RM”.
According to the company's calculations, the market is already suffering from overproduction and selling prices are falling. The European construction sector is stagnating, and the fall in demand makes any additional volume of timber dangerous for the entire industry. In 2024 the highest LVM felling volume in history was reached – 7.44 million cubic metres. Demanding a further 27% on top of that would mean overloading service providers, running into shortages of labour and machinery as well as rising costs, and substantially reducing any potential fiscal gain.
Moreover, in order to achieve the intended 200-300 million euro in additional revenue, LVM's profit would have to rise to more than 100 euro per cubic metre, which is simply impossible, because that is almost five times the current average price – around 20 euro per cubic metre.
A more effective alternative, and one more advantageous for the state – public auctions of felling sites
“Stiga RM” proposes topping up the state budget by using a proven, transparent and economically sound solution – the sale of standing timber felling sites at public auctions. Such a mechanism encourages competition between market participants and increases state revenue, while avoiding harvesting costs and not distorting the market. In 2024, 0.23 million cubic metres were sold in this way, achieving an average price of 47.8 euro per cubic metre. According to “Stiga RM” calculations, applying this model effectively to the sale of the planned 2 million cubic metres could bring the state up to 140 million euro in additional revenue.
“Competition at auction ensures that the state receives the highest price possible – businesses compete for the resource, and the winner is the one who offers the most for the standing timber. Net revenue per cubic metre can therefore be higher than if LVM sold the assortments itself, because there is no need to cover the direct costs of harvesting,” Andris Ramoliņš explains the company's position.
By choosing this model, the state would not only gain more budget funds but would also preserve the stability, the jobs and the competitiveness of the forestry sector. It is a sensible, economically sound solution that is advantageous for the state and consistent with Latvia's strategic interests – including in the field of defence.
“Stiga RM” calls on policymakers and decision-makers to act responsibly and, in strengthening national defence, to choose the most profitable and most economically sound solution.