As the Russian invasion of Ukraine continues into its third year, the ripple effects on international trade are becoming increasingly apparent, exacerbated by the widening sanctions on Russian exports. Researchers have now highlighted the immediate repercussions on global timber markets and the potential long-term consequences on the global economy and the environment.

A recent study, conducted with meticulous attention to detail, examines the impact of sanctions against Russia and the ongoing military disruptions in Ukraine on the global markets for wood products. Utilising the Global Forest Products Market model, researchers outlined two scenarios: one assuming the absence of the invasion and another assessing the current ramifications of the sanctions on wood products alongside trade disruptions up to 2025. This thorough comparative analysis has enabled them to develop a predictive model that forecasts shifts in the global wood product markets over both the short and long term.

The study, led by Rajan Parajuli, Associate Professor of Forest Economics and Policy at North Carolina State University, points to significant immediate effects. “In the short term, defined as within a decade following the invasion’s end, we anticipate a price increase of up to three per cent for commodities like industrial roundwood and finished wood products,” explains Parajuli. As a significant producer of forest products with a global reach, Russia feels the substantial impact of international sanctions. Furthermore, military operations in Ukraine complicate timber harvesting operations, adding to the disruption.

However, the outlook for Russia’s timber market share might improve over the long haul. Projecting up to 2050, the study suggests a diminished overall disruption as Russian markets for industrial timber recuperate. The researchers have based their model on an assumption that the invasion will conclude by 2025, anticipating a gradual return to pre-invasion market levels over the subsequent 10 to 30 years. This potential for recovery offers a glimmer of hope in an otherwise challenging situation.

Yet, not all sectors are expected to recover to their pre-crisis conditions. “We believe that certain products, like wood-based panels and paper and paperboard, may never regain their pre-invasion market levels in Russia or Ukraine,” Parajuli notes. Not being very large, these sectors might face a permanent decline if these countries fail to resume production over the next few years, likely leading other nations to fill the void. “The resulting higher prices could incentivise resource-rich countries such as the USA, Canada, China, and several Asian nations to increase production, capitalising on the elevated market prices,” he added.

This anticipated shift in production and trade dynamics holds profound implications globally, touching economic and environmental spheres alike. The potential for increased production in other countries poses significant economic opportunities but raises environmental stewardship concerns. The study warns that this could result in relaxed environmental regulations and a surge in deforestation, mainly through increased timber logging activities. Developing countries, already grappling with high rates of illegal logging, might bear the severe consequences of heightened deforestation and associated environmental damage.

Thus, while the direct impact of the invasion and sanctions on market disruptions and price changes is clear, the broader implications for the global economy and environmental health point to a complex and challenging recovery path. This underscores the urgent need for careful management and international cooperation to mitigate long-term damage, making it clear that action is needed now.

More information: Prakash Nepal et al, Projected effects of the Russian invasion of Ukraine on global forest products markets, Forest Policy and Economics. DOI: 10.1016/j.forpol.2024.103301

Journal information: Forest Policy and Economics Provided by North Carolina State University