13.3.2025

Minimum cost of Ukraine’s reconstruction is EUR 500 thousand million – experts have messages to EU decision-makers

Among experts, the emphasis on the importance of the bioeconomy in the EU has emerged. Maarit Lindström (left), Marjo Maidell, and Marko Mäki-Hakola were interviewed for an article by Forest.fi.

Three forest sector experts predict the possible consequences of the end of war, if and when it comes.

There have been speculations that Russia’s aggressive war against Ukraine could end within the year. Forest.fi asked three experts to consider what a peace agreement could mean for the forest sector in the EU.

The three experts we interviewed were Maarit Lindström, Director and Chief Economist at the Finnish Forest Industries Federation; Marjo Maidell, Forest Economist at Pellervo Economic Research PTT; and Marko Mäki-Hakola, Forest Director at the Central Union of Agricultural Producers and Forest Owners (MTK).

All the interviewees stressed the uncertainty of the situation and the possibility of rapid changes. The interviews were made in the second week of March 2025.

Marjo Maidell, PTT:

’The reconstruction of Ukraine will require huge investments. Once that process starts, it will cause a clear increase in the demand for timber for construction. Even so, it is possible that some terms of the peace agreement, for example, have an impact on how far Finnish timber will be in demand.

And what about sanctions against Russia? When new sanctions were set in 2022, the imports of raw wood from Russia to Finland stopped. This has decreased the availability of wood and affected the timber market in Finland, but also in other countries surrounding the Baltic Sea.

Dialogue between the USA and Russia, or even the achieving of peace, will not automatically mean that Europe will revoke the sanctions. If the terms of peace are not favourable to revoking the sanctions, a joint stand by the EU will be important.

If the sanctions are revoked at some point, either in part or completely, importing timber into Finland from Russia could, in principle, begin again. However, we cannot assume that the imports would reach the same level as before the sanctions.

The markets have developed during the thee yeas of the war. As an example, the EU’s Deforestation Regulation, which will become effective next year, poses new requirements on imports. Moreover, even if the sanctions were revoked, there are other factors related to re-starting raw wood imports. Setting up a timber procurement organization takes time, and building trust will certainly take even longer.

When the sanctions were imposed in 2022, the trade flows of forest industry products assumed new directions. Sawmill products and plywood from Russia and Belarus, which had satisfied a significant share of the demand for these grades in the EU Member States, were no longer imported. If the sanctions are eventually revoked, the imports of Russian sawmill products and plywood into the EU might continue. It is, however, unlikely that these imports would come even close to the pre-war level.’

Maarit Lindström, Finnish Forest Industries Federation:

’Ukraine was given the status of EU membership candidate on 23 June 2023. At the same time, Ukraine received a list of the reforms that it will need to implement in order to maintain this status. The implementation of these reforms will be a measure of Ukraine’s will and capability to become a member state.

Even after the war has ended, Ukraine faces several challenges. The country has been beset by corruption, its infrastructure must be improved and demining undertaken, and in this Ukraine itself must be active, although with support from the EU.

In terms of the forest sector, Finland and other EU member states can offer expertise, support and training. Important topics include administrative reforms, utilization of forest resource data, inventorying of forests, forest renewal and use, construction of logging roads and combating forest fires. All these are important with a view to attracting investments in Ukraine.

The forest resources of western Ukraine provide potential for the development of and investments in the forest sector. At the moment, exports of raw wood from Ukraine are prohibited, which should be taken into account in the criteria of the accession process. Lifting this prohibition would be an important step in trade liberation and the development of exports – and, if and when there is a desire that Finnish companies can help enhance he wood-processing industries in Ukraine.

The objective of banning the exports of raw wood has been to increase domestic processing. From the perspective of Finnish companies, allowing raw wood exports would create revenue. It would also form a basis for preparing investments, and for mapping the single market, both of which are requirements for investments in mechanical and chemical forest industries.

The potential utilization of Ukraine’s forest resources would have a favourable impact on the tightening of Europe’s timber market caused by Russia’s aggressive war.

The construction of infrastructure and the utilization of forest resources are required if economic growth based on wood processing industries is to be expected in Ukraine.

During the war, certain EU member states, including Germany, Poland, Sweden, Denmark and, to some extent, Finland, have been active in Ukraine. They have studied the market from the perspective of reconstruction.

Estimates on the cost of reconstruction in Ukraine vary, but it is expected to be over EUR 500 thousand million.

The demand for construction materials, such as sawmill products and CLT/LVL products, will increase due to he reconstruction. Ukraine aims at reconstructing the country on the ”Build Back Better” principle, which can provide opportunities for ecological timber construction and replacing concrete with wood.

Funding will be available from international bodies, such as the European Bank for Reconstruction and Development and the EU. As regards Finland, financial support could be applied for from the export credit agency Finnvera and the development financier Finnfund.

At the moment, however, the general attitude is cautious and reserved. Entering an area of conflict entails considerable risks, which companies will have to assess carefully.

Uncertainty is increased by the situation in world politics, and during his second term, U.S. President Donald Trump has contributed to it as regards internation trade flows, which is sharply detrimental to economic growth. Decision-making by businesses is more difficult due to geopolitical tensions.

Throughout the period of Russia’s aggression on Ukraine, Finland has exported forest industry products to Ukraine. The value of these exports in 2023 was EUR 47.3 million. The biggest group of products has been paperboard and paper.

Despite a drop of 30 percent in 2022, Ukraine’s economy has grown since the end of 2022. Russia has destroyed half of the energy generation capacity of Ukraine and caused a strong inflation in the country. It can hardly be expected that the economy will reach its previous volume for some time to come. The shortage of labour has increased.

Ukraine has lost roughly a quarter of its labour force since January 2022. At the current growth rate of about 4 percent, Ukraine’s GDP would reach the pre-war level in 2030. The reconstruction will not be an easy task.

And what about the sanctions on Russia? If the sanctions are revoked, Russian sawmill products and plywood may again enter the market. Before the war, 1.3 million cubic metres of birch plywood, for example, were imported to Europe from Russia each year. This would have an impact on the market and trade flows in Europe.’

Marko Mäki-Hakola, Central Union of Agricultural Producers and Forest Owners:

’Provided the peace agreement brings stability and faith in the future, the forest sector in Ukraine could well start to grow. EU decision-makers would do well to invest in creating favourable conditions for bioeconomy. The reconstruction will be a boost to bioeconomy, but EU’s relations with Russia will continue to be tense. I believe that the EU will become more cohesive and will invest in self-reliance and independence of external agents. Another agent favouring this is the USA. In other words, from the perspective of the forest sector as from those of others, the situation has a global impact. The reconstruction of Ukraine will certainly be visible in Finland, too.

A unique factor in Finland were the substantial imports of timber from Russia. I strongly hope that the Finnish forest industry understands its responsibility and will not return to procuring timber from behind our eastern border. I also anticipate that there will be a demand for Finnish forest know-how once Ukraine can begin to develop its forest sector.’