The E.U. is against a further increase in Russian export duties on unprocessed timber and a failure to compromise on the issue could affect Russia's WTO entry prospects, E.U. Trade Commissioner Peter Mandelson wrote in a letter to Russian Deputy Prime Minister Alexei Kudrin, the text of which was obtained by Prime-Tass Wednesday.

In the letter, Mandelson linked the issue of timber export duties to Russia's negotiations on acceding to the World Trade Organization (WTO), saying that the E.U. was willing to make concessions for Russia on a number of WTO-related issues, but expected Russia to compromise on the timber issue.

In an effort to encourage domestic timber processing, the Russian government approved a ruling early last year slapping prohibitive export duties on unprocessed timber exports.

Last July 1, the export duty on unprocessed timber was increased to 20% of the customs value but no less than 10 euros per cubic meter from 6.5% of the customs value but no less than 4 euros per cubic meter. The duty will be further increased to 25% of the customs value but no less than 25 euros per cubic meter on April 1 of this year and 80% of the customs value but no less than 50 euros per cubic meter in 2009.

Mandelson said that E.U. member countries were suffering financially from the increase in Russian timber duties. He added that a further increase in the duties starting April 1 "would put an end to timber trade and make it impossible to find a solution in negotiations on export duties."

The E.U. is proposing negotiating the size of the export duties with Russia, he said.

Kudrin, who is also Russia's finance minister, is expected to meet with Mandelson on Thursday to discuss the issue.

It is not the first time Russia's timber duties have come under fire. Last May, E.U. member Finland said its position on Russian WTO accession depended on reaching a compromise on timber export duties.