Corrupt management of Ukraine’s timber sector is supplying the EU with large amounts of wood from the country’s dense forests.

The London-based investigative nonprofit Earthsight found evidence that forestry officials have taken bribes to supply major European firms with Ukrainian wood that may have been harvested illegally.

Earthsight argues that EU-based companies are not carrying out the due diligence that the EU Timber Regulation requires when buying from “high-risk” sources of timber.

Lax due diligence by European companies is driving the illegal harvest of timber in Ukraine, one of the largest suppliers to the continent, according to a report published July 14.

“It’s a huge source of high-risk timber coming into the EU,” said Sam Lawson, who directs the London-based investigative non-profit Earthsight.

Ukraine holds some of Europe’s largest tracts of unspoiled forests. But those forests, home to brown bears (Ursus arctos arctos), wolves (Canis lupus lupus), and bison (Bison bonasus), also supply more “high-risk timber” to the EU than all countries in the tropics combined, Lawson said. Earthsight carried out a two-year probe into the country’s timber sector, digging through court documents and customs records, interviewing industry staff and government officials, and conducting on-the-ground and under cover investigations.

Video © Earthsight.

The effort uncovered evidence of corruption on the part of government-run “state forestry enterprises” and department heads in Ukraine. They also traced the tendrils of that corruption to large sawmills, suppliers and retailers in the EU — companies that Earthsight says are falling short of their responsibility to verify that the wood they buy comes from trees cut down in accordance with the law. That means that a significant proportion of the wood found in products around the continent come from illegally harvested sources, Lawson told Mongabay.

“It gets used in absolutely everything,” he said. “You can barely look around you without seeing something that could have Ukrainian wood in it.”

The timber industry is a huge source of income for the country, bringing in around $1.7 billion every year, roughly 2 percent of Ukraine’s 2016 gross domestic product. But the Earthsight team uncovered evidence of substantial corruption and questionable management of this economically vital resource, extending from the dense forests of western Ukraine on up through the supply chain.

An Earthsight-funded study revealed that more than two-thirds of the trees harvested in 2017 were cut down because managers took advantage of a loophole designed to stop the spread of disease. In many cases, forest managers liberally applied this method of “sanitary felling” to clear away more trees than needed to be cut down simply for health reasons, Lawson said.

“It’s a common form of malpractice in other parts of the ex-Soviet world,” he said. Trees felled under this pretext account for between 38 and 44 percent of total production and exports — a harvest that Earthsight contends should be considered “unjustified” and “illegal.”

In response to problems within the timber industry, Ukrainian officials banned the export of unprocessed timber in 2015.

“If you have a lot of corruption in your logging sector driven by overseas demand,” Lawson said, “then a log export ban is a sensitive thing to do to try and provide some breathing space within which to reform the industry.”

In effect, the ban gives a country like Ukraine control over processing facilities, where inspectors can verify the origins of the raw materials coming in, he added.

But data from EU customs offices “show that they’re importing huge volumes of logs into Europe that are supposedly banned from export in Ukraine,” Lawson said. And the team found that much of the wood was finding its way into EU countries tagged as fuelwood.

Lawson said European authorities were putting pressure on Ukraine to allow round log exports again, using the argument that EU-based companies didn’t have access to enough information that would “persuade” them to stop importing Ukrainian timber.

“Why do you have to persuade the importers to comply with the law?” Lawson said. The EU Timber Regulation (EUTR), a set of laws that went into effect in 2013, mandates that companies check the sources of the wood from high-risk sources that they import.

“The EUTR is a law,” he added. “It’s not a voluntary thing.”

Earthsight turned up evidence of millions of dollars of graft wending its way through the industry. Several key figures in the timber industry appear to have profited personally from corrupt management. In 2017, Roman Cherevaty, the director of a regional forestry board in the Carpathian Mountains, was arrested by police in a sting operation as he tried to bribe officials with payments of $10,000 a month to overlook illegal logging practices.

Viktor Sivets, the former head of the national forestry department, has been investigated for taking perhaps 30 million euros ($35.1 million) in bribes at the expense of Ukraine’s forests.

“The reason that Sivets was able to run that corrupt scheme was that he was basically able to order individual logging enterprises under his management to sell logs to these overseas buyers at specific prices,” Lawson said. “That was what gave him the power to extract bribes.”

Sivets was also an associate of ex-president Viktor Yanukovych, himself accused of running a broadreaching syndicate during his term that may have cost Ukraine $100 billion.

Until the 2015 log export ban, Holzindustrie Schweighofer, an Austrian timber processor, had been the leading purchaser of Ukrainian wood. The Earthsight team pointed to filings by Ukrainian prosecutors showing that Schweighofer and several other importers had paid a total of 13 million Euros ($15.2 million) for “marketing” services to Sivets and his wife through “letterbox” companies based in U.K. that often consist of little more than a mailing address. In other cases, these companies were registered in places known for shrouding owners’ identities in secrecy, such as Panama and Belize.

“As it is our principle to only act within the framework of every national and international law relevant for our company, we of course strongly reject these allegations,” Thomas Huemer, a spokesman for Schweighofer, said in an email to Mongabay. Huemer added that it was company policy “not to do any business with convicted offenders in the areas of corruption and illegal felling.”

Schweighofer and one of the world’s largest panel-making companies, Austria-based EGGER, also received timber that was suspected of having been sold at reduced prices to companies registered in “secrecy jurisdictions” like Belize or Panama, according to Earthsight’s investigation.

A spokesperson for EGGER told Mongabay in an email that part of the company’s approach to sustainability involved using wood “from forest thinning [and] hygienic activities as raw materials in the production process, and applying very strict wood procurement policies to ensure control of the wood origin.” Egger did not respond directly to a question about whether sanitary felling was considered a “hygienic” activity.

“Reducing the risks of illegality of wood is EGGER’s highest concern and we will also take further steps of investigation specifically for the wood from Ukraine,” the spokesperson said. “We also count on the support of local authorities and European institutions for a strict law to ensure control of the wood origin.”

Lawson said some companies had come to rely on certification by the Forest Stewardship Council (FSC) in Ukraine to verify that the sources of their timber were legal.

“Rather than doing meaningful due diligence as the law requires, they’re buying FSC wood instead, which is failing to fulfill the spirit of what that law is supposed to achieve,” Lawson said.

He said the substitution of FSC standards for companies’ own due diligence could be seen as “undermining” the EUTR’s impact, especially given the volume of wood that Ukraine supplies to the rest of the continent.

“Your roof, your floor, your table, the newspaper you are holding, all might well be made from Ukrainian wood,” Lawson said in a statement. “And if it is, there is a good chance it was cut or traded illegally, abetted by high-level corruption.”

Banner image of railway cars with timber © Earthsight.

John Cannon is a Mongabay staff writer based in the Middle East. Find him on Twitter: @johnccannon

Editor’s note: Mongabay has an ongoing collaboration with Earthsight on the Indonesia for Sale series.

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