• European customers may have unknowingly bought hundreds of millions of dollars worth of timber linked to one of Russia’s biggest illegal logging scandals, a new report by NGO Earthsight has alleged.
• The timber was exported to the E.U. by Russian conglomerate BM Group, led by tycoon Alexander Pudovkin, who was arrested last year along with two officials implicated in fraud and bribery in the case.
• Major timber accreditation body the Programme for the Endorsement of Forest Certification (PEFC) was criticized for “greenwashing” BM Group’s timber export business.

Timber linked to one of Russia’s largest illegal logging scandals has entered the E.U. despite rules meant to tackle the illicit trade, according to a new report.

The report, titled Taiga King, by UK-based environmental group Earthsight alleges more than 100,000 tons of timber from Khabarovsk Krai in Russia’s far east made its way into Europe via the BM Group, a conglomerate headed by Alexander Pudovkin, who was arrested last year and is being investigated along with two officials who are accused of abuse of office.

According to prosecutors, Pudovkin admitted to paying bribes to the officials in return for government subsidies and access to timber concessions. He has denied wrongdoing and is due to stand trial.

Prosecutors also allege Pudovkin was handed contracts without public tender and his company received state funding for a sawmill project that it never completed.

The BM Group’s offices in Khabarovsk, near the Chinese border in Siberia, were raided by Russia’s domestic spy agency, the FSB, in March 2019. The FSB seized computer hardware and a safe in the raid and subsequently a criminal investigation was launched. The law enforcement action led to BM Group’s removal from Russia’s federal list of priority investment projects, which allow a select group of firms to sidestep public auctions for logging rights.

“Pudovkin’s BM Group milked this lucrative status for all it was worth, setting up no fewer than five sawmill ventures between 2008 and 2017. Together, they handed over combined rights to cut more than two million trees each year, catapulting it into the ranks of the world’s largest timber makers,” the report says.

The boreal forests that encircle much of the far northern hemisphere, also known as the taiga, are home to numerous species, including bears, wolves and reindeer. Conservation scientists believe the biome is critical to preventing catastrophic climate change as boreal forests store almost twice as much carbon per hectare as their tropical counterparts.

Prosecutors have alleged that a BM Group affiliate, Asia Les, logged 600,000 cubic metres of timber illegally and that the licenses for the forest concessions and state subsidy grants were obtained fraudulently. When the authorities began to take action against Asia Les, a sister firm, Logistic Les, began exporting timber of the same type and quantities as Asia Les. “It seems likely this was laundered Asia Les timber,” the report says.

Earthsight estimates BM Group logged and degraded an area the size of London. Total losses to the state treasury as a result of the alleged fraud are estimated to be as high as $140 million.

Aerial view of the Asia Les sawmill project in Khabarovsk Krai, Russia.

Most of the timber harvested by BM Group and its affiliated companies was traded to China and Japan, but a large amount of larch was also sold to several European firms for the production of home cladding, paneling and yachts, according to Earthsight. German firms made up the majority of E.U. buyers, with a smaller proportion of the timber going to Estonia, France, Belgium, Sweden, Latvia, Slovakia, Czech Republic, Denmark, Lithuania and Austria.

“Over less than a decade, the Asia Les swindle exposed major blind spots in tackling the illegal timber trade. In what may well be the largest single scandal of its kind, Earthsight has estimated that European consumers have shelled out somewhere in the region of €59 million [$72.3 million] to €316 million [$387.2 million] cladding their homes with illegal Russian wood,” the report says.

The trade occurred despite an E.U. timber regulation introduced in 2013 that requires companies to check the source of the wood they buy to reduce the risk of trading illegal timber to a “negligible” level. “Far from EU laws preventing them from handling this timber, European companies profited handsomely from it,” Earthsight said.

Russia exported more than $12 billion of timber last year and at least half of the wood logged in the country’s far east is thought to be illegal.

The BM Group has said it held leases covering the logging activities in Khabarovsk and had engaged in local sustainability programs. It did not immediately respond to a request for comment.

Despite the public nature of the scandal following the 2019 raid, arrests and subsequent legal proceedings, the report says many of the European importers continued to buy tainted timber, with some even increasing their orders.

Earthsight criticized the reliance of European firms on timber accreditation body the Programme for the Endorsement of Forest Certification (PEFC), saying their role in the scandal had amounted to “greenwashing”.

The factory and forest leases owned by Asia Les have lost their PEFC accreditation since the scandal broke, but the BM Group still maintains more than 150,000 hectares (370,000 acres) of certified forest holdings in eastern Russia, which include responsibilities for protecting biodiversity and preventing illegal logging, the report says.

Sam Lawson, Earthsight director, said European consumers were “aiding and abetting the destruction of the world’s precious forests.”

“Governments must act urgently to prevent this, both by passing new laws and better enforcing existing ones.”