The Prosecutor General’s Office should assess the submission by Minister of Agriculture Armands Krauze (Union of Greens and Farmers) regarding support measures for the timber industry, candidate for Prosecutor General Armīns Meisters said on Wednesday during a meeting of the Saeima’s Legal Affairs Committee. Meisters is expected to be confirmed in the post on Thursday.
Committee chairman Andrejs Judins (New Unity), questioning the candidate, asked whether Meisters had noticed the information about Krauze’s submission and whether the Prosecutor’s Office would pay attention to the issue. Meisters replied that he had seen the matter discussed publicly, but since he currently heads a regional-level prosecutor’s office, the submission had not reached him, and therefore he was not familiar with the detailed arguments.
However, as a candidate for Prosecutor General, his view is that such cases require evaluation by the Prosecutor’s Office, something he also noted in his concept paper. Meisters stressed that one of the functions of the Prosecutor’s Office — protecting the rights of individuals and the state — is not always used proactively or is sometimes used too late.
“Essentially, in cases where the highest officials of the state or the Prosecutor’s Office itself determines that grounds exist for such a review, it must be initiated, and the Prosecutor’s Office must provide its assessment. This does not always lead to a criminal case — a criminal process is an extreme measure and should never be a goal in itself. The mere initiation of a criminal case does not solve anything; there must be a prosecutorial assessment that determines how the review concludes,” Meisters emphasized.
As reported,
Krauze has asked the Prosecutor’s Office to evaluate potential unlawful conduct by officials
and the legality of government decisions made on the 19th of December, 2023 and the 25th of June, 2024 regarding price adjustments for timber sold by Latvijas valsts meži (LVM) in line with free-market prices.
Krauze stresses that if there is even the slightest doubt about the legality of preparing and adopting these decisions — including the Ministry of Agriculture’s (MoA) instructions to LVM as shareholder — an independent review is necessary.
“The interests of the state must come before everything else, because the stability of the national economy is a matter of national security,” the minister said.
The party The Progressives, which had previously argued that the MoA’s proposed support mechanism for the timber industry should be evaluated to determine whether it was truly in the public interest, again demanded explanations in a statement released Monday. The party said that upon reviewing the information, it would consider turning to the Corruption Prevention and Combating Bureau (KNAB) and the Prosecutor General’s Office.
LVM board chairman Pēters Putniņš decided to resign in October.
Putniņš did not comment on the matter to LETA.
At the same time, TV3’s programme Nekā personīga reported that his resignation was likely due to political pressure — specifically, linked to government decisions to accommodate timber companies that had, at LVM auctions, signed three-year contracts for relatively high prices.
The programme noted that Putniņš’s board had previously been asked to review and reduce the prices in existing contracts, but LVM refused, stating that doing so would constitute wasteful spending.
Prime Minister Evika Siliņa’s (New Unity) government approved decisions favourable to timber companies despite the fact that in previous years the industry had earned record profits, the programme said.
Nekā personīga explained that
in 2023 major timber producers began warning that Russia’s war in Ukraine had slowed construction activity
in the region, reducing demand for sawn timber and lowering prices. Large exporters — those who had secured three-year long-term contracts for conifer sawlogs at high auction prices — were the most affected. Industry associations approached LVM, proposing that “competitive prices” be set, but LVM leadership refused, arguing that doing so would be economically unsound and unlawful.
In a response letter signed by Putniņš and other board members, LVM argued that such a decision would reduce its revenue by millions of euros, representing wasteful use of state resources. It also noted that the move had to be evaluated within the context of EU law, as it could constitute state aid that distorts competition.
However, at the end of 2023, Minister Krauze and the ministry’s then–state secretary — who was also the state’s representative holding LVM shares and is now State Chancellery director Raivis Kronbergs — submitted a report to the government on mitigating factors negatively affecting the competitiveness of Latvia’s timber industry. According to the programme, the report attempted to create the impression that the industry faced an emergency situation: Latvian sawmills were losing competitiveness to Nordic countries due to high raw material prices, and therefore
LVM should effectively grant discounts on already concluded long-term contracts to stabilise the market.
The Ministry of Environmental Protection and Regional Development (MEPRD), however, objected, pointing out that the industry’s difficulties had lasted only one year, while in previous years exporters in the forestry sector had earned record profits — €201 million in 2021 and €102 million in 2022 — and that the expected crisis was only a forecast. The ministry also expressed concerns that long-term contract price reductions would benefit only large timber producers, not the entire sector.
Based on the MoA’s report, the government instructed LVM to apply — starting 1 January 2024 — not the prices that companies had bid in auctions, but significantly lower weighted average prices for sawlogs in long-term contracts. The government also required information on the impact on LVM’s revenue. It was found that LVM’s quarterly profit decreased by €7.54 million. The annual impact was not evaluated, but the programme reported that this decision, favourable to sawmills, cost LVM more than €30 million.
Siliņa, like Krauze, denied meeting with specific timber industry businessmen. However, the Prime Minister still has not answered why, at the end of 2023 — when the need for austerity was already evident — the state gave up €30 million in revenue in favour of large timber companies, rather than the industry as a whole.
This Sunday, Nekā personīga reported that Uldis Mierkalns, owner of the timber company Pata, had arranged through the Ministry of Agriculture additional discounts on two more contracts with LVM, which will cost the state €12 million.
Last week, Siliņa announced that she had instructed Minister Krauze to explain the Cabinet’s decision related to support for the timber industry. She also requested data-based information on the decision’s impact on LVM, the companies involved and the national economy as a whole.
Siliņa additionally expects proposals regarding long-term forestry contracts and how they relate to the above decision.
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