SAINT PETERSBURG (AFP) - Russia will not raise its export duties on timber – but increases pressure on Sweden and Finland to approve the Nord Stream gas pipeline.

Any rise in timber duties could hurt paper making firms in EU members Sweden and Finland, such as Stora Enso and UPM-Kymmene.

"The Russian government already took the decision to delay the next round of tax increases on round wood. Today, I can say that this moratorium will be extended to next year," Russian's Prime Minister Vladimir Putin told Finnish Prime Minister Matti Vanhanen at a forestry summit in Saint Petersburg.

He added that Moscow's decision came as a result of a "sharp fall" in export demand for timber amid the global financial crisis.

Exports have been hit badly since Russia started gradually ratcheting up export duties in 2006. But Moscow views the duties on round wood exports as a means of encouraging investment in developping its own timber processing sector.

Vanhanen sharply criticised the tariffs as protectionist, saying Moscow should speed accession talks to join the World Trade Organization.

"We think that the cancelling of protective export duties on timber could be an answer to the problem of developing the timber processing industry. We have differing views on this question," he said.

"As far as the WTO is concerned, Finland sees Russia's place as part of the WTO."

The Finnish Prime Minister said he expected his government to authorise Russia's Nord Stream gas pipeline to pass under its waters by the end of the year. He told reporters after meeting Putin that his government would make a decision in early November.

"After that, the services in charge of the environment will give their authorisation to the construction of the gas pipeline. We expect this to be done by the end of the year," he said.

The pipeline project, which is led by Russian state-run energy giant Gazprom in partnership with Germany's E.On Ruhrgas and BASF-Wintershall, will run under the Baltic Sea to bring gas from Russia to the European Union.

It will link the Russian city of Vyborg and Greifswald in Germany over a distance of 1,220 kilometres (760 miles), going under the Baltic Sea and passing through Russian, Finnish, Swedish, Danish and German waters.

Denmark approved it Tuesday. Finland and Sweden still need to approve the project, which is criticised by Poland and the Baltic states, who claim that the project's sole aim is to circumvent them.

Meanwhile, Russian officials at the weekend summit loudly complained that Finnish companies were not investing enough in Russia's timber sector, pushing for more projects in the Russia's Far East.

"Finnish capital is largely invested in Russia's northwest and the Moscow Region. But Finnish investors are also present in China. It may interest them to also be present in the Far East," Industry and Trade Minister Viktor Khristenko said.

His deputy minister, Andrei Dementyev added: "Unfortunately, we see that our Finnish colleagues are not investing enough in Russia."

According to Finnish officials, over one billion euros (1.5 billion dollars) was invested by Finnish business in the Russian timber industry over the last 15 years.

Finland's Minister of Economic Affairs Mauri Pekkarinen admitted there was "still a lot of untapped potential" for investment in Russia, but added: "Russian duties have a negative influence both in Finland and in Russia."

Finnish paper companies, which rely heavily on cheap Russian wood, have threatened to close mills and cut jobs if the timber row is not resolved, but negotiations between the EU and Russia have so far failed to strike a deal.

Russia, the only major economic power still outside the WTO, began negotiations to join in 1993, but talks have been marked by growing expressions of Russian frustration over the process.

Moscow surprised the trade body this year with an unorthodox request to join the WTO as part of a joint customs union with ex-Soviet neighbours Belarus and Kazakhstan.