AN ANALYSIS OF WOOD PELLETS EXPORT FROM VIETNAM TO EU IN THE CONTEXT OF RUSSIA-UKRAINE WAR

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MINISTRY OF EDUCATION AND TRAINING
FOREIGN TRADE UNIVERSITY
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MASTER THESIS
AN ANALYSIS OF WOOD PELLETS EXPORT FROM
VIETNAM TO EU IN THE CONTEXT OF RUSSIA-
UKRAINE WAR
Specialization: International Trade Policy and Law
LE MAI HUONG

Hanoi - 2023

MINISTRY OF EDUCATION AND TRAINING
FOREIGN TRADE UNIVERSITY
MASTER THESIS
AN ANALYSIS OF WOOD PELLETS EXPORT FROM
VIETNAM TO EU IN THE CONTEXT OF RUSSIA-
UKRAINE WAR
Major: International Economics
Specialization: International Trade Policy and Law
Code: 8310106
Fullname: Le Mai Huong
Supervisor: Dr. Pham Huong Giang

i
STATEMENT OF ORIGINAL AUTHORSHIP
I solemnly declare:
The data and research evaluations presented in this thesis have not been
utilized in any other work and are entirely truthful.
The information cited in this research has been sourced from the reference list,
and acknowledgments have been expressed for any assistance provided in
completing this thesis.
Hanoi, 08 September 2023
Thesis author
Le Mai Huong

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ACKNOWLEDGEMENT
The research thesis on "An analysis of wood pellets export from Vietnam to
EU in the context of Russia-Ukraine war" is the result of my personal exploration
and the encouragement, support, and guidance of my professors.
I would like to express my sincere gratitude to Dr. Pham Huong Giang for her
dedicated guidance and support throughout the research, implementation, and
completion of this thesis.
I would like to thank my family and the institutions I am affiliated with for
providing the necessary resources and assistance during the entire process of
conducting this research. They have also been a great source of encouragement and
support in my journey to complete this study.

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TABLE OF CONTENT
STATEMENT OF ORIGINAL AUTHORSHIP ................................................... i
ACKNOWLEDGEMENT....................................................................................... ii
LIST OF ABBREVIATIONS...................................................................................v
LIST OF TABLES .................................................................................................. vi
LIST OF FIGURES ............................................................................................... vii
ABSTRACT........................................................................................................... viii
INTRODUCTION.....................................................................................................1
CHAPTER 1: THE THEORETICAL FRAMEWORK ON THE
EXPORTATION OF WOOD PELLETS AND AN OVERVIEW OF THE
POTENTIAL IMPACTS OF RUSSIA-UKRAINE WAR ON THE EU’S
IMPORTATION .......................................................................................................7
1.1. Export..............................................................................................................7
1.1.1. Definition ..................................................................................................7
1.1.2. Roles of export ..........................................................................................7
1.2. Overview of wood pellets...............................................................................9
1.2.1. Definition ..................................................................................................9
1.2.3. Applications of wood pellets ...................................................................12
1.3. Overview of European Union......................................................................12
1.3.1. General introduction to the EU ............................................................12
1.3.2. International trade policy of EU ............................................................15
1.3.3. EU wood pellets market..........................................................................20
1.3.4. Trade relation between EU and Vietnam ..............................................22
1.3.5. EU-Vietnam Free Trade Agreement (EVFTA).....................................24
1.4. Overview of Russia-Ukraine war..............................................................28
1.4.1. The cause of Russia-Ukraine war........................................................28
1.4.2. Progress of the Russia-Ukraine war ......................................................30
1.4.3. Effects of Russia-Ukraine war on international trade..........................34
SUMMARY OF CHAPTER 1 ...............................................................................39
CHAPTER 2: ANALYZING WOOD PELLETS EXPORT FROM VIETNAM
TO EU IN THE CONTEXT OF RUSSIA-UKRAINE WAR .............................40
2.1. The current situation of wood pellets exports in Vietnam (2018-2022) ..40

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2.1.1. Wood pellets value structure ..................................................................40
2.1.2. Export volume and value of wood pellets ..............................................42
2.1.3. Wood pellets exporting and manufacturing enterprises in Vietnam....44
2.2. The current situation of wood pellets exports from Vietnam to Europe in
the context of Russia-Ukraine war.....................................................................47
2.3. Assessment the situation of exporting wood pellets from Vietnam to the
EU in the context of the Russia-Ukraine war....................................................50
2.4. Opportunities of exporting wood pellets from Vietnam to the EU in
the context of the Russia-Ukraine war ............................................................55
2.4.1. Expanding market share in the European market and contributing
to the growth of Vietnam's export turnover...................................................55
2.4.2. Attracting foreign direct investment (FDI) .........................................56
2.4.3. Improving the quality of wood pellets..................................................57
2.5. Challenges of exporting wood pellets from Vietnam to the EU in the
context of the Russia-Ukraine war...................................................................57
2.5.1. Challenges with government agencies.................................................57
2.5.2. Challenges for enterprises ....................................................................58
CHAPTER 3: POLICY IMPLICATIONS AND SOLUTIONS TO PROMOTE
EXPORT VIETNAM’S WOOD PELLETS TO EU IN THE CONTEXT OF
RUSSIA-UKRAINE WAR .....................................................................................65
3.1. Forecasting prospect of exporting wood pellets from Vietnam to EU in
the context of Russia-Ukraine war.....................................................................65
3.2. Policy implications to promote Vietnam’s wood pellets exports to the
EU in the context of Russia-Ukraine war........................................................66
3.3. Solutions for enterprises to promote exports of wood pellets to the EU
in the context of the Russia-Ukraine war........................................................72
SUMMARY OF CHAPTER 3 ...............................................................................78
CONCLUSION........................................................................................................79
REFERENCES........................................................................................................ ix

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LIST OF ABBREVIATIONS
Abbreviation Interpretation
EVFTA European Union–Vietnam Free Trade
Agreement
FTA Free Trade Agreement
EU European Union
GSP Generalized System of Preferences
SPS Technical Barriers to Trade
TBT Technical Barriers to Trade
CCT Common Customs Tariff
GDP Gross Domestic Product
HS Harmonized System
FSC Forest Stewardship Council
NATO The North Atlantic Treaty Organization
WTO World Trade Organization
UN The United Nations
VIFOREST Vietnam Timber and Forest Product Association
MIT Ministry of Industry and Trade
MT Metric ton

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LIST OF TABLES
Table 1.1: EU overview data.....................................................................................14
Table 1.2: EU27 Wood Pellets Market Balance and Production Capacity (1,000 MT)20
Table 1.3: Main Suppliers of Wood Pellets to EU27 (1,000 MT)............................22
Table 1.4: Top 10 EU members in export value to Vietnam (USD) ........................23
Table 1.5: Top 10 EU members in import value to Vietnam (USD)........................24
Table 2.1: Number of enterprises exporting wood pellets by size from 2018-202245
Table 2.2: Vietnam's main tablet export markets in 2022 (compare to 2021)..........48

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LIST OF FIGURES
Figure 1.1: Wood pellets...........................................................................................10
Figure 1.2: European wood pellet consumption for heat in 2021 (tonnes,%) ..........21
Figure 1.3: NATO members in Europe.....................................................................28
Figure 1.4: EU trade with Russian 2021-2022 (€ billion).........................................35
Figure 1.5: Most traded goods between EU and Russia, 2022 (€ billion)................35
Figure 1.6: Dependency on wheat imports from Russia and Ukraine from 2018-
2021 (%)....................................................................................................................37
Figure 2.1: Export turnover of wood pellets compared to the whole industry of
wood and wood products from 2018-2022 (million USD).......................................40
Figure 2.2: Structure of export value of wood and some wood products 2021 (%).41
Figure 2.3: Structure of export value of wood and some wood products 2022 (%).41
Figure 2.4: Export quantity and value of wood pellets in Vietnam from 2013 to
2022...........................................................................................................................42
Figure 2.5: Number of wood pellets exporting enterprises in Vietnam from 2018-
2022...........................................................................................................................44
Figure 2.6: Export quantity of wood pellets to different markets in Vietnam from
2018 to 2022 (tonnes)................................................................................................47
Figure 2.7: Average export price of tablets by month from 01/2021 - 10/2022
(USD/tonne, FOB) ....................................................................................................49

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ABSTRACT
Wood pellets are becoming one of the sustainable energy sources gradually
replacing fossil fuels in the EU market. With the escalating Russia-Ukraine conflict,
the global energy supply is increasingly disrupted, affecting both the global energy
supply and the EU in particular. However, this situation opens up opportunities for
Vietnam to export wood pellets to this demanding market.
The thesis “An analysis of wood pellets export from Vietnam to EU in the
context of Russia-Ukraine war” introduces general theories on exports and
evaluation criteria used in the research. Next, the author provides an overview of
wood pellets, followed by an explanation of the regulations related to wood pellets
exports to the EU under the framework of the EVFTA. Furthermore, the author
analyzes the current situation of wood pellets imports and consumption in EU
countries, including market scale, characteristics, and supply sources. Finally, the
author examines the context of the Russia-Ukraine war and its impacts on global
trade.
From the synthesized theoretical framework, the author analyze the following
key contents: Firstly, an overview analysis of Vietnam's wood pellets exports during
the period of 2018-2022. Secondly, an analysis of Vietnam's wood pellets exports to
the EU during the period of 2018-2022, based on export turnover indicators, export
structure, export markets, and Vietnam's competitive capacity in the wood pellet
sector in the EU region. Thirdly, based on the analyzed situation combined with the
theoretical basis in the research field, the author evaluates the opportunities and
challenges for Vietnam in exporting wood pellets to the EU in the context of the
Russia-Ukraine war. The opportunities may include the removal of trade barriers,
trade liberalization, etc., while the challenges may involve technical standards
related to product quality assurance, food safety and hygiene, rules of origin, and
intense competition from competitors.

ix
After assessing the opportunities and challenges in Chapter 2, the author
proposes several solutions to promote Vietnam's wood pellets exports to the EU in
the context of the Russia-Ukraine war.

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INTRODUCTION
1. Research topic justification
In recent years, as fossil fuel sources such as coal, gasoline, and oil
continue to deplete, the search for alternative materials has become urgent in any
country. Among them, wood pellets are considered a substitute material with
many advantages, including abundant and readily available raw materials, low
cost, and environmental friendliness. With abundant raw material sources and an
easily scalable production model, along with the increasing demand for biomass
fuel conversion in many regions such as South Korea, Japan, and the EU, wood
pellets are becoming one of the industries expected to bring billions of USD to
Vietnam's budget. According to the Vietnam Timber and Forest Product
Association (VIFOREST), compressed wood pellets are among the top five
highest export value items in the timber industry. Vietnam is currently the
world's second-largest exporter of wood pellets. Over the past seven years, the
production volume, exports, and value of wood pellets have been increasing.
Specifically, the volume of exported pellets has increased by over 18.28 times,
from 175,000 tonnes in 2013 to about 3.2 million tonnes in 2020. The export
value of wood pellets has increased by 15.3 times, from nearly 23 million USD
in 2013 to 351 million USD in 2020. In the first 10 months of 2022, the volume
of exported pellets reached nearly 3.9 million tonnes, an increase of 34%
compared to the same period in 2021, equivalent to over 111% of the total export
volume in 2021 (VIFOREST, 2022)
The EU is an attractive market for importing wood pellets, ranking first in
the world in terms of consumption of this product, accounting for about 50% of
the global consumption of wood pellets. Despite the complex developments of
the Covid-19 pandemic causing difficulties for the economy, wood pellets
remain one of the high-consumption items in the EU. Prior to 2022, there was a
concerning situation where although Vietnam consistently ranked first in the
world in exporting wood pellets, the volume of exported wood pellets to the EU
accounted for less than 1% of the total exports (Ministry of Industry and Trade,

2
2022). Vietnamese-branded wood pellets have had little presence in this
demanding market compared to the dominant exporters like the United States,
Russia, and Belarus before the Russia-Ukraine conflict erupted. In the context of
escalating and unpredictable political tensions between Russia and Ukraine,
under retaliatory measures between NATO and Russia, the supply of fuel for
heating such as gas and wood pellets has been reduced. The EU is forced to seek
new and stable sources of supply to maintain production and livelihoods for the
people in the region. Along with the good trade relations with the EU, the recent
signing of the EVFTA, is a great opportunity for Vietnam to establish a foothold
for wood pellets in this vast market.
Alongside the potential and opportunities, Vietnam also faces numerous
challenges when choosing to export wood pellets to the EU in the context of the
Russia-Ukraine war. The production of wood pellets is heavily impacted by the
availability of raw materials and production chains. Many wood pellet
manufacturing companies in Vietnam have increased their production to achieve
high output, but the quality has not yet met the strict requirements of the EU.
Additionally, major wood pellets suppliers are focusing on increasing exports to
the EU market to compensate for the shortfall of up to of the imported wood
pellets after the ban on importing wood and wood products from Russia.
Based on these reasons, the author chooses the topic "An analysis of wood
pellets exports from Vietnam to the EU in the context of the Russia-Ukraine
war" for the master's thesis.
2. Literature review
Recently, there have been some studies on the context of the Russian-
Ukrainian military conflict and its impact on Vietnam's economy as well as
consultations for the relevant parties on promoting export activities of various
goods. Nguyen and Hoang (2022) provided an overview of the impact of the
Russian-Ukraine military conflict on the world economy and Vietnam. The
research provided information of the global economy in general and Vietnam's

3
economy in particular when the war between the two Eastern European countries
broke out. The study also identified and analyzed both negative and positive
impacts on international trade and Vietnam's trade. However, the study only
provided a general overview of the economy and did not delve into any specific
industry.
Nguyen and Tran (2022) researched Vietnam's import and export situation
with European countries in the context of the Russian-Ukrainian political
conflict. The study highlighted the negative impact that this war had on the fuel
market, primarily gas and coal, as well as European timber and agricultural
products. It also concluded the opportunities and challenges for Vietnam's
participation in import and export with both the EU and Russia. However, the
study was also general in nature and did not focus on any specific industry.
Nguyen (2022) conducted a study on the export of wood pellets at the Mi
Sa Viet Han Joint Stock Company. The research analyzed the supply chain
situation of this company's compressed wood pallets under the impact of Covid-
19 and the Russian-Ukrainian conflict. Based on that, it identified the strengths
and weaknesses to propose solutions to strengthen and develop this supply chain,
including planning, sourcing, and production activities for the company.
However, this study only focused on the company level and there are many other
issues to explore when considering the entire wood pellet industry.
So far, there has been no specific study on the export of compressed wood
pallets to the EU in the context of the Russian-Ukrainian conflict. With the
desire to gain a clearer understanding of the export of compressed wood pallets
to the EU market in the tense context of the Russian-Ukrainian conflict, I hope to
contribute the following:
Analyzing the current situation of exporting wood pellets to the EU in the
context of the Russian-Ukrainian conflict.
Identifying the opportunities and challenges for Vietnam to expand the
market for wood pellets in this region, while providing implications related to

4
policies to promote the export development of this industry to the EU in the
future.
3. The purpose and research objectives of the thesis
The main purpose of the study is analyzing the export situation of wood
pellet products from Vietnam to the EU in the context of the Russia-Ukraine
conflict and proposing solutions to promote the development of wood pellets
export from Vietnam to the EU market. To achieve the research objective, the
thesis will carry out the following tasks:
- Explore the theoretical basis of exports, an overview of wood pellets
products, the EU market, the Russia-Ukraine conflict, and the impacts
of this conflict on international trade.
- Investigate the current situation of wood pellets export from Vietnam to
the EU in the context of the Russia-Ukraine conflict, and identify the
opportunities and challenges when exporting wood pellet products to
this market in the context of the aforementioned conflict.
- Propose policy implications for the government and solutions for
businesses to leverage the export opportunities of wood compression
products to the EU market in the context of the Russia-Ukraine conflict.
4. The research subject and scope
The research subject of the thesis is the export of wood pellets to the EU.
The research scope includes:
- Content: Studying the export of Vietnamese wood compression
products to the EU market in the context of the Russia-Ukraine conflict.
- Time: Focusing on the study of the export situation of wood
compression products from 2018 to 2022.
- Space: Within the scope of the thesis, the focus is on studying the
consumption of wood compression products in the EU market
6. Research methods

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Method of studying primary and secondary sources provides the author
with an overview of the research subject, including its characteristics, nature,
and laws of motion. The process of studying the materials is implemented in four
stages as follows: collecting and categorizing, organizing the materials;
synthesizing the materials; reading and note-taking the materials; summarizing
the materials. The collected materials for this research will include reports on the
situation of compressed wood exports in Vietnam and the EU. The sources for
collecting materials consist of two main sources:
- Internet: Online information sources from government agencies
such as the Customs Department, the General Statistics Office,
EUROSTAT, World Bank...
- Scientific research papers, journals, specialized books, master's
theses, doctoral dissertations...
Then, to complete the research, the author utilizes statistical methods and
data analysis techniques to examine the fluctuations in key indicators over time.
Specifically, the author examines the changes in production volume, value, and
structure of compressed wood exports from Vietnam to the EU from 2018 to
2022 based on fundamental indicators of the import-export situation. These
indicators include export volume, export value, the share of exports and imports
in each market, and average export growth over the years.
7. Thesis structure
This thesis is divided into 3 chapters
Chapter 1: The theoretical framework on the exportation of wood pellets
and an overview of the potential impacts of Russia-Ukraine war on the EU’s
importation
Chapter 2: Analyzing wood pellets export from Vietnam to EU in the
context of Russia-Ukraine war
Chapter 3: Solutions to promote the export of wood pellets from Vietnam to
the EU in the context of the implementation of the Russia-Ukraine war

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CHAPTER 1: THE THEORETICAL FRAMEWORK ON THE
EXPORTATION OF WOOD PELLETS AND AN OVERVIEW OF THE
POTENTIAL IMPACTS OF RUSSIA-UKRAINE WAR ON THE EU’S
IMPORTATION
1.1. Export
1.1.1. Definition
The trading of goods is the first field of activity that appears in international
trade, constantly developing and still the most popular and important form of
activity today (Liên et al., 2011)
According to the Commercial Law No. 36/2005/QH11 dated June 14, 2005 of
the National Assembly of the Socialist Republic of Vietnam, the export of goods
refers to the act of taking goods out of the territory of Vietnam or bringing them
into a special zone located on the territory of Vietnam that is considered a separate
customs area according to the law.
Another definition of exports is presented by Feenstra and Taylor (2010),
which states that countries buy and sell goods and services from each other. Exports
are products sold from one country to another.
The concept of exports can be defined as the sale of goods and services
(tangible or intangible) to another country on the basis of payment using currency.
The currency used can be either foreign currency for one country or for both
countries.
1.1.2. Roles of export
- The contribution of exports to economic growth
In the calculation of total demand, exports are considered as external demand.
The degree of dependence of an economy on exports is measured by the ratio of
import value to gross national income. For economies with weak domestic demand,
exports are significant for economic growth. Exporting is the largest way to bring
foreign currency into the country, and it helps domestic businesses expand their

8
consumption market and production scale, thereby promoting economic growth
(Balassa, 1978)
Therefore, many developing countries are pursuing industrialization strategies
aimed at exports. However, Bird and Mosley (2004) state that because exports
depend on external factors, to ensure stable and sustainable economic growth, the
International Monetary Fund (IMF) often recommends that countries rely more on
domestic demand.
- Export activities contribute to improving product quality
During the process of integration into the global and regional economy, goods
of each country have to face fierce competition with goods from other countries and
encounter strong barriers of customs duties and non-tariff barriers set by other
countries.
According to Hallak (2006), in order to survive, stand firm and develop,
countries must constantly improve the quality of their products, reduce the cost of
production... to create strong competitiveness for their goods, in order to stand firm,
develop in the market and counter the fierce competition from goods of other
countries.
- Export helps shift the economic structure towards a more outward-oriented
economy.
The shift in economic structure is influenced by many factors such as
scientific and technological advancements and the speed of economic development.
McGregor (2021) believes that export activities are one of the factors that influence
the shift in economic structure. Since the Party and the State have developed the
economy based on the model of export-oriented combined with the replacement of
imports, it has positively shifted the economic structure of the country to be more in
line with the development trend of the world and the region. The impact of exports
on production and the shift in Vietnamese economic structure can be viewed in the
following ways:

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Exporting products of Vietnam to foreign countries starting from the demand
of the world market, organizing production and exporting the goods that other
countries need, this has a positive impact on the shift in economic structure,
promoting production development. Exporting creates conditions for industries to
develop favorably. Exporting creates the ability to expand the consumption market,
provide inputs for production, and maximize domestic production. Exporting
creates economic and technical prerequisites for regular innovation of production
capacity in Vietnam. In other words, export is the basis for bringing capital,
advanced technology, and techniques from the world into Vietnam to modernize the
country's economy. Through exports, Vietnam's goods will participate in the
competition in the world market in terms of price and quality. Competition requires
the reorganization of production to meet market demand. Exporting also requires
businesses to improve and innovate production and management activities to
improve quality and reduce costs.
- Exporting provides job opportunities and improves people's livelihoods
The impact of exporting on people's lives includes many aspects (WTO,
2015). Firstly, the production of export goods attracts millions of workers with
decent incomes. Exporting also creates a source of capital to import essential
consumer goods to serve people's lives and meet the increasing demand for
consumption.
1.2. Overview of wood pellets
1.2.1. Definition
Wood pellets are a type of biofuel produced from natural materials such as
sawdust, wood chips or corn stalks. These are all surplus materials that are reused
after trees are cut for timber, household goods, and other agricultural products.
Producers of wood pellets extract moisture from wood fiber, turn it into
powder by grinding it, and then compress it into small cylinders, with a diameter of
5 to 10 mm and a length of up to 20 mm (Tojo and Hirasawa, 2014). This process
involves the application of heat which activates the natural polymer, lignin, present

10
in the wood, which acts as an adhesive to bind the compressed particles together.
The end product is a dry, highly compressed, and energy-rich material that can be
conveniently handled and transported over long distances.
Figure 1.1: Wood pellets
Source: Khôi, 2022
1.2.2. Benefits of wood pellets
This type of product is made from leftover wood, which means they are
extremely safe to use, reducing the processing of waste from plants and utilizing
existing resources for high efficiency.
Wood pellets are an excellent source of energy as they contain very little
moisture, usually lower than 10% (Schlesinger, 2018). This feature allows for
maximum energy utilization since minimal energy is expended in evaporating
moisture.
With its compact size, wood pellets can be easily packaged and transported
over long distances. This type of fuel can also be stored anywhere as long as the

11
place is dry. While fossil fuels like fuel oil, gas, diesel fuel, and coal are highly
combustible and emit unpleasant odors

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1.2.3. Applications of wood pellets
Wood pellets have various useful and diverse applications in different fields.
Here are some key uses of wood pellets:
- Fuel: Wood pellets are widely used as fuel in households, industrial facilities,
and thermal power generation. They have efficient combustion properties, generate
high heat output, and produce fewer emissions compared to traditional fuels like
coal.
- Heating: Wood pellets are used as a fuel source for heating systems and
stoves. They provide consistent heat output and extended burn times compared to
other fuel sources.
- Fertilizer: The sawdust from wood pellets can be used as an organic fertilizer
to provide nutrients for plants. When decomposed, wood pellets release nutrients
such as nitrogen, phosphorus, and potassium, which contribute to the vigorous
growth of plants.
- Soil amendment: Wood pellets can also be used as soil amendments or soil
conditioners. They have the ability to improve soil structure, retain moisture, and
provide resistance against bacteria, fungi, and pests.
- Bedding for livestock and poultry: Wood pellets can be used as bedding
material for livestock and poultry. They absorb liquids and odors, helping maintain
a clean and dry environment in the animal pens.
Overall, wood pellets offer a sustainable and versatile energy solution with
multiple benefits such as efficient heating, reduced environmental impact, and
diverse applications across various industries.
1.3. Overview of European Union
1.3.1. General introduction to the EU
The European Union (EU) is a multi-national intergovernmental organization
with 27 member states, established to promote peace, stability, and economic
development in the European region. Since its establishment in 1957, the EU has

13
evolved into a union with the participation of European countries, influencing
various aspects of the daily lives of European citizens. Here is the list of EU
members in the order of their accession (as of 2023): Belgium, Germany, France,
Italy, Luxembourg, Netherlands, Portugal, Ireland, Denmark, United Kingdom
(Since January 1, 2021, the United Kingdom has left the EU following the Brexit
decision.), Greece, Spain, Austria, Finland, Sweden, Poland, Hungary, Czech
Republic, Slovakia, Slovenia, Estonia, Latvia, Lithuania, Malta, Croatia, Bulgaria,
Romania.
The primary goal of the EU is to promote political, economic, and social
cooperation among its member states. The Treaty on the Functioning of the
European Union (1957) and the Treaty on European Union (1992) and more
recently, the Lisbon Treaty (2007) pointed out that the EU has important institutions
and organizations, including the European Commission, the Council of the
European Union, the European Parliament, and the European Court of Justice. The
European Commission serves as the central authority of the EU, responsible for
proposing and enforcing common laws. The Council of the European Union
consists of the government leaders of the member states and plays a significant role
in making collective decisions. The European Parliament represents the citizens of
Europe and participates in legislative processes. The European Court of Justice
oversees the application and resolution of disputes related to EU common laws.
The EU has the world's largest economy, with a common market and free
trade among member states. The freedom of movement, residence, and work within
the EU have facilitated cultural, educational, and scientific cooperation among the
members. The euro currency is the common currency of several countries in the EU,
contributing to the economic integration of the region.

14
Table 1.1: EU economic statistics from 2019-2021
2019 2020 2021
Population
(people)
447,367,191 447,692,315 447,199,800
GDP per capital
(US dollars)
3,5079.5 3,4330.4 3,8411.1
GDP growth (%)
1.8 -5.7 5.4
Total export
(billion euros)
2,132.3 1,933.1 2,181
Total import
(billion euros)
1,932 1,717.3 2,111.5
Source: World Bank, 2023
Based on the Table 1.1, it can be seen that the economy and trade of Europe
have also been severely affected by the COVID-19 pandemic. The indicators in
2020 all decreased significantly compared to 2019. Particularly, the GDP growth
rate in 2019 fell to -5.7%, meaning that the GDP experienced a sharp decline
compared to previous years. Starting from 2021, the European economy has been
recovering with strong signs of growth, with a GDP growth rate of 5.4%.
Regarding international trade, it can be observed that the EU is an
organization that tends to have a trade surplus, with total exports exceeding total
imports. The total export index for the years 2019-2021 was 2,132.3, 1,933.1, and
2,181 billion euros respectively. The import volume for the recent three years from
2019-2021 was 2,132.3, 1,933.1, and 2,181 billion euros respectively.

15
1.3.2. International trade policy of EU
1.3.2.1. Common Customs Tariff
The Common Customs Tariff (CCT) of the European Union (EU) is a unified
tariff schedule that applies to imports from non-EU countries. It is a key component
of the EU's external trade policy and is designed to promote fair competition,
protect domestic industries, and generate revenue for the EU budget.
Specifically, based on Treaty of the European Union (1992), the CCT sets out
the tariffs, or customs duties, that are applied to different categories of goods
imported into the EU. These duties are levied at the point of entry and are based on
the classification of goods under the Harmonized System (HS), an international
standard for classifying traded products. The HS code determines the applicable
tariff rate for each product category.
The EU uses the CCT to regulate and control imports by imposing tariffs on
certain goods. The tariff rates can vary depending on the nature of the goods and the
country of origin. The CCT aims to create a level playing field by ensuring that
imported goods face the same tariff rates regardless of the EU member state they
enter.
1.3.2.2. Generalized System of Preferences
The Generalized System of Preferences (GSP), instituted in 1971 under the
aegis of UNCTAD, is a program implemented by the European Union (EU) to
provide tariff preferences to developing countries (Vietnam is one of the countries
that benefits from the GSP). The main objective of the GSP is to promote economic
development and remove trade barriers for countries on the EU's list of
beneficiaries.
According to WTO (2015), under the GSP, the EU provides favorable import
conditions for exported goods from developing countries. The EU applies
preferential tariff policies, including tariff reductions or complete elimination, for
many types of imported goods from countries on the list of beneficiaries. This helps

16
reduce import costs and create a more level playing field for developing countries
participating in the EU market.
Additionally, the GSP also incentivizes beneficiary countries to comply with
social and environmental standards. The EU requires beneficiary countries to
participate in international agreements regarding labor rights, human rights, and
environmental protection. This is aimed at promoting sustainable development and
ensuring that export products from beneficiary countries meet international
standards.
The GSP program is reviewed periodically to assess its effectiveness and
make necessary adjustments. The EU may add or remove countries from the list of
beneficiaries based on their development status and compliance with the program's
requirements.
Decision No. 17 dated March 5, 2021, by the Council of the Eurasian
Economic Commission removed 75 developing countries, including Vietnam and
two other less developed countries, from the list of GSP beneficiaries starting from
October 12, 2021.
In fact, the GSP benefits for Vietnam could have ceased immediately after the
Vietnam - Eurasian Economic Union Agreement took effect on October 5, 2016.
However, the EAEU decided to extend the GSP benefits for Vietnam for an
additional 5 years, and as of October 2021, it will no longer be applicable.
1.3.2.3. Non-tariff barriers
a. Technical Barriers to Trade
Technical Barriers to Trade (TBT) are regulations and technical standards that
countries apply to control and manage the import and export of goods and services.
TBT can include requirements for quality, technical standards, technical
regulations, testing and certification procedures, labeling, packaging, and other
product-related requirements (TBT Agreement,1995).
In the context of the EU, TBT is implemented through the provisions set out in
the Technical Agreement and the regulations of the International Organization for

17
Standardization (ISO). The main objective of the EU in applying technical barriers
is to ensure consumer safety and protection, environmental protection, product
quality assurance, and promotion of fair competition.
The EU often imposes high technical standards and strict requirements on
imported products within its territory. This can create barriers and difficulties for
manufacturers and exporters from countries outside the EU. However, the EU is
committed to promoting trade integration and reducing unnecessary barriers by
participating in international negotiations and promoting the acceptance of
international standards.
The EU also promotes technical and technological assistance to developing
countries, aiming to help them grasp and comply with international technical
standards and overcome TBT barriers. This is intended to promote fair and equal
trade and create opportunities for manufacturers and exporters from developing
countries to participate in the EU market.
b. Sanitary and Phytosanitary Measures
Sanitary and Phytosanitary Measures (SPS) is a term used in the field of
international trade to refer to quarantine measures related to animal and plant health.
SPS measures are implemented by the European Union (EU) to protect the health of
humans, animals, and plants, as well as to ensure food safety and environmental
protection.
The SPS measures of the EU include regulations and standards related to the
control and monitoring of the import and export of animal and plant products. The
main objective of these measures is to ensure that products meet the safety and
quality requirements set by the EU.
The EU's SPS measures apply to various sectors, including food processing,
agricultural production, livestock farming, fisheries, and other products related to
animal and plant health. According to SPS Agreement (1995), these measures
include:

18
Food control: The EU sets high standards for food safety and requires
imported products to comply with these standards. The standards relate to bacteria,
viruses, pesticides, chemical compounds, and other factors that may be harmful to
human health.
Animal control: The EU applies regulations and control measures for the
import and export of animal products to prevent the spread of animal diseases that
may be harmful to livestock, poultry, and other animals.
Plant control: The EU establishes regulations and standards to control the
spread of plant diseases and harmful pests in crops and plant products. This includes
the control of pesticides, fertilizers, prohibited substances, and other factors that
may be harmful to human health.
c. Quota
The term "quota" in the context of trade refers to a predetermined limit on the
quantity or value of goods that can be imported or exported. In the case of the EU,
quotas are often used to regulate the trade of specific products or between specific
countries or regions. Based on Treaty of the Functioning of the European Union
(1992), here are some examples of quotas within the EU:
Import Quotas: The EU may establish import quotas to limit the quantity of
certain goods that can be imported into the EU member states. Import quotas can be
allocated to specific countries or regions, or they can be global quotas applicable to
all countries. Once the quota limit is reached, additional imports may face
restrictions or higher tariffs.
Tariff Rate Quotas (TRQs): Tariff rate quotas are a combination of a quota
and a tariff system. They allow a specified quantity of goods to be imported at a
lower or zero tariff rate, while imports exceeding the quota face higher tariff rates.
TRQs are often used to protect domestic industries while allowing limited market
access for foreign producers.
Export Quotas: The EU may also establish export quotas on certain products
to manage the outflow of goods from EU member states. Export quotas can be

19
applied to preserve domestic supply, manage prices, or comply with international
agreements. Exporters must obtain licenses or permits to export goods subject to
quotas.

20
1.3.3. EU wood pellets market
Table 1.2: EU27 Wood Pellets Market Balance and Production Capacity
(1,000 MT)
Calendar
Year
2014 2015 2016 2017 2018 2019 2020 2021 2022e
Beginning
Stocks
304 569 762 1,078 957 1,128 1,067 1,317 1,107
Production 13,892 14,641 14,178 14,957 15,772 18,668 19,209 19,700 20,200
Imports 2,966 2,556 2,523 3,012 3,906 4,192 4,681 5.428 6,000
Exports 1,013 1,517 944 900 994 1,193 1,170 2,210 2,250
Consumption 15,580 15,487 15,441 17,190 18,513 21,728 22,469 23,128 24,300
Ending
Stocks
569 762 1,078 957 1,128 1,067 1,317 1,107 757
Source: United States Department of Agriculture, 2022
According to Bioenergy Europe (2022), the EU is the largest market for wood
pellets consumption in the world. Over the past 10 years, the demand for wood
pellets in Western countries has been continuously increasing due to the shift
towards using clean energy sources, reducing CO2 emissions that contribute to the
greenhouse effect, and replacing depleting fossil fuel sources. From Table 1.2, it
can be seen that the trend of consumption and import of wood pellets of the EU
market increases every year
In the EU, nearly 60% of the renewable energy consumed is generated by
bioenergy, of which approximately 70 % is contributed by solid biomass
(Bioenergy Europe, 2022). The biomass is sourced from the agricultural and related
food processing sector and the forestry sector. Wood chips and pellets are
increasingly used as input for renewable heat and power production. Because wood
pellets are generally traded over longer distances than chips, this report is restricted
to the wood pellets market.

21
While the EU accounts for 45% of world production, its demand represents
55% of the global market (EUROSTAT, 2022). The major users of wood pellets in
the EU are Italy, the Netherlands, Germany, Denmark, France, Sweden, Belgium,
and Austria (in declining order of importance).
Figure 1.2: European wood pellet consumption for heat in 2021 (tonnes,%)
Source: Bioenergy Europe, 2022
Over the last 10 years, EU demand for pellets has dramatically surpassed local
supply, resulting in increased imports from Russia, the United States, Ukraine, and
Belarus. As shown in Table 1.3 below, in 2021, the EU imported 5.4 million metric
tonnes (MMT) of wood pellets worth $924 million. In 2021, US exports to the EU
totaled 1.85 MMT, valued at $287 million, with the Netherlands leading the way.
Wood pellet imports from Russia, Ukraine, and Belarus have been considerably
impacted as a result of Russia's invasion of Ukraine. The EU decided on a fifth
round of sanctions against Russia on April 8, 2022. As part of this package, the EU
enacted import prohibitions via Council Regulation (EU) 2022/576, which implies

22
that Russian wood pellets are no longer permitted to enter the EU market (WTO,
2023).
Table 1.3: Main Suppliers of Wood Pellets to EU27 (1,000 MT)
Calendar
Year
2016 2017 2018 2019 2020 2021
Russia 773 1,148 1,186 1,475 1,510 1,914
United
States
774 940 1,259 1,295 1,247 1,853
Belarus 145 212 262 375 524 594
Ukraine 165 213 380 431 441 412
Canada 300 222 330 80 517 292
Brazil 33 50 77 147 174 196
Norway 11 23 39 13 42 54
Total 2,523 3,012 3,906 4,192 4,681 5,428
Source: United States Department of Agriculture, 2022
Accordingly, it can also be seen that the EU will have to find a new supply to
make up for the shortfall when it no longer imports from Russia - the largest
supplier of tablets to the EU up to now.
1.3.4. Trade relation between EU and Vietnam
Calculations based on information from the General Department of Vietnam
Customs (2022) indicate that in 2022, the value of products traded between
Vietnam and the EU27 increased by 9.2% from 2021 to 62.2 billion USD. Exports
of this amount were 46.8 billion USD, up 16.7%, while imports totaled 15.4 billion
USD, down 8.7%. In 2022, Vietnam's trade surplus with the EU27 market was
roughly 31.4 billion USD, up 35.2% over the same time the previous year.

23
Overall, in 2022, the trade value of exports to the EU27 market maintained
optimistic growth throughout most of the year but showed signs of slowing down
and declining towards the end of the year. In 2023, as the EU27 economy may face
recession and inflation, consumer demand in this market is expected to decrease and
have an impact on the trade growth between Vietnam and the EU27. Therefore, in
2023, the export of goods to the EU market is likely to slow down until the end of
the first quarter, even extending into the second quarter of 2023, with a projected
growth rate ranging from 5% to 7% compared to 2022 (MIT, 2022).
In 2022, Vietnam's export turnover of goods to the EU market increased by
16.7% compared to 2021, reaching approximately 46.83 billion USD. This
accounted for 12.6% of Vietnam's total export turnover of goods. Table 1.4 shows
that many markets within the EU27 bloc recorded high growth in the export of
goods from Vietnam, with the exception of Austria and Slovakia.
Table 1.4: Top 10 EU members in export value to Vietnam (USD)
Number EU member Total export 2021 Total export 2022
Growth
(%)
1 Netherlands 7,686,292,353 10,430,448,391 35.7
2 Germany 7,286,933,268 8,968,137,786 23.1
3 Italy 3,878,600,777 4,430,363,670 14.2
4 Belgium 3,603,005,335 3,976,156,072 10.4
5 France 3,210,277,776 3,697,727,544 15.2
6 Spain 2,546,043,906 2,962,562,535 16.4
7 Austria 3,022,168,612 2,458,825,615 -18.6
8 Poland 2,067,063,083 2,291,317,227 10.8
9 Sweden 1,199,619,272 1,264,228,110 5.4
10 Slovakia 1,239,490,925 1,037,079,562 -16.3

24
Source: MIT, 2022
In 2022, Vietnam's imports from the EU decreased by 8.7% compared to
2021, reaching a value of 15.42 billion USD (MIT, 2023). As shown in Table 1.5,
the decline was mainly due to reduced imports from major markets such as
Germany, Ireland, the Netherlands, Spain, and Poland. Notably, imports from
Ireland saw a decrease of over 1.1 billion USD, a 24.6% decline compared to 2021.
According to Vietnam's 2022 Import-Export Report, the decrease in imports from
these two countries was primarily attributed to a reduction in the import of
integrated circuits used in the production of electronic goods.
Table 1.5: Top 10 EU members in import value to Vietnam (USD)
Number EU member Total import 2021
Total import
2022
Growth
(%)
1 Germany 3,942,029,138 3,617,209,926 -8.2
2 Ireland 4,438,296,450 3,347,197,099 -24.6
3 Italy 1,724,325,828 1,786,751,694 2.8
4 France 1,592,574,148 1,636,835,322 10.4
5 Belgium 685,519,555 754,880,961 10.1
6 Netherlands 687,028,008 668,847,184 -2.6
7 Hungary 529,384,863 628,581,927 18.7
8 Spain 578,302,565 572,692,840 -1.0
9 Poland 509,307,242 375,280,555 -26.3
10 Sweden 321,587,951 353,427,817 9.9
Source: MIT, 2022
1.3.5. EU-Vietnam Free Trade Agreement (EVFTA)
On July 17, 1995, Vietnam and the European Communities (EC) signed the
Framework Cooperation Agreement (FCA). This is the first important legal

25
document that laid the foundation for the increasingly strong development of the
Vietnam-EU relationship.
After 17 years, the Partnership and Cooperation Agreement (PCA) was
signed on June 17, 2012. The PCA came into effect on October 1, 2016,
providing a legal framework to shape and regulate the political, economic, and
development cooperation between Vietnam and the EU, replacing the FCA.
Through the PCA, Vietnam and the EU may now cooperate in areas other than
trade and the economy, including the environment, energy, technology, efficient
public administration, tourism, culture, migration, security, anti-corruption, and
organized crime.
The PCA also serves as a precursor for the initiation of negotiations on the
EVFTA. This agreement was signed on June 30, 2019, and entered into force on
August 1, 2020. The EVFTA is a comprehensive and advanced trade agreement
between Vietnam and the EU, expanding the scale and scope of economic
cooperation, including trade in goods and services. It provides favorable
conditions for promoting exports and investment between the two sides, as well
as enhancing cooperation in the areas of intellectual property rights, labor
standards, and the environment.
1.3.5.1. Negotiation process
- 06/2012, Vietnam and the EU announced the initiation of negotiations for
the EVFTA.
- 10/2012 – 08/2015: the parties have conducted 14 rounds of official
negotiations, in addition to many other rounds of midterm negotiation
sessions.
- After nearly 3 years of negotiations, in 2015, Vietnam and the EU reached
a preliminary agreement on all the fundamental contents of the
Agreement.
- 01/02/2016, the official text of the Agreement was formally announced.
- In June 2018, the EVFTA was split into two separate agreements: the
EVFTA and the Investment Protection Agreement (IPA).

26
- 08/2018, the legal review of the IPA was completed.
- 25/06/2019, the European Council made a decision to authorize the
European Commission to sign the Trade Agreement and the Investment
Protection Agreement with Vietnam.
- 30/06/2019, the European Commissioner for Trade and the Minister of
Foreign Affairs - Trade of Romania visited Hanoi to sign these two
significant agreements. This marked the result of considerable efforts in
terms of politics, diplomacy, negotiations, and cooperation from both
sides.
1.3.5.2. Regulations related to the export of wood pellets in EVFTA
a. Tariff
Before the EVFTA was signed, wood pellets (HS code 44013100) were in
the group of 117 wood products and wood products that were entitled to 0%
export tax. After the EVFTA is implemented, wood pellets will continue to enjoy
the tax rate of 0%. Thus, from a tariff perspective, the EVFTA does not provide
a driving force to promote the export of wood pellets to the EU market.
b. Non-tariff
In term of rules of origin, EVFTA sets strict requirements for the origin of
products. Specifically, a product will be considered to originate in one party
(Vietnam or the EU) if it meets one of the requirements agreed upon by both
parties: "wholly obtained or produced entirely in the territory of the exporting
party. Not wholly obtained or produced in the territory of the exporting party but
meets requirements such as a domestic value content of not less than 40%.”
Moreover, wood products from Vietnam must pay attention to the issue of
wood origin from planted forests which certified wood from plantations that are
allowed to be harvested by The Forest Stewardship Council (FSC). This is a non-
governmental organization devoted to promoting responsible forest management
worldwide. FSC has risen to become the world's most regarded and widely used
forest certification system since its inception in 1994.

27
FSC's pioneering certification system, which now covers more than 200
million hectares of forest, enables businesses and consumers to choose wood,
paper and other forest products made with materials that support responsible
forestry. FSC certificate is popularly applied by many countries to imported
wood and wood products, especially EU members.

28
1.4. Overview of Russia-Ukraine war
1.4.1. The cause of Russia-Ukraine war
1.4.1.1. Deep causes
After the Cold War in 1991, the world, especially the Euro-Atlantic region,
did not witness a decrease in confrontational relations between the two military
superpowers, Russia and the United States, as expected to move towards peace
and cooperation. While Russia weakened due to the dissolution of the Warsaw
Pact (1991), the North Atlantic Treaty Organization (NATO) tended to grow
stronger by admitting more members. Among them, three former Soviet states,
namely Estonia, Latvia, and Lithuania, joined NATO despite Russia's objections.
The relationship between competition and cooperation, sometimes on the brink
of confrontation, has strongly influenced the formation of new alliances and
significantly impacted the trend of defense and security cooperation worldwide,
especially in strategically important countries like Ukraine (Tuấn, 2022).
Figure 1.3: NATO members in Europe
Source: Hưng, 2023

29
NATO stopped its "partnership for peace" with Russia when Moscow annexed
the Crimean Peninsula in 2014, which includes the vital naval port of Sevastopol,
and began to view Russia as a danger to the security of the European area. NATO
believed that Russia had "violated international law" by directly or indirectly
supporting separatist forces in Ukraine and annexing the territory of a sovereign
country into Russia. NATO stepped up its assistance for Ukraine by giving it more
modern weapons and training, threatening to impose stricter economic penalties on
Russia in the event that it attacked Ukraine, and urging Moscow to "de-escalate"
and adopt a number of preventative measures.
Russia views "NATO Eastern Expansion" as a long-term goal and a challenge
that has exacerbated the strategic imbalance between Russia and NATO even prior
to the Ukraine conflict. Russia is concerned about the absence of ratification of the
Treaty on Conventional Armed Forces in Europe (CFE) by NATO member states.
According to Russia, the situation is exacerbated by the United States' deployment
of missile defense systems in Poland and the Czech Republic, which breaches
strategic stability. NATO, according to Russia, has been fostering "color
revolutions" across the post-Soviet sphere. The Ukraine conflict has inflicted severe
harm on the majority of Russia-NATO cooperation structures (Tuấn, 2022).
1.4.1.2. Direct causes
First, the conflict between the Ukrainian government and the separatist forces
in Donbass (including Donetsk and Luhansk) backed by Russia has hampered the
peace process based on the Minsk II Agreement, which is the only solution to
Ukraine's political crisis, particularly after October 2021.
Second, the US and NATO not only provided weapons to Ukraine,
particularly following the US withdrawal from Afghanistan (September 2021),
when there was an excess of weapons and ammunition (intended to be transferred to
US-friendly forces in Afghanistan), but also deployed medium-range missiles and
military forces in NATO-Eastern European territories towards Russia (Tuấn, 2022)..

30
1.4.2. Progress of the Russia-Ukraine war
- February 2022:
In the early morning of February 24, 2022, Russian President Vladimir Putin
officially declared the launch of a special military campaign taking place in
Ukraine. Shortly thereafter, the capital city of Kiev and numerous areas across
Ukraine swiftly became battlegrounds for widescale missile attacks.
In response to these actions, Ukrainian President Volodymyr Zelensky issued
a state of emergency, ordered nationwide mobilization, and severed diplomatic
relations with Moscow.
The United Nations, the US, and the EU vehemently protested against these
developments and simultaneously announced punitive measures targeting critical
sectors of Russia.
On February 28, 2022, Ukraine submitted an application to join the European
Union (EU).
- March 2022:
On March 2, 2022, seven Russian banks were excluded from the EU's SWIFT
payment system.
On March 8, 2022, the European Commission announced a plan to reduce
natural gas imports from Russia by two-thirds by the end of 2022. The United
States also implemented a ban on crude oil imports from Russia. An estimated 2
million people from Ukraine were displaced as refugees.
On March 10, 2022, the first high-level negotiations between the foreign
ministers of Russia and Ukraine did not achieve the expected goals.
Moscow declared the withdrawal of its forces from Kiev and other areas on
March 29, 2022, with a focus on the Donbas region in the east. On the same day, in
Istanbul, Turkey, the Russian and Ukrainian negotiating delegations had their first
direct meeting after more than three weeks of conflict.

31
- April 2022:
The EU continued to impose its fifth round of sanctions on Russia, which
included a ban on importing coal, timber, cement, seafood, and fertilizers from
Russia, as well as an embargo on exporting aircraft fuel, as well as other
technologies and software to Russia.
On April 8, 2022, Ukraine began the process of being recognized as a member
of the EU, activated by the European Commission.
On April 12, 2022, Russia declared that peace talks with Ukraine were "at a
dead end" and that the special campaign in Ukraine was still being carried out
"according to plan".
- May 2023:
The transit of Russian natural gas through Ukraine began to be restricted, with
a 1/4 reduction in gas flow through one of the two main pipelines.
May 18, 2022: Finland and Sweden submitted applications to join the North
Atlantic Treaty Organization (NATO).
May 21, 2022: Russia declared complete control over Mariupol.
May 30, 2022: The United States made the decision to provide advanced
missile systems as assistance to Ukraine.
- June 2022
On June 15, 2022, gas supply to Europe through the Nord Stream 1 pipeline
was reduced by 60% of its capacity.
A warning from the United Nations was issued regarding a food crisis
affecting around 41 countries, as grains from Ukraine were not allowed to be
exported.
- July 2022
On July 3, 2022, the Ukrainian military ceased control of the city of
Lysychansk in the Luhansk region, eastern Ukraine.

32
On July 22, 2022, Russia and Ukraine, with the mediation of Turkey and the
United Nations, reached an agreement on the export of grains from Ukraine's ports
along the Black Sea coast.
- August 2022
On August 30, 2022, the Ukrainian military launched a comprehensive
counter-offensive in the southern region of Kherson. As a result, Ukraine regained
control over a significant portion of the northeastern Kharkiv region and the city of
Lyman in Donetsk.
On August 31, 2022, the state-owned energy company of Russia, Gazprom,
suspended gas supplies throughout Europe, citing maintenance reasons for the Nord
Stream 1.
- September 2022
On September 6, 2022, the Ukrainian military launched a surprise
counterattack in the northeastern region of Kharkiv.
On September 21, 2022, Putin announced that he had signed an order to
mobilize a part of the military to supplement an additional 300,000 troops.
On September 30, 2022, President Putin and the leaders of the territories in
Ukraine, including Donetsk, Lugansk, Kherson, and Zaporizhzhia, completed the
signing of documents regarding the incorporation of these regions into the Russian
Federation following a referendum. In response, the United States and its allies
imposed sanctions on over 1,000 individuals and entities in Russia.
- November 2022
Following Ukraine's counter-attack on November 9, 2022, Russia announced
its departure from Kherson.
In Europe, inflation has fallen but stays in the double digits, hitting 10% in
November 2022.

33
- December 2022
President Zelensky paid an official visit to the United States. During the visit,
the leaders of the two nations discussed the provision of the Patriot air defense
system and other weaponry to Ukraine.
Washington unveiled a fresh $2 billion military aid package for Ukraine.
- January 2023
On January 14, 2023, the United Kingdom announced that it would supply
Challenger 2 battle tanks to Ukraine, becoming the first NATO member to agree to
provide Ukraine with the alliance's most sophisticated armored hardware.
On January 25, 2023, the US announced the deployment of 31 M1 Abrams
combat tanks to Kiev.
Germany also announced that it would provide Ukraine with a number of
Leopard 2 tanks for the first time.
- February 2023
Rishi Sunak, the Prime Minister of the United Kingdom, revealed on February
8, 2023, that the UK is contemplating supplying long-range missiles and fighter
planes to Ukraine, as well as offering pilot training to Ukrainian troops. Sunak's
remarks came as a surprise during President Zelensky's unscheduled trip to London
before meeting with EU leaders in Brussels, Belgium.
President Joe Biden of the United States unexpectedly visited Kiev on
February 20, 2023, to meet with his counterpart, President Zelensky. President
Biden promised an additional $500 million in US aid to the Eastern European
country during their joint speech.
On February 21, 2023, Russian President Vladimir Putin said that Russia
would temporarily withdraw from the New Strategic Arms Reduction Treaty (New
START).

34
1.4.3. Effects of Russia-Ukraine war on international trade
According to World Bank (2023), “the war in Ukraine is an immense human
tragedy for the people of Ukraine, but its economic implications are global”.
During the continuing armed war, prominent acts include the withdrawal of
numerous Russian banks from the international financial system (SWIFT), as well
as the enforcement of export restrictions and trade finance bans.
In response, Russia has enacted a slew of punitive measures against the
commodities, individuals, and companies of countries that have placed sanctions on
Russia. These reciprocal sanctions and retaliations have not only harmed the
economies of Russia, the United States, and Western countries but have also had a
severe influence on the global economy as a whole.
1.4.3.1. In term of energy
It can be seen that the EU is the region most severely affected by the
successive imposition of import bans on fuel from Russia, such as diesel, natural
gas, and coal. Russia is known as the largest exporter of natural gas, the second-
largest exporter of crude oil, and the third-largest exporter of coal in the world.
Specifically for the EU market, the bloc imports around 40% of its natural gas and
45% of its coal from Russia (VCCI, 2023).

35
Figure 1.4: EU trade with Russian 2021-2022 (€ billion)
Source: EUROSTAT, 2023
Figure 1.5: Most traded goods between EU and Russia, 2022 (€ billion)
Source: EUROSTAT, 2023
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Balance -85.7 -84.2 -75.6 -59.9 -44.7 -55.5 -78.6 -57.2 -15.7 -74.4 -148.2
Export 117.9 114.8 99.1 70.5 69.3 82.8 82.3 87.8 79.0 89.2 55.2
Import 203.6 199.0 174.7 130.3 113.9 138.3 160.9 144.9 94.7 163.6 203.4
-200
-150
-100
-50
0
50
100
150
200
250

36
The Diagram 1.1 and Diagram 1.2 figures clearly demonstrate the EU's
dependence on energy supply from Russia in. Western countries were unable to
immediately impose sanctions on Russia's oil and gas sources, despite the tense
military situation in Ukraine. The punitive measures implemented in 2022 only
partially limited imports from Russia. Natural gas has been the primary fuel for
residential heating in Europe for many decades. It is essential for European
households as they rely on it to keep warm during the winter. Within just a few
months since the outbreak of the conflict until now, Europe has witnessed a
staggering 60% increase in coal prices and a more than 30% increase in natural gas
prices. These are record-breaking price hikes since the economic crisis of 2008.
According to the WTO (2023), Russia's exports increased by 15.6% from
2021 to 2022, basicly because of export energy. However, this is not necessarily
good news for Russia. By the end of 2022, the EU showed signs of seeking new
energy sources to reduce dependence on Russia. According to commodity data
company Kpler, oil exports from Russia to Northwestern Europe have decreased by
threefold from 1.08 million barrels per day to below 325,000 barrels per day in
May. As a result, in order to compensate for the losses, Russia has had to seek
alternative export markets and explore new destinations, such as the Asian region
(including China, India, etc.).
In truth, oil is a vital fuel that is utilized in almost all businesses and activities
today. As a result, as oil prices rise, production and transportation expenses rise,
raising the overall price of numerous goods and services. This has a direct impact
on inflation in many nations throughout the world.
1.4.3.2. In term of food
The Russian Federation and Ukraine are known as major suppliers in global
food and agricultural trade. According to Food and Agriculture Organization
(2022), in 2021, the wheat exports of the Russian Federation and Ukraine accounted
for about 30% of the global market. Additionally, the sunflower oil exports from
both countries accounted for 78% of the global supply. The Russian Federation is

37
also a major exporter of fertilizers. In 2021, it was ranked as the leading exporter of
nitrogen fertilizers, the second-largest supplier of potassium, and the third-largest
exporter of phosphate in the world.
Nearly 50 countries depend on the Russian Federation and Ukraine for at least
30% of their wheat import needs. Among them, the countries in the Africa and
Middle East region import over 50% of their wheat from these two countries, which
can be seen on Diagram 1.3. In this context, the ongoing conflict will have
significant consequences for the global market and food supply, representing a
challenge to food security for many countries, particularly those with low incomes
dependent on food imports and vulnerable populations.
According to data from WTO (2022), within a few short months before and
after the conflict, the price of wheat increased by about 31%, corn prices rose by
15%, and soybean prices increased by 8%. Faced with a volatile market, several
agriculturally strong countries have implemented restrictive export measures to
safeguard domestic food security, but at the same time, it has made it more difficult
for low-income countries to access food. Secretary-General of the United Nations
stated that the Russia-Ukraine conflict could trigger a food crisis leading to an
unprecedented wave of hunger and extreme poverty (WTO, 2022).
Figure 1.6: Dependency on wheat imports from Russia and Ukraine
from 2018-2021 (%)

39
SUMMARY OF CHAPTER 1
The content of this chapter has addressed some theoretical and practical issues
as a basis for analysis in the following chapters.
Firstly, Chapter 1 clarifies the concept and role of export activities.
Secondly, it presents concepts regarding wood pellets, highlighting the
advantages of wood pellets compared to other fossil fuels. From there, it provides
information on the application of wood pellets in daily life and production.
Thirdly, the author provides an overview of the European Union (EU),
including basic information about its economy, population, and trade, while also
discussing the trade relationship between Vietnam and the EU. Additionally, the
author presents an overview of the wood pellets market in the EU in recent years.
Lastly, the author offers a general view of the Russia-Ukraine conflict. It
provides information on the causes and developments of this conflict over the past
year. Particularly, the article highlights the negative impacts of the conflict on
global trade, emphasizing the energy and food crises.

40
CHAPTER 2: ANALYZING WOOD PELLETS EXPORT FROM VIETNAM
TO EU IN THE CONTEXT OF RUSSIA-UKRAINE WAR
2.1. The current situation of wood pellets exports in Vietnam (2018-2022)
2.1.1. Wood pellets value structure
The General Department of Customs (MIT, 2022) has stated that according to
calculations based on data from the General Department of Customs (2023), within
the structure of wood and wood product exports in the past 5 years, the proportion
of wood chips and compressed wood pellets in exports has significantly increased.
Wood pellets, although a commodity with a relatively small share in terms of value,
have shown a growing trend over time.
Figure 2.1: Export turnover of wood pellets compared to the whole industry of
wood and wood products from 2018-2022 (million USD)
Source: VIFOREST, 2023
8476
10330
12013
14125
15668
362 311 352 413
787
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
2018 2019 2020 2021 2022
million
USD
Total wood & wooden products export turnover Wood pellet export turnover

41
Specifically, in the past two years, 2021 and 2022, the wood pellets
commodity reached $787.5 million, an increase of 83.6% compared to 2021. Its
proportion accounted for 4.9%, which is a 2-percentage point increase from 2021.
Figure 2.2: Structure of export value of wood and some wood
products 2021 (%)
Figure 2.3: Structure of export value of wood and some wood
products 2022 (%)
67.1%
13.6%
11.7%
2.9%
4.9%
Wooden furniture Wood, planks and flooring Woodchips Wood pellets Others
62.3%
11.7%
16.8%
4.86%
4.4%
Wooden furniture Wood, planks and flooring Woodchips Wood pellets Others

42
2.1.2. Export volume and value of wood pellets
In recent years, the global wood pellets market has been continuously
growing, and Vietnam is no exception. The transition to clean energy sources in
advanced countries and regions such as South Korea, Japan, and the EU has
contributed to the sustained high growth of the wood pellets production industry.
According to the report by VIFOREST (2022), Vietnam has experienced consistent
growth in the export volume of wood pellets over the past 10 years.
Figure 2.4: Export quantity and value of wood pellets in Vietnam
from 2013 to 2022
The wood pellets export market in Vietnam has grown significantly in both
volume and value over the last ten years according to Figure 2.4. The year 2018 in
particular was regarded as one of compressed fuel wood's most rapid development.
This product's export volume and value were still increasing significantly as of the
first quarter of 2022.
175
774
1005
1354
1579
2640
2791
3207
3504
4882
23
117 104
131
165
362
311
352
413
787
0
100
200
300
400
500
600
700
800
900
0
1000
2000
3000
4000
5000
6000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Quantity(thousand tons) Value (USD)

43
In particular, Vietnam exported 175.49 thousand tonnes of wood pellets in
2013, worth 22.98 million USD. In 2014, these figures grew to 774.04 thousand
tonnes, with a total value of 117.41 million USD, reflecting a 341% rise in
volume and a 411% increase in value. The export of this commodity increased
significantly in 2015, with shipments topping 1,005 million tonnes, a 30%
increase over the previous year, but an 11% decline in value, reaching 104.27
million USD. In 2016 and 2017, the value and volume of this product's exports
increased further, reaching 1.35 million tonnes (2016) and 1.58 million tonnes
(2017), respectively, contributing to an export turnover of around $150 million
USD each year, accounting for more than 2% of total exports.
Significantly, 2018 was regarded as a year of exponential growth for wood
pellets, with export turnover exceeding 2.64 million tonnes and reaching 362.16
million USD, representing a 67% rise in volume and a 120% increase in value
over the previous year. As a result, the product accounted for 4.3% of the
industry's overall export value. In 2019, the export volume climbed by 6% to
2.79 million tonnes compared to the previous year, but the value declined by
14% to 311.08 million USD due to a fall in the export price of this commodity
by more than 25 USD per tonne. In 2020, the export volume reached 3,207
million tonnes, a 15% increase compared to the previous year, with a value of
352.04 million USD, a 13% increase in value. In the of 2021, the export volume
reached 0.81 million tonnes, equivalent to 90 million USD, an 18% increase in
volume and a 23% increase in value compared to 2020. In 2022, wood pellets
export sector witnessed a significant surge in export value, which increased from
413 million USD to 787 million USD, equivalent to a growth rate of 91%.
However, the export volume of compressed wood in 2022 only increased by
approximately 39% compared to 2021. This indicates that the prices of wood
pellets in 2022 experienced a record-breaking surge in the past five years.

44
2.1.3. Wood pellets exporting and manufacturing enterprises in Vietnam
From 2021 onwards, the number of wood pellets exporting enterprises has
increased significantly. The rise in the number of companies exporting compressed
wood is indicative of the growing attractiveness of this industry.
Generally, the majority of companies have export volumes below 50,000
tonnes of compressed wood per year.
Figure 2.5: Number of wood pellets exporting enterprises in Vietnam
from 2018-2022
The number of manufacturing facilities for compressed wood is greater than
the number of enterprises exporting this product. Currently, according to statistics
from the MIT (2022), there are approximately 80 compressed wood manufacturing
plants and over 300 production facilities nationwide. These plants are primarily
concentrated in the Southeast region, followed by the Northeast region of Vietnam.
Most export companies have their own manufacturing plants, but the production
capacity is often insufficient, so these companies usually engage in both production
and trade activities.
70
77
74
83
92
2018 2019 2020 2021 2022

45
Table 2.1: Number of enterprises exporting wood pellets by
size from 2018-2022
Enterprise size 2018 2019 2020 2021 2022
0.5 - 1 million
tonnes
1 1 1 1 1
0.1- 0.5 million
tonnes
4 5 5 7 7
0.05 - 0.1
million tonnes
3 2 11 8 9
< 50,000 tonnes 62 69 57 67 73

46
Firgure 2.1: Distribution of wood pellet manufacturing factories
in Vietnam 2021

47
2.2.The current situation of wood pellets exports from Vietnam to Europe in
the context of Russia-Ukraine war
Before 2022, the main export markets for Vietnamese wood pellets were
South Korea and Japan, accounting for over 99% of the total volume of wood
pellets exported from 2018 to 2021 (Forest Trends, 2021). The proportion of wood
pellets exported to the EU remains very modest, about 0.15% – 0.2% of the total
volume.
Figure 2. 1: Export quantity of wood pellets to different markets in Vietnam
from 2018 to 2022 (tonnes)
1864873
765639
7532
4167
1923725
856171
7879
4578
1981416
1216777
5534
2067
1962410
1534926
5245
2043
K ORE A N JA P A N E U OT H E R
2018 2019 2020 2021

48
This is also understandable because the wood pellets market in the EU already
has a stable supply from the top two countries in wood pellets exports, which are
the United States and Russia, as mentioned in Chapter 1. In addition, some EU27
member countries also produce wood pellets for domestic use.
In 2022, with the Russia-Ukraine war event, Vietnam became the second-
largest wood pellets exporter in the world, following the United States (MIT, 2023).
The volume of wood pellets exported to the EU, although still relatively modest
compared to Japan and South Korea, has significantly increased compared to 2021.
Similarly, the export value has also seen a significant increase, as follows:
Table 2.2: Vietnam's main wood pellets export markets in 2022
(compare to 2021)
Export
volume in
2022 (tonnes)
Change
compared to
2021 (%)
Export value in
2022 (USD)
Change
compared to
2021 (%)
Japan 2,495,123 62.6% 384,296,452 92.1%
Korean 2,264,725 15.4% 377,136,572 77.9%
EU 122,622 1991.8% 25,667,310 3018.5%
From the table above, it can be observed that the volume and export value
of wood pellets to the EU have experienced remarkable changes. Although the
proportion compared to South Korea and Japan remains relatively modest, the
volume of wood pellets exported to the EU has increased by an astonishing
1991.8% compared to 2021, equivalent to approximately 20 times. Meanwhile,
the export value of wood pellets to the EU in 2022 has surged by 3018.5%
compared to 2021, approximately 30 times higher. These figures are truly
remarkable.

49
The sudden growth can be attributed to the retaliatory sanctions imposed by
NATO and Russia. In the second half of 2022, the EU announced a ban on the
import of certain key commodities from Russia, including timber and wood
products, including wood pellets. It should be noted that Russia is the largest
supplier of wood pellets to the EU, accounting for about 19% of the imported
wood pellets volume in recent years. Additionally, the gas supply from Russia
was also disrupted in the latter half of 2022 due to retaliatory actions by Eastern
European countries. Both gas and wood pellets are commonly used for heating
purposes during winter and are widely utilized in households across the EU.
With the sudden disruption in the stable supply, the EU had to seek alternative
markets to ensure heating fuel for hundreds of millions of people in the region.
Vietnam became one of the sought-after markets in Asia in 2022.
Figure 2.7: Average export price of tablets by month from 01/2021 - 10/2022
(USD/tonne, FOB)
113.3 113.7 111.2 111.4 108.7
111.9
116.4 118
123
127.1
130.6 133
138.2
144.5
149.4
153.4 154.3
158 159 157.8
162.2
172.8
0
20
40
60
80
100
120
140
160
180
200
USD/TONNE

50
The export value of wood pellets in the first 10 months of 2022 reached
$602.7 million, marking an 81% increase compared to the same period in 2021,
which is nearly 146% of the total export value in 2021. Notably, the export price of
wood pellets has been continuously increasing since June 2021 and reached its peak
at over $172 per tonne in October 2022, representing a nearly 60% increase
compared to the price in May 2021. Not only did the export price of wood pellets to
Europe increase significantly, but the export price of wood pellets to Japan and
South Korea also experienced a notable increase. According to the MIT (2022), due
to the EU's disruption of wood pellet supply from Russia, the United States
redirected its resources to focus on exporting to the EU market, resulting in reduced
supply to South Korea and Japan.
2.3. Assessment the situation of exporting wood pellets from Vietnam to the
EU in the context of the Russia-Ukraine war
In recent years, wood pellets have not been one of Vietnam's main export
products to the EU market. The volume of wood pellets exports to the EU has
always been much smaller than the volume exported to South Korea and Japan.
In 2020 and 2021, due to the impact of the Covid-19 pandemic, Vietnam's wood
pellets exports also declined along with the general situation of global trade.
Although the volume of wood pellets exports has decreased in the past two
years, the export value of wood pellets in 2022 is trending upward, mainly
because the wood pellets exported during this period have higher prices.
Overcoming the difficulties caused by the Covid-19 pandemic, as well as the
challenges of container shortages and high logistics costs, the export value of
wood pellets to the EU market in 2021 increased by 30 times compared to
2021.
In addition to the positive signs in wood pellets exports to the EU market
amidst the Russia-Ukraine war, Vietnam's wood pellets exports to the EU have
also achieved results in dealing with difficulties in EU trade activities, such as:

51
Meeting EU standards on technical requirements: Although the technical
requirements of the EU are quite high, some Vietnam's wood pellets exports to
the EU market can still meet these requirements and regain momentum in the
coming years, contributing significantly to the country's export value.
Vietnamese wood pellets manufacturing and exporting enterprises have
continuously improved, focused on investing in plantation planning, linking the
production chain between manufacturing enterprises and local people,
cooperatives engaged in forestry, applying ENplus standard wood pellets
processing technology, and increasing market share in this demanding market.
In recent times, some businesses have realized the opportunities and intense
competition in the market, and they have placed more emphasis on producing
wood pellets according to the ENplus standards of Europe, gradually exporting
Vietnamese wood pellets products to different countries worldwide, including
the EU region.
Despite the initial positive results achieved, Vietnam's wood pellets
exports to the EU still face many difficulties:
Although Vietnam is still among the leading countries in the world in
exporting wood pellets, Vietnamese companies often only meet small and
medium-sized orders and face the problem of missing out on larger orders due
to the limited scale of Vietnamese wood pellets enterprises, low labor
productivity, low processing capacity, and unstable input materials.
In terms of production and processing: Vietnam's large volume of wood
pellet exports does not yet generate significant export value. The Vietnamese
wood pellets brand has not truly made its mark in the EU market, so the export
price of Vietnamese wood pellets remains low compared to other competing
suppliers. Currently, Vietnam has few production facilities or ENplus-standard
wood pellets factories since this standard is much stricter than the standards for
wood pellets exported to South Korea or Japan.

52
Market penetration activities of Vietnamese enterprises: Vietnamese
export-oriented enterprises in general, and wood pellets exporters in particular,
still lack proactivity in market research, data collection, and market analysis,
failing to timely grasp changes in regulations and consumer demand in the EU
market. In 2022, most businesses found themselves in a passive position as EU
customers sought their products but no orders were secured because resources
were focused on the South Korean and Japanese markets. However, at the
beginning of 2023, wood pellets exports to South Korea and Japan showed
signs of decline as these two countries experienced excess import volumes.
Moreover, the wood pellets exported to these Asian countries have lower
technical standards compared to EU requirements, so even though the EU
market still has a big demand for wood pellets, Vietnam has not been able to
meet it yet.
The limitations of Vietnam's wood pellets exports to the EU can be
explained by the following reasons:
The EU is a unified market with consistent regulations and policies
throughout the bloc. However, alongside the common policies, each EU
member country still retains its own cultural habits, tastes, and specific product
demands. Vietnamese companies need to thoroughly understand the
information of each individual market to have an effective sales strategy.
In the context of the economy just recovering from the Covid-19
pandemic and the tense Russia-Ukraine conflict, the shortage of gas and
heating fuel in the EU tends to relax the policies and regulations on imports
and exports to compensate for the disrupted energy supply from Eastern
Europe. This situation can be seen as a double-edged sword, potentially
resulting in missed opportunities for Vietnam's wood pellets exports due to
increased competition from other countries entering this supply chain.
Therefore, to successfully enter the EU market, it is necessary to build a
competitive advantage. Vietnamese wood pellets exporters need to find ways to
improve product quality, reduce production costs, and provide better services.

53
The distribution system in the EU market is quite complex. Large
supermarkets, retail companies, or stores in the EU import goods through
reputable intermediaries rather than directly from manufacturing and exporting
enterprises. As a result, the cost of products becomes higher when goods do not
go through a direct import channel but instead pass through intermediaries.
The majority of Vietnamese wood pellets companies are small and
medium-sized enterprises with limited effectiveness in linking the supply chain
between businesses and wood pellets growers or among businesses themselves,
leading to low efficiency and instability. Inconsistent machinery systems,
cultivation processes, harvesting, and production significantly affect the quality
of Vietnam's wood pellets industry as a whole. The Vietnamese wood pellets
brand has not been widely spread in the EU market, and wood pellets products
primarily depend on wood pellets trading platforms.
Currently, wood pellets, in particular, and wood products, in general,
require Forest Stewardship Council (FSC) certification when exported to
Europe. The FSC is an international, non-governmental organization dedicated
to promoting responsible forest management. Since the EU is one of the
markets with a high level of environmental protection consciousness, FSC
certification is indispensable for wood products imported into this region.
According to the statistics compiled by the General Department of Forestry, the
area of natural forests and certified planted forests currently accounts for only
about 8% of the total forest area in the country. This is the biggest challenge
for the wood pellets industry in particular and the wood industry in general.
From the perspective of government agencies, there has not been strong
guidance in restructuring the wood pellets industry, and specific instructions
have not been provided for local planning, quality control of wood pellets, and
high investment efficiency. Moreover, the Vietnam Timber and Forest Product
Association (VIFOREST) has not promptly conducted market forecasting and
supported member businesses in export activities. Therefore, businesses lack

54
comprehensive market information and face difficulties in adapting to sudden
changes in the EU region.

55
2.4. Opportunities of exporting wood pellets from Vietnam to the EU in the
context of the Russia-Ukraine war
2.4.1. Expanding market share in the European market and contributing to
the growth of Vietnam's export turnover
As mentioned, on March 8th 2022, the Russian government issued a ban on
the export of certain wood products, including wood pellets and roundwood, in
response to sanctions imposed by European countries due to the conflict between
Russia and Ukraine. This ban will be maintained until the end of 2022. With this
ban in place, the export of wood pellets from Russia is considered illegal. As a
result, the supply of wood pellets from Russia, which amounts to 2.4 million
tonnes per year, has been disrupted, and the global market for wood pellets
imports needs to find alternative sources. This presents an opportunity for
Vietnam to develop its wood pellets exports.
It can be said that after 31 years of diplomatic relations, the EU has become
one of Vietnam's leading partners in various fields, particularly in the economy,
trade, and investment, contributing positively to Vietnam's socioeconomic
development and international economic integration. Developing relations with
the EU has helped the MIT effectively implement the strategy of diversifying
markets, especially in the context of complex and unpredictable regional and
global economic developments.
In the coming period, the situation regarding the Russia-Ukraine conflict
remains uncertain, and the market conditions will continue to undergo changes.
The process of globalization and regionalization will become increasingly strong
and practical, with the expansion of trade liberalization and the implementation
of commitments in new-generation FTAs, including the EVFTA. This will
certainly open up new opportunities for the development of the wood pellets
export market. According to forecasts, when the EVFTA takes effect, by 2035,
Vietnam's export turnover to the EU will increase by about 18%, equivalent to 8
billion EUR. According to EUROSTAT's forecast, the wood pellets market in
Europe will continue to grow in the coming years.

56
With the well-maintained trade relations between Vietnam and the EU, as
well as the current global political situation, this is a great opportunity for
Vietnam to penetrate deeply into the European wood pellets market.
2.4.2. Attracting foreign direct investment (FDI)
VIFOREST (2022) has reported that since 2016, Vietnam has continuously
received foreign investment projects in the wood pellets sector. Specifically,
there have been 7 investment projects with a total investment capital of over
48.83 million USD from investors of various countries. South Korea has 3
projects with a total investment capital of 32 million USD; Japan has 2 projects
with an investment capital of 13.673 million USD; Sweden has 1 project with an
investment capital of 1 million USD; and Taiwan has 1 project with an
investment capital of 2.15 million USD. Most of the FDI projects in the wood
pellets sector are concentrated in raw material centers such as Phu Tho, Ha Tinh,
Thanh Hoa, Binh Duong, and Quang Binh.
These figures do not include small-scale factories. However, many factories
only operate at around 70-75% of their design capacity, or newly invested
factories in 2020 have not yet been operational. The number of wood pellets
manufacturing plants in Vietnam has been increasing over the past 2-3 years.
Prior to 2017, there were only about 20-25 factories producing this product with
a capacity of nearly 1 million tonnes per year. However, now the number of
factories has more than tripled.
It is worth noting that to invest in a well-designed and modern wood pellets
plant, according to expert calculations, it would require an investment of 2-3
million USD for a plant with a capacity of 10,000-12,000 tonnes per month.
With the disruption of wood pellets and gas supply from Russia to the EU,
the likelihood of large, medium, and small foreign investors, especially from the
EU, shifting their investment in this product to the Vietnamese market is very
high.

57
In addition, according to the results of the Provincial Competitiveness
Index 2022, the majority of FDI enterprises still consider Vietnam as an
attractive investment destination due to its stable political environment and
expanding administrative procedures. Inspections and unofficial fees have been
reduced. After initial achievements in controlling the pandemic, political
stability, continuous economic development, and favorable conditions for trade
and international investment, Vietnam has emerged as a promising destination
for FDI.
Moreover, FDI enterprises can utilize the existing infrastructure system of
the raw material forest region for their purposes without the need to develop
from scratch. EU investors can also develop wood products alongside wood
pellets production to create value-added products and increase benefits.
2.4.3. Improving the quality of wood pellets.
Wood pellets exported to the EU require ENplus-A1 and ENplus-A2
standards, which are slightly stricter compared to the standards for pellets
exported to South Korea and Japan. Typically, wood pellets exported to the EU
have a maximum ash content of <0.7% by weight, whereas pellets exported to
Korea and Japan usually allow for 1-3% ash content. However, thanks to the
EVFTA, through technology transfer from international enterprises, Vietnamese
companies have an advantage in accessing advancements in modern scientific
and technological fields. This allows the wood pellets industry to benefit from
comprehensive development by providing advanced machinery and processing
equipment.
2.5. Challenges of exporting wood pellets from Vietnam to the EU in the
context of the Russia-Ukraine war
2.5.1. Challenges with government agencies
Despite becoming one of the important products in the wood and timber
export industry, wood pellets have not received the necessary attention from the
relevant government agencies.

58
Currently, production and exports are developing in an unregulated and
independent manner, with each entity doing as they please. The lack of
management, supervision, and self-development has led to a series of
misdirections for both production and export enterprises of wood pellets, such as
not meeting the required quality standards for the EU, and not being certified for
sustainable plantation forest sources by FSC.
Additionally, the lack of connection between the government and
businesses has also resulted in unhealthy competition. Especially for small-scale
production facilities and enterprises, intense competition for input materials,
prices, and customers is increasing day by day. The absence of a representative
agency for wood pellets production and export enterprises further complicates
the development of suitable policies for this industry by the regulatory
authorities.
Furthermore, in addition to the trade promotion aspect of the EVFTA (EU-
Vietnam Free Trade Agreement), this agreement also includes strict regulations
governing investment procedures, customs, trade facilitation, technical
standards, plant quarantine measures, intellectual property rights, government
procurement, sustainable development, and other areas. Enforcing these
restrictions requires Vietnam to adjust its legal system. In the context of the
complex Nga-Ukraine war, adjusting Vietnam's legal system to serve the EU
market will also become a pressing issue that needs prompt resolution in order to
seize opportunities and bring benefits to the country..
2.5.2. Challenges for enterprises
2.5.2.1. Competition for raw materials is a significant challenge faced by wood
pellets enterprises
According to policy analyst from Forest Trends (2022), the current input
source for wood pellets mainly consists of by-products from wood processing
facilities.

59
As shared by some businesses, the production cost of wood pellets is
approximately $30 per tonne higher than that of wood chips. However, the
export price of wood pellets is about $30 per tonne lower than the export price of
wood chips. Wood chips have attracted the raw material supply, leading to a
significant increase in raw material prices recently. Many wood pellet
enterprises, especially those with pre-signed export contracts, find it difficult to
compete with wood chip producers without the ability to adjust export prices.
This has resulted in some wood pellets businesses having to limit their
production.
In the context of a shortage of input materials, some wood pellets producers
have had to use "substandard" raw materials and expand their network for
sourcing input materials from more distant areas. For example, some businesses
in Quang Nam have had to purchase raw materials from the Central Highlands
region, which is approximately 200 km away from their production plants. On
the other hand, some smaller-scale factories have intensified their efforts to
procure products from remote areas, where there is less competition for raw
materials from wood chip processing facilities. Expanding the network for
sourcing input materials is a short-term solution for businesses to maintain
production activities and fulfill pre-signed orders.
The scarcity of input materials poses certain risks in controlling the supply
chain, including the risk associated with sourcing input materials that are linked
to activities causing damage to large-scale planted forests, and even natural
forests. According to Phong (2022), by the end of 2022, there was a severe
situation in several provinces such as Thai Nguyen, Thanh Hoa, Nghe An,
Quang Ngai, Binh Duong, Dong Nai, and Ho Chi Minh City, where forest
owners were intensively cutting down young trees to sell as export wood pellets.
This exploitation of young forests not only affects the future supply of
sustainable wood processing but also has negative repercussions on the
ecosystem and impacts the productivity of rapidly growing planted forests.
2.5.2.2. Inadequate compliance with product requirements

AN ANALYSIS OF WOOD PELLETS EXPORT FROM VIETNAM TO EU IN THE CONTEXT OF RUSSIA-UKRAINE WAR

AN ANALYSIS OF WOOD PELLETS EXPORT FROM VIETNAM TO EU IN THE CONTEXT OF RUSSIA-UKRAINE WAR

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AN ANALYSIS OF WOOD PELLETS EXPORT FROM VIETNAM TO EU IN THE CONTEXT OF RUSSIA-UKRAINE WAR