liability that would be due if all taxes were properly assessed and collected = notional gross profit * 30% (if notional gross profit > 0) + stumpage fees + export duties. Using the NIPEILesprom set, notional tax take = notional gross profit * 30% (if notional gross profit > 0) + export duties (stumpage fees are included in production costs and cannot be dissociated). All other taxes, in particular social security contributions, are included in production costs in both data sets. Unlike the oil and gas sectors, forest companies are not traded publicly and no market capitalization data exists to estimate equity. For the purpose of estimating normal profit, a standard return on equity therefore had to be reconstructed for the whole Russian logging sector in the following manner. Total assets in the Russian logging sector had a book value of RUB 28.6 billion in 1998.24 1999 investments amounted to just over RUB 2 billion while depreciation amounted to just over RUB 1 billion. Converting each figure in US$ at the appropriated exchange rate and using the average equity-to-assets ratio in the logging sector of 70%, total equity in the logging sector in 1999 was around US$ 987 million. A normal profit rate of 20% (Eurobond 2007 average 2000 yield plus a premium of around 5%) was selected for the Russian forest sector.25 Given this rate and the timber cut for main usage of 122 million cubic meters, the standard normal profit on equity for the Russian logging sector for 1999 was estimated at US$ 1.62/m<sup>3</sup> (Burdin _et al._ 2000; Sakhanov 2000). Then, the unit appropriated rent = notional gross profit minus notional tax take minus normal profit. Since the unit appropriated rent is estimated for both domestic sales and exports, it is necessary to weight each figure by the relative sales shares: weighted unit appropriated rent = unit appropriated rent on domestic sales * domestic sales share + unit appropriated rent on exports * export share. The total appropriated rent, or foregone revenues = weighted unit appropriated rent * total timber cut for main usage.<sup>2 6</sup> 2.71 The Annex gives the synthesis for each region and both data sets, while Table 15 gives the aggregated results for Russia as a whole. Using the regional data set as lower bound estimate and the NIPIEILesprom as upper bound estimate, the interval for the average current appropriated rent on round wood was around US$ 1.9 - 7.8 per cubic meter in 1999, which means total foregone revenues of around US$ 227 - 944 million per year. In addition, more revenues are foregone because part of the rent is unrealized through excessive domestic sales, which could be reallocated to export markets. However, as in the case of oil and gas, no value is attached to this category of foregone revenues, as it is not clear how much extra timber from Russia foreign countries could import.

24 Book values tend to over-represent reality given some of the peculiarities of the Russian accounting system. As a consequence, the calculated normal profit might itself be overestimated, and the appropriated rent underestimated.

25 NIPIEILesprom recommends 25% as a normal rate of return on capital in the logging sector, but that seemed too high as the rate for the central scenario.

26 Main usage means timber cut for use as round wood, lumber, or to be processed. It excludes the sanitary and salvage cuts performed by _leskho2y._ 30