(HELSINKI) - Finland threatened Thursday to retaliate against Russia's refusal to lower duties on raw timber imports by taxing all trucks hauling goods through the country to Russia.

Finnish Foreign Minister Paavo Vaeyrynen described the situation as unbearable for the country's papermakers and said a new tax on Russia-bound trucks was justified because of the costs to Finland of the heavy traffic.

"The tax could be introduced this autumn and it could be hiked if Russia carries out its plans to increase duties in the beginning of 2009," Vaeyrynen said.

Finnish paper companies, which rely heavily on cheap Russian wood, have warned they will need to close mills and cut jobs if the timber row is not resolved quickly.

Exports have been hit badly since Russia started gradually ratcheting up export duties in 2006.

At the same time the flow of trucks hauling cars, electronics and other goods from Finnish harbours to Russia has steadily increased from 421,000 in 2006 to 461,000 last year, according to official figures.

Negotiations between the EU and Russia have so far failed to strike a deal. The European Commission has warned Russia that the row could hamper negotiations to join the World Trade Organization.

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