UPDATE 5-Finland's tariff threat overshadows EU-Russia summit

(Adds Swedish trade minister in pararaphs 10-12)

By Tarmo Virki and Gleb Bryanski

HELSINKI/MOSCOW, June 26 (Reuters) - Finland said on Thursday it was considering counter-measures against Moscow in a row over wood tariffs which threatens to delay both Russia's WTO membership and a partnership deal with the EU.

Former Russian President Vladimir Putin imposed export duties on raw timber in 2007 to promote the development of Russia's wood-processing industry -- a move Finland has said would force plant closures and cost up to 16,000 jobs.

Finnish Foreign Trade Minister Paavo Vayrynen said Russia should agree a solution to join the World Trade Organisation and warned that Helsinki may impose a tariff on goods transported across Finland to Russia to compensate its paper makers.

Finland is as large a trading partner with Russia as the United States. Russia is hungry for cars, televisions and machinery, meaning transit routes through Finland, Latvia, Lithuania and Estonia are clogged with trucks.

"A sustainable solution to wood tariffs has to be found as part of Russia's WTO membership," Vayrynen told a news conference in Helsinki before an EU-Russia summit expected to mark the start of new talks on a strategic partnership deal.

Vayrynen's comments sent Finnish paper stocks higher, including those of world no.1 paper and board firm Stora Enso (STERV.HE). Shares in Stora Enso were 3.9 percent higher, while UPM (UPM1V.HE) was up 0.76 percent by 1500 GMT.

EU RULES

An EU official said later on Thursday Finland's tariff proposal could be counter to core European Union rules.

"Any move in this direction by a member state could bring it into conflict with the (European) Community's common commercial policy and/or its internal market rules," the official said.

The head of Finland's forestry industry body, Anne Brunila, said Finland should instead push for finding a more sustainable solution by sourcing more wood domestically or from elsewhere.

Sweden, which also has a large timber industry, shares Finland's frustration and is critical of Russia's policy. But Swedish Trade Minister Ewa Bjorling argued for diplomacy rather than tit-for-tat measures.

"I think that we should keep on with the free trade line and not suggest more things like Finland has done for the moment," Bjorling told Reuters.

She said the European Commission had not yet suggested it would seek to block WTO membership for Russia purely over the wood row. "They have not put that on the table," she said.