The planned industrial complex would include a modern pulp mill, a sawmill and an OSB building panels mill in the community of Sheksna, in the southern part of Vologda.
It will have a pulp mill capacity of 800,000 metric tonnes, a sawmill of 300,000 cubic metres, and an OSB mill of 450,000 cubic metres.
News of the joint venture comes ahead of plans by the Russian government to increase export duty on timber, in a bid to boost the domestic timber processing industry. There are fears this will impact the Finnish paper industry.
Last year a similar deal was agreed by International Paper with the Russian pulp and paper group Ilim Holding.
The UPM deal with Sveza will see each hold a 50% share of the share capital of the new company, which will be known as OOO Borea.
Its formation is subject to regulatory approval. The companies are estimating the mill will begin operating in 2012.
Andrey Kashubski, managing director of Sveza Group, will take the role of chairman of the new company initially, however the chairmanship will rotate between the companies in time.
UPM in 790m deal to build joint Russian forestry plant
UPM, the Finnish paper giant, and Russia's Sveza Group, have signed a deal to create a joint-venture company that will build a timber processing plant in the Vologda region of north-west Russia, at a cost of around 788.4m.
