Kaliningrad: Gateway to Wider Europe

8 february 2005

Sergei Kortunov, professor, is Head of the International Affairs Department at the State University–Higher School of Economics.

Resume: Moscow does not have a geopolitical understanding of the Kaliningrad Region’s role, nor a long-term economic strategy. If Moscow continues to do nothing, the Kaliningrad Region, like a ripe fruit, will fall into the EU’s hands on its own accord.

Of the numerous unsolved problems plaguing relations between Russia and the European Union, the Kaliningrad issue occupies a special place. For example, the new rules for Russians who wish to travel by land between “mainland Russia” and the Kaliningrad Region, in effect from January 1, 2005, are a new reminder of this problem. From now on, Russian citizens can visit Kaliningrad only if they have a foreign passport.

Meanwhile, nothing has been done to settle unresolved issues: either in 2002, when the Russian president’s representative Dmitry Rogozin showed “deep concern” about the residents of Kaliningrad; or in 2003, when the Kaliningrad issue was discussed during the Russia-EU summits and when the Russian president visited the region, or later. Some may recall the presidential ‘Shuvalov commission’ which cited the economic development of the Kaliningrad Region among Russia’s six national priorities, or the establishment of an interdepartmental working group in the autumn of 2004 on the Kaliningrad Region, headed by presidential aide Sergei Yastrzhembsky. However, there has been no breakthrough in the overall situation; the region remains as neglected as it was in former years. The State Duma has not yet discussed the draft of a renewed federal law on a “special economic zone” in the Kaliningrad Region, which was submitted to the Parliament more than four years ago. This cloud of uncertainty surrounding the region’s economic prospects prevents Russian and foreign investment in local businesses.

The way in which the region’s development programs are being implemented shows that the federal center has not yet decided what functions the region should fulfill in the national division of labor, what role it can play in the country’s foreign trade, and what should be done to develop the region. There is the impression that Moscow does not have a geopolitical understanding of the Kaliningrad Region’s role, nor a long-term economic strategy. Furthermore, there seems to be a lack of well-formulated military interests in the area.

No wonder the major countries of the European Union have taken a wait-and-see approach to the situation. Many correctly believe that time is on the EU’s side: if Moscow continues to do nothing, the Kaliningrad Region, like a ripe fruit, will fall into the EU’s hands on its own accord.

STRATEGY OF COMBINING INTERESTS

There are two opposing points of view as to who must display initiative in addressing the problems arising between Russia and the EU. Russia believes that since these problems have been created by the enlargement of the European Union they must be solved by the EU. However, some EU officials argue that the EU must continue to enlarge, without paying any heed to Russia or its Kaliningrad Region.

Both approaches reflect old stereotypes and can produce nothing but a cold confrontation. A report by the Kiel International ad-hoc Group of Experts on Kaliningrad said that the best strategy between the EU and Russia would be to share the responsibility. This approach alone will allow the development of the region to begin, as well as become a pilot project for EU-Russian cooperation. Within the framework of this project, the parties could implement the latest economic and foreign-trade formulas, as well as cooperation mechanisms. Three groups of interest – federal, regional and pan-European – must be clearly formulated and then harmonized.
Moscow’s approach to solving Kaliningrad’s problems rests on several basic principles: Russia welcomes the enlargement of the EU, which creates additional opportunities for mutually advantageous cooperation; Russia has proclaimed its participation in the formation of the Wider Europe and its integration into the Euro-Atlantic economic, judicial, cultural and security space as a top priority; Moscow regards Kaliningrad as a special region and is thus creating special economic conditions for it. At the same time, Russia does not seek any special terms for its integration and is going to firmly uphold its national interests.

Russia’s general economic interests have been formulated in the federal target program The Development of the Kaliningrad Region for the Period Until 2010, which is aimed at creating conditions in the area for its “stable social and economic development through extending export-oriented businesses and achieving living standards comparable with those in adjacent states.”

The primary interest for the region is raising the population’s standard of living. Local resources, however, are not enough for boosting the region’s social and economic development. According to estimates of the Institute of Economics of the Russian Academy of Sciences, the Kaliningrad Region needs U.S. $36 billion in investment before 2010 to at least approach the EU countries in the level of development. Russia’s federal budget cannot afford to allocate such an amount, while foreign investment in the region over the last decade has not exceeded U.S. $65 million. The disproportion in economic development between the Kaliningrad Region and its neighbors has been quickly increasing since 2000 when Lithuania and Poland, as candidates for admission to the EU, were admitted to the EU’s new special programs – SAPARD (Special Accession Program for Agriculture and Rural Development) and ISPA (Instrument for Structural Policies for Pre-Accession). These programs are intended to help candidate countries catch up with EU environmental standards, as well as to upgrade and expand their links with the trans-European transport networks.

In Soviet times, the Kaliningrad Region gave priority to the development of machine-building, pulp-and-paper production, food (fish) and amber industries. Today, the region is not leading in any of these sectors, except, perhaps, the amber industry; it is not competitive on either the European or Russian markets. The regional authorities tend to overestimate Kaliningrad’s role as the only non-freezing port and a major sea transport hub on the Baltic Sea. The region is largely oriented to Moscow and actually maintains no ties with other countries of the Commonwealth of Independent States or even Russia’s northwest, not to mention other regions.
Kaliningrad’s average annual GDP growth rate is higher than Russia’s average (9-11 percent), while Russia’s growth rate is higher than that of the Baltic States, Poland and other countries of the European Union. Nevertheless, the developmental disproportion between Kaliningrad and its neighboring countries continues to increase. If this trend continues, it may decrease the region’s investment attractiveness still further and have other negative consequences. The Kaliningrad authorities have requested special financial and technical aid that would help the enclave cope with its unique position and reduce its growing socio-economic gap in comparison with its neighboring countries. As another additional step, Russia should press for the extension of the EU’s development programs to Kaliningrad.
International interests (or rather the interests of the EU countries) have two major aspects. On the one hand, these countries seek to prevent the emergence of economic, social, ecological and political tensions inside the EU. On the other hand, they would like to use Kaliningrad as an economic link between them and Russia (the regional market proper is much less important due to its small capacity). The EU’s primary goals for cooperating with Kaliningrad are the solution of problems pertaining to public health, the municipal economy and the environment, and the development of democracy, local self-government, and transparent small and medium-sized businesses capable of integrating into the European economy and market. The level of the region’s development in these spheres is not sufficient for its full-scale participation in the pan-European processes. The format of the Special Economic Zone set up by Russia in Kaliningrad to stimulate the region’s economic relations with the EU countries, is described by the latter as unproductive and, perhaps, even incompatible with the requirements of the World Trade Organization. With regard to Kaliningrad, the European Union seeks to solve, above all, local tasks, specifically to minimize ‘soft risks’ (real or imaginary) in the sphere of security, such as organized crime, illegal immigration, drug trafficking, communicable diseases (AIDS and others), and the environment. Quite often, however, the scale of these problems is grossly exaggerated.

At the current stage, the European Union will hardly contribute heavily to the region’s development. The EU members and large private investors have taken a wait-and-see position (the provisions of the EU’s TACIS program with regard to Kaliningrad are only for monitoring the overall situation while developing a European lobby in the region). Moreover, the EU has levers for “fencing off” the region by means of customs and border barriers, which it may implement at any moment.

The EU’s economic and legal strategy toward Kaliningrad has the following major aspects:
– extending the EU technical norms and standards to the region;
– bringing the region’s legal regulations into line with those of the EU;
– creating a transparent transport space in the region;
– incorporating the region’s power system, which receives power primarily from mainland Russia, into the European power system;
– delimiting zones of natural resource management, above all, fishing zones;
– reducing social tensions along the EU borders;
– integrating the region into the European Information Space.

These measures are intended to transform Kaliningrad into a bridge for Western technologies into Russia, as well as yet another region of Europe (the European Union holds that the “Europe of countries” will become a “Europe of regions” in the 21st century). Thus, the region will be gradually absorbed by the EU, dissolving into “Euro-regions” and “transport corridors.” The EU is ready to fund (and already is funding) related measures. So, it looks as if the European Union is a more important factor than Russia for building the region’s future.
And still, the strategic approaches of Russia and the EU have more in common than mutually exclusive points.

KALININGRAD SEPARATISM: MYTH OR REALITY?

The European Union has no territorial claims to Russia at the official level, and this is a major prerequisite for the further development of political ties between the two parties. The European Union regards the Kaliningrad Region as an inalienable part of the Russian Federation without reservations. Characteristically, “radical” solutions to the Kaliningrad problem, which include the region’s separation from Russia, are usually forwarded by Russian politicians. One such proposal suggests an association between Kaliningrad and the EU, as well as the creation of a common market. The latter would imply the removal of trade, manpower and capital barriers; the euro could also be introduced in Kaliningrad. This model cannot be implemented, however, without revising the region’s current political and legal status, which would bring about its isolation from mainland Russia. The EU admits that this variant is politically unacceptable to Moscow.

At the same time, Kaliningrad may be vulnerable to the danger of “creeping revenge” on the part of Germany. Among unofficial concepts, there is a proposal to establish a “Baltic Hanseatic Region” which would include the three Baltic States and a “Euroregion KЪnigsberg.” This concept is aimed at creating political, economic and legal conditions over the next few years which would be followed by the question of granting Euroregion KЪnigsberg membership in the EU, thus following in the footsteps of its immediate neighbors Lithuania, Latvia and Estonia. Russia’s participation in this project has not been proposed at all. To all outward appearances, the authors of this concept believe that the economic development of Kaliningrad under Germany’s wing will create a political situation where a hypothetical Euroregion KЪnigsberg will have enough legal autonomy from Russia to make an independent decision concerning its entry into the EU.

In November 2004, the opposition Christian Democratic Union/Christian-Social Union (CDU/CSU) parties in Germany’s Bundestag called into question the expediency of Kaliningrad remaining within the Russian Federation. In a parliamentary document addressed to Federal Chancellor Gerhard Schroeder, the deputies described the Russian region as the “KЪnigsberg area” and asked the Chancellor to assess their “considerations” concerning the idea of the region becoming a Euro-entity named Prussia. Point 14 of the document asked: “What is the Federal Government’s attitude to the idea of establishing a Lithuanian-Russian-Polish Euroregion that geographically would correspond to the historical province of East Prussia?” The deputies also wanted to know the government’s opinion about a proposal to convene a conference under the EU’s patronage in order to discuss the “economic future of the KЪnigsberg area,” which would be attended by representatives of Russia, Lithuania, Latvia, Estonia and Poland, as well as Kaliningrad and Germany.

Although such views and concepts have no official status (in November 2004, the federal government of Germany turned down the odious interpellation from the opposition and reiterated its recognition of Russia’s sovereignty over Kaliningrad), the aforementioned document was signed by 71 Bundestag deputies from the CDU/CSU, which may come to power in the next elections. The deputies believe that the Kaliningrad’s return to the zone of German influence is just a matter of time and that Moscow’s inactivity will introduce a “natural solution,” thus presupposing the beginning of restitution in the broad sense of the word. To counter this tendency, Russia must pursue an intelligible, responsible and active strategy.

Equally worrisome is the fact that some Lithuanian politicians are even more resolute about the status of Kaliningrad than politicians in Germany. They refer to the city of Kaliningrad as ‘Karaliaucius’ and the whole of this Russian region as ‘Lithuania Minor.’ The Encyclopedia of Lithuania Minor, published in the United States and distributed at various international forums, designates the Kaliningrad Region as a “Russia-occupied Karaliaucius area of Lithuania,” as an “ethnic land of the Balts” and part of their “historical heritage.” Georgs Bagatis of the Baltic Unity organization says the presidents of the Baltic States must make a joint statement acknowledging the occupation by Russia of the “KЪnigsberg area.” He wants the statement to be submitted to the United Nations in order to win international recognition of the fact that the decisions of the 1945 Potsdam Conference allowed Russia to govern the region only temporarily.

Lithuania’s parliamentary politics reveals its desire to isolate Kaliningrad from the rest of Russia, while isolating Russia from the integration processes in the European Union. This was made evident from the September 10, 2004 resolution of the Lithuanian Seym (parliament) entitled On Cooperation with the Kaliningrad Region. The resolution asserts that the EU’s plans to facilitate the transit of people and shipments between Kaliningrad and Russia run counter to the interests of Lithuania. In fact, Lithuanian deputies would like to repudiate the agreements between Russia and the EU on visa-free transit by non-stop trains and the provisions of the April 27, 2004 Joint Statement on the Enlargement of the EU [which envisage the conclusion of a separate Russia-EU or Russia-EU-Lithuania agreement on the regime of customs transit between Kaliningrad and mainland Russia – Ed.].

The separatist trend in Kaliningrad proper is represented by the minority Baltic Republican Party led by Sergei Pasko. The party’s main platform is the inability of the regional and federal authorities to “propose adequate and radical solutions to the problem of the development of this Russian exclave in the changing geopolitical conditions.”

First, Pasko suggests establishing a Baltic Republic in the region, which would have the status of Russia’s associated member and which would, simultaneously, integrate into the European Union as an international legal entity. Each Kaliningrader would have dual (Russian and EU) citizenship.

Pasko also proposes to conclude a new treaty on the delimitation of powers and matters of competence between the federal center and the Kaliningrad Region.
The party believes that its time will come in the next few years after the living standards in Lithuania and Poland have significantly risen due to their entry into the EU, while the same standards in the Kaliningrad Region will fall sharply. Then, Pasko says, a referendum on sovereignty could be conducted in the region (Such a referendum would contravene the Russian Constitution, as “the status of a Russian Federation entity can be changed by mutual agreement of the Russian Federation and the entity of the Russian Federation.” Therefore, the sovereignty issue can be decided only by a nationwide referendum.)

Everyone agrees that “Kaliningrad separatism” is a myth and that there are no psychological, social or economic prerequisites for separatist tendencies. Nevertheless, separatist sentiments are widespread among young people. A recent public opinion poll (conducted anonymously) revealed that almost 60 percent of the Kaliningrad Region’s population below the age of 28 favors separation from Russia. According to Kaliningrad Governor Vladimir Yegorov, Kaliningraders travel to the west six times more often than they travel to the east. Over 90 percent of young people have already repeatedly visited Poland, Lithuania and Germany, but they have never been to Russia. At a March 5, 2002 conference with Russia’s prime minister, members of the Kaliningrad Region administration even demanded that Moscow draw up a state program for acquainting young Kaliningraders with Russia (!).

While contacts with Russia are complicated, they are easier with foreign countries; or rather they used to be until recently, as these relations are growing more complicated, too. The local population is beginning to suffer from an “exclave syndrome” due to the region’s spatial isolation from both Russia and the neighboring countries. Deputies of the Kaliningrad Region Duma argue that the factors behind the anti-Russian sentiments in Kaliningrad are the passive policies of Moscow, which is delaying the consideration of an amended law on the Special Economic Zone, as well as fears that Moscow may abrogate the region’s economic exclusiveness.

The only possible political solution to the Kaliningrad problem in the light of the EU’s expansion is the region’s participation in the integration processes that will develop in the course of Russia-EU interaction. This will be only the first stage on the way toward making Kaliningrad a region of Russia-EU cooperation, and it is this model that will open prospects for future progress. At the same time, Kaliningrad will not become an international legal entity. The activities of regional bodies in the sphere of international relations will be coordinated by the federal center.

The Kaliningrad Region must be recognized as an entity of the Russian Federation and, simultaneously, an object of the EU’s economic activity. Ideally, it should be turned into a large-scale multinational economic project. To this end, Russia and the EU must conclude a special agreement (treaty) on the development of the region as an object of international cooperation. Unfortunately, the EU countries have not yet agreed with Russia’s proposals for signing such a document, considering the relations between the two parties within the frameworks of the 1994 Partnership and Cooperation Agreement sufficient. As a result, the visa issue – a technical issue per se – has acquired a political connotation.

In fact, the main danger lies in the possible weakening of the region’s ties with Russia. This possibility is irrespective of the EU’s intentions, and may be simply a byproduct of the European Union’s enlargement, which is being implemented without taking into consideration Russia’s vital interests. The real threat is not the region’s separation from Russia, but rather it becoming a depressed territory; any decline in development rates would be very undesirable for the region itself and for Russia as a whole. From the EU’s point of view, the emergence of a crisis region in the center of a prospering Europe, working toward aggravating instability, would not be the best variant, either. Therefore, Russia and the EU must work out a joint strategy for the region’s accelerated economic development, and focus their efforts on the solution of problems pertaining to the basic infrastructure (transport, telecommunications and power engineering).

Europe must make a choice and give answers to the following questions: Does it view Russia as a partner or as a potential threat? Is Russia a supplementary part of the European economic complex or is it a potentially dangerous rival? Does Russia stand as part of European civilization, or a burden to it?

In turn, Russia must reiterate its vision of a binding document that could ensure the region’s future development, and propose to its Western partners that they express their views on each of the document’s points. As the report of the Kiel International ad-hoc Group of Experts on Kaliningrad said, “the emergence of such a concept lies very much on Russia’s shoulders.” The report, however, also said that, “it is also a challenge to the EU, which needs to provide substance to the slogan about ‘Europe whole and free’ instead of sliding into a ‘Fortress Europe’ that would be conducive to the creation of isolated and unstable outsiders.”

IN SEARCH OF STRATEGIC APPROACH

The Russian government is to make a political choice among a limited number of possible scenarios: a policy toward a “creeping exchange” of the Kaliningrad Region’s territory on some or other terms; an optimization of the current situation; and, finally, a radical and breakthrough strategic maneuver. The choice of a scenario can be made only after Russia sets itself a strategic goal and its leadership, the regional administration, businesses and the public reach a mutual agreement.
Efforts to solve new problems caused by the EU’s enlargement must focus on Kaliningrad’s development as a region of Russia-EU cooperation, while consolidating the internal base of regional development and increasing the region’s role in the Russian economy, especially in serving its foreign economic ties.

The long-term economic significance of the Kaliningrad Region lies in the benefits of its enclave position in the European Union. This status is the region’s special resource, and it would be a mistake for Russia not to use it in its interests. If this realization is made at the federal level, Kaliningrad will become a priority development region for Moscow which then can make the following moves.

First, the permanent upgrading and renovation of the federal target program The Development of the Kaliningrad Region for the Period Until 2010, taking into consideration problems caused by the EU’s eastward expansion and by Russia’s entry into the WTO. Extra expenses on these purposes, to be incurred by regional enterprises and organizations, should be financed by the federal center.

Second, the adoption of an amended law on the Special Economic Zone (SEZ) in the Kaliningrad Region. The amended variant must reflect the European and global tendencies toward greater freedom in the movement of goods, services, capital, and manpower resources, and must be in line with other legislative acts (especially the Customs and Tax Codes). The new document must also take into consideration the terms of Russia’s expected entry into the WTO, so that the import-substituting enterprises opened in the region have a chance for development.

The situation of uncertainty, which is characteristic of the present stage in Kaliningrad’s development, calls for improving the SEZ mechanisms and drawing up a new federal document which would be broader in content and establish economic, political and social conditions for regional development. This may be a federal law on the Kaliningrad Region which would fix federal policy toward the region. The exclave status is a political category; therefore, the region needs a special economic and political regime.

Third, considering and implementing (notwithstanding the resistance of local businesses) proposals for setting up an investment and finance corporation, a guarantee fund or other structures, presumably international ones, which would ensure the funding of the federal target program and other investment projects on the regional market. It is advisable that the founders of such a corporation (fund) include federal and regional bodies of state power, municipalities, large Russian and foreign investment banks and, possibly, representatives of the EU Commission.

Fourth, the establishment of a special international analytical center in the Kaliningrad Region, headquartered in Kaliningrad, for harmonizing federal, regional and international interests. Within its frameworks, an international group of lawyers would bring into line the European and Russian legal norms to form a single legal space in Europe.

Fifth, coordination bodies should be set up to address regional problems, guaranteeing that the federal target program be implemented under the supervision of federal institutions. This should be done by both the federal center (for example, a Council on the Kaliningrad Region under the Russian president) and by the European Union. Such a move, however, may not be necessary if the regional governor is made more responsible to the president by the reform of the executive power system in the Russian Federation.

Making the Kaliningrad Region open to the EU and Russia would give it the opportunity for attracting new resources. In order not to lose control over the region, Russia must ensure a large and permanent Russian presence, strengthened by visits by politicians, businesspeople, experts and ordinary Russian citizens from other Russian regions. Such visits require an adequate transport, legal and social infrastructure and, most importantly, motivation.

Specifically, Russia should turn the Kaliningrad Region into a showcase highlighting the achievements of its regions, as well as a zone for contacts between Russian and EU citizens. This may become a mega-project for the whole of Russia’s northwest; the Kaliningrad Region’s development will be based then not on the construction of new large industrial enterprises, but on the presentation of existing enterprises of the Russian regions, together with their products.

This proposal can be accomplished by building a large exhibition and business center in the Kaliningrad Region (“Euro-EXPO”), which would serve as a key strategic solution of the region’s problems. The center could be gradually put into operation between the years 2005 and 2010, eventually covering a total area of 300,000 square meters. The construction should be given the status of a presidential program.

The exhibition, which should be coordinated as an annual event, could be held simultaneously with a large investment congress. To this end, there should be a standing executive body in the region, supported by the regional administration, and delegated the required authority by the federal center.

This measure, fully meeting the letter and spirit of all the fundamental federal documents on Kaliningrad and the Russia-EU agreements, would be a major public relations program for Russia. The very beginning of its implementation could stop, once and for all, any talk of regional separatism.

Such an exhibition would bring benefits to the EU countries, as well. A preliminary study has revealed an interest on the part of the EU business circles in promoting such a program. There could very well be a historical role for Kaliningrad in the development of contemporary Russia. It could become a model for a new “assembly” of the country with a view to ensuring its full-fledged inclusion into the Common European Economic Space and, through it, into the international division of labor in a global world. There is no sense implementing this “assembly” by restoring the former national economic complexes, as the former system would be ineffective given the conditions of the international market.

Russia must act in accordance with the latest principles of the postindustrial global economy of the 21st century, while relying on all available resources. The European Union Enlargement Commissioner GЯnter Verheugen said at a June 2004 conference in Vilnius that the EU would like to see Kaliningrad serve as Russia’s western gateway to Europe. Concerted efforts by the Russian regions, the federal center, and the public and private business sectors, required for the implementation of “Euro-EXPO,” which would match the scope of Russia and the Wider Europe, can make this mega-project Russia’s gateway (not just a “window”) to the Wider Europe.

Last updated 8 february 2005, 15:23

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