08.02.2005
Kaliningrad: Gateway to Wider Europe
№1 2005 January/March
Sergei Kortunov

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

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.