Articles

60 years is a considerable period in the life of a concrete person. It’s time to collect stones, as they say. For economic life of 60-years’ region anniversary it is a great occasion to discuss great milestones, must-have-been dreams, realities of today and perspectives for the nearest and far future.

Last week, a ferryboat called “Baltiysk”, which is capable to carry more than a hundred of railroad cars, arrived in the Ust-Luga port. The ferry crossing was opened by President of Russia Vladimir Putin. This is how Russia is solving a part of the problem of Kaliningrad transit. Experts believe that the major portion of unresolved problems in relations with Lithuania and Poland can be settled at a trilateral summit.

The favorable geographical position of Kaliningrad region with regard to the main trading partner of the Russian Federation – to the European Union – and the status of special economic zone create specific external conditions, in many respects distinct from conditions for economic activities in other Russian regions. Although the effects of the factors are not obvious and not only positive, in combination with such traditional factors of competitive advantages as relatively low cost of labour and development of the industrial and transport infrastructure, they have actually decisively influenced the formation of economic specialization of the Kaliningrad region at the present stage of development.

In 1996, a special economic zone was established in Kaliningrad to encourage investments in the region. The zone’s attraction is duty-exempt import. If a company can increase the value of an imported product by 30 per cent and change its customs heading, it is entitled to sell the product exempt of duty elsewhere in Russia as well.
The special economic zone has resulted in a steep increase in Kaliningrad’s foreign imports and sales to the mother country. The region’s share of Russian imports is ten times bigger than its share of the country’s GDP.
Despite its status as a special economic zone Kaliningrad has not managed to convince foreign investors. At the end of 2005, direct investments totalled less than 90 million US dollars, or slightly over 90 dollars per each Kaliningrad resident.
Direct foreign investments per inhabitant in Kaliningrad are only one seventh of the Russian average. In contrast, per-inhabitant investments made by foreign companies in Lithuania are nearly 20 times larger than those of Kaliningrad. This is a huge difference, taking into account that only 15 years ago both Lithuania and Kaliningrad came under the same economic system.
The Kremlin, too, has noted the disappointing progress in foreign investments. To rectify the situation, a new law for the Kaliningrad special economic zone entered into force in April 2006.

Back in November 2002 the EU and Russia laid the ground, by way of a joint statement adopted at the highest possible level, for the transit of persons between the Kaliningrad region and mainland Russia. It involves the use of “facilitated travel documents” and has operated to the entire satisfaction of all sides ever since it was put into effect in July 2003. On average, 1.5 million persons travel annually to/from Kaliningrad and so far only relatively few had to be refused at the border or taken off the transit trains.

The first crisis in EU-Russia relations over the ‘Kaliningrad transit’ issue took place in 2002-03, when Lithuania introduced a visa regime. That move provoked strong concerns in Russia that its Kaliningrad Region would be politically and economically detached from the mainland. Russia and Lithuania managed to reach a half-hearted compromise, which was implemented in July 2003. The compromise was at best temporary, however, since it was already known that Lithuania aspired to join the Schengen zone a few years later. Now that Lithuania will most probably join the Schengen zone by late 2007, that time has now about come. The consultations on the Kaliningrad transit issue are ongoing, although a final decision is not yet in sight. The prospects of achieving a comprehensive breakthrough are dim, due to the shallow nature of EU-Russia relations. To avoid a new crisis, another compromise is needed.

This year in the middle of May I was invited to participate the Baltic Sea INTERREG III B final project conference. The event took place in Sweden and the shortest way there was via Gdansk. Early in the morning I left home for Mamonovo and soon found myself at the Russian check- point. There were not so many cars from Kaliningrad in the queue, and in twenty minutes, having passed the Russian customs and border control, I, being surprised with efficiency of our bodies, made my way to the Polish border. And there was a great surprise. There were two queues of machines at the departure to the Polish side. In one queue - much longer - Poles, in another – about 40 cars - Russians. After some time, I started to realize that I can just miss my plane. The Russian queue moved extremely slowly, while the Polish queue - very fast. Only in five (!!!) hours I managed to pass the hundred-meter site that divided me from a Polish barrier.

CafeBabel. There is a region between Poland and Lithuania that is not part of the European Union, this region is Kaliningrad; a Russian territory with a hundred-year-old history, a difficult present and a European future.

EUobserver. With Brussels drafting a new trade pact with Moscow and with the Finnish presidency prioritising Russian relations, Russia says that its EU enclave - the Kaliningrad oblast - could become a pilot project for EU integration in the next few years.

As is has been shown over some past years, the Northern Dimension initiated and inspired by Finland, proved to be an efficient policy tool of the European Union allowing to meet the interests of Russia and EU member-states.