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2008 the Russian Baltic Exclave of Kaliningrad International Master Programme in European Spatial Planning and Regional Development The Russian Baltic exclave of Kaliningrad: Prospects for economic development International Master Programme in European Spatial Planning and Regional Development Master Thesis Supervisor: Jan‐Evert Nilsson Author: Natalia Ryzhkova 2008 B LEKINGE T EKNISKA H ÖGSKOLA The Russian Baltic exclave of Kaliningrad: Prospects for economic development Acknowledgements I would like to express my sincere gratitude to all those who helped me to accomplish my thesis. I am very thankful to my supervisor Jan‐Evert Nilsson for his very helpful observations and interesting discussions during the process of writing my thesis. I also very much appreciate the assistance I received from Vicky Gatzouras with regard to improving my English and general writing techniques. Not less important was the help I received from my classmates, Jan Exner and Gbemi Falade. I wish to thank them for finding time and providing me with very useful feedback about coherence and the logic of my ideas. Finally, I am glad to express my gratitude to the Swedish Institute which provided me with a scholarship for the whole period of my studies at the BTH thereby allowing me to pursue my goals in life. Page 2 of 75 The Russian Baltic exclave of Kaliningrad: Prospects for economic development Figure 1. Europe Source: Vinokurov, 2007 Page 3 of 75 The Russian Baltic exclave of Kaliningrad: Prospects for economic development Abstract The thesis focuses on the question of the regional economic development of the part of Russia with unique location within the EU territory – the region of Kaliningrad. The region has a relatively short but eventful history as a Russian exclave. A small territory has been facing numerous challenges in its development owing to the region’s detachment from the mainland. In addition to this, the position between two major players on European arena – the EU and Russia – defined a particular political significance of the small region. Complexity and interdependence of Russia‐EU relationship is reflected in their ways of perception and treatment of the region. The objectives of the work are to understand specifics of development of small territories surrounded by other states and to define challenges the territories have to tackle; to apply theoretical findings for analyzing a particular case of the detached part of Russian territory – Kaliningrad ‐ and to identify future prospects for the region. Methods to achieve stated objectives include an analysis of relevant literature on specifics and challenges of development of detached regions, an investigation of Kaliningrad’s historical background and the current situation as well as an examination of the EU’s and RF’s policy lines towards the Kaliningrad region. The main findings of the work comprise several future prospects for the Russian region of Kaliningrad in the view of its specific geopolitical position which implies intricate combination of such factors as EU‐Russia relationship, WTO expansion, energy prices and globalization. Page 4 of 75 The Russian Baltic exclave of Kaliningrad: Prospects for economic development Table of Contents Introduction ................................................................................................................................... 6 Study questions and methods ................................................................................................... 8 Structure .................................................................................................................................... 8 1 Enclaves and exclaves: definitions, classification, common features and economic problems ...................................................................................................................................... 10 1.1 The classification of enclaves in the context of political geography ........................... 13 1.2 Common features and economic problems of enclaves ............................................. 17 2 Background information on Kaliningrad .......................................................................... 20 2.1 An analysis of Kaliningrad’s historical characteristics .................................................. 20 2.2 Economic and political trends in the region of Kaliningrad in the 1990s .................... 22 2.2.1 Economic problems in the 1990s ......................................................................... 26 2.2.2 Political trends in the 1990s ................................................................................. 28 3 The current situation in the Kaliningrad region ............................................................... 31 3.1 The economy ................................................................................................................ 31 3.2 The Special Economic Zone regime and its impact on local economy ........................ 33 3.3 Kaliningrad’s economic and social situation in comparison ........................................ 42 3.4 Kaliningrad’s demographical situation ......................................................................... 44 3.5 The political dimension of Kaliningrad’s identity ......................................................... 46 3.6 The main obstacles to economic and social development of the region .................... 48 4 EU’s approach .................................................................................................................. 52 5 Russia’s policy towards the exclave ................................................................................. 55 6 Critical examination of the RF’s and EU’s approaches towards Kaliningrad ................... 60 7 Conclusion ........................................................................................................................ 62 7.1 Kaliningrad’s development prospects .......................................................................... 63 8 Bibliography ..................................................................................................................... 70 9 Figure index ...................................................................................................................... 74 Page 5 of 75 The Russian Baltic exclave of Kaliningrad: Prospects for economic development Introduction The Kaliningrad region1, as it appears today, is the Russian territory sandwiched between Poland and Lithuania. It has a population of almost one million people, of whom about 430,000 are concentrated in the capital, Kaliningrad. In 1990 when Lithuania declared its independence from the Soviet Union, the region found itself cut off from the mainland. In 2004 Lithuania and Poland joined the EU and Kaliningrad became surrounded by EU territory (Figure 2). These two global events heavily effected the economic and social situation of the Kaliningrad oblast. WTO expansion and NATO enlargement are two other external processes with a huge impact on the region´s development. Figure 2. Europe after the 5th enlargement Source: http://newsimg.bbc.co.uk/media/images/41260000/gif/_41260177_kaliningrad_map2_416.gif (2005) 1 Here and elsewhere in the text Kaliningrad is used to refer to the Kaliningrad region. The terms ‘Kaliningrad region’ and ‘Kaliningrad oblast’ are used intermittently as well. Page 6 of 75 The Russian Baltic exclave of Kaliningrad: Prospects for economic development The break up of the Soviet Union hit the region’s economy tremendously. Kaliningrad was left with a fragmented and obsolete industrial system. The effects of the following economic crisis of the 90s on society have been arduous. The region has suffered high rates of poverty, unemployment, subsequent health and education problems. The Kaliningrad economy started however to recover with rapid pace following the financial crisis of August 1998 in the Russian Federation. Nevertheless, the social situation in the region remains problematic, especially, when compared with the European neighbors. The anticipated EU enlargement of 2004 caused new worries for the region. According to the official reports from the Commission (EC, 2001) the enlargement should have benefited Kaliningrad substantially. However, the negative implications of the enlargement in form of limitations on transit of goods and people to and from Kaliningrad affected development patterns in the oblast. The main concerns included extremely low economic competitiveness of the region compared to its neighbors. This lack of competitiveness was at the same time one of the causes for and consequences of Kaliningrad’s exclusion out of the main trade and transport flows. Profound social problems, economic isolation of the region and environmental threats caused by Kaliningrad’s activities to the whole Baltic Sea region required attention and joint actions from both sides – the RF and the EU. Finally, the common nature of these problems was acknowledged by the European countries. Some kind of agreement was reached between the EU and Russia in the beginning of the new century. According to the official documents (EC, 2006) the main goal of the EU policy for Kaliningrad that time was to support the Russian Federation in pulling Kaliningrad out of its protracted economic crisis of the 90s and increasing its socio‐economic situation afterwards. The Russian Federation has also developed a new strategic approach towards the region’s future. A number of the acute concerns found solutions and the Kaliningrad region received a new urge
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