Exclavity under globalization. Selected works

The development strategies of the Kaliningrad region

ingrad region as a region of cooperation”);

the formation of a developed market infrastructure in the re-

gion;

the implementation of the new Federal Programme of the development of the region;

the elaboration and realization of a complex middle term regional programme of social and economic development of the Kaliningrad region.

Proceeding from the geopolitical position and role of the Kaliningrad area, its potential and advantages, the authors specified that the development of the Kaliningrad region should preferably go in the following directions:

the region of cooperation of the Russian Federation and the European Union in the XXI century (approbation of potentially effective schemes, mechanisms and methods of economic cooperation between Russia and the EU);

“contact” territory of Russia in Europe;

full use of the regional natural resource and economic potential;

sustaining Russia’s strategic interests (the Kaliningrad region is the place where the Baltic fleet of Russia is stationed).

The new law on the special economic zone in the Kaliningrad region (2006)

On January, 10th, 2006 the President of Russia signed the new law №16-ФЗ “On the special economic zone in the Kaliningrad region and amendments to some legislative acts of the Russian Federation”. The law assumes coexistence of two kinds of privileges during a 10-year period: customs and taxation ones. The law introduces the following changes to a mode of economic activity in the region:

Participants of the SEZ are legal persons implementing in the Kaliningrad region investment projects in the form of capital investments. In the definition of the resident of the SEZ the major requirement is that “capital investment of no less than 150 mln roubles must be made within a 3 year period from the date the le-

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gal person is registered as resident. Extraction of crude oil and natural gas, the production of vodka and other alcoholic drinks, ethyl spirits, tobacco and tobacco products, and also others excise goods (except for cars and motorcycles), wholesale and retail trade, car maintenance, repair of household appliances and financial services are excluded from the list of investment projects approved by the Government of the Russian Federation.

During a 10-year transition period customs privileges granted by the law on SEZ continue to operate and can be enjoyed by legal persons previously registered as residents of the SEZ. Customs privileges are given to:

1.imported to the territory of the Kaliningrad region;

2.foreign goods imported to the territory of the SEZ for production purposes;

3.goods produced in the Kaliningrad region and then taken to any other part of customs territory of the Russian Federation31;

4.foreign goods and goods manufactures in the Kaliningrad region, and then taken to territories outside the customs zone of the Russian Federation.

The law introduces taxation privileges for residents of the SEZ: no profit tax and property tax are paid during the first six years of activity and 50% of the taxes are paid during the following six years.

The new law, together with developing import substituting production, creates preconditions for orientation of the region’s economy towards export. The realization of aforementioned measures may lead to a new cardinal reform of the regional economy.

Conditions for the implementation of the regional strategy Combination of interests as a condition

for a successful regional strategy

A balance of interests (regional, national and international ones) is a necessary precondition for a sustainable and dynamic development of the region

31 Russian goods are goods manufactured in the Russian Federation that can circulate within the borders of the Customs of the Russian Federation.

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The development strategies of the Kaliningrad region

Russian interests

Retaining the Kaliningrad region within the Russian Federation and in the Russian economic space is among the genuine and unquestionable Russian national interests. This is to become an axiom, a condition for any discussion of the prospects of the regional development.

The Russian interests in the region are of military and strategic importance. In case of a favourable development of the international relations in general, and in the Baltic Sea region in particular, Russian military and strategic presence in the Kaliningrad region could be maintained at the level necessary for ensuring the security of the country.

The Kaliningrad region has all the necessary prerequisites for fulfilling important economic functions. Common Russian interests have been formulated in the Federal Special Programme the “Development of the Kaliningrad region for the period up to the year 2010”. The major aim of the programme is “to establish conditions for a sustainable socio-economic development of the Kaliningrad region on the basis of export-oriented production, raising the standards of living of the region's population so that it is comparable to those of the neighbouring states”.

The following objectives are aimed at maintaining the geostrategic interests of Russia in the Baltic Sea region:

the development of Kaliningrad as a large transport junction of Russia by modernizing the region’s transport infrastructure;

ensuring energy security of the region by reconstructing the existing energy plants and putting new ones into operation;

improving the ecological situation in the region.

The objectives of the federal significance are defined in the following way:

orientation of the region’s economy towards export;

perfection of the mechanism of the Special Economic Zone as a tool for the development of the region's economy and its integration into the world economic space;

development of an effective system of the SEZ administration with the participation of the federal and regional authorities;

development of telecommunications infrastructure;

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development of tourism and the recreation;

structural reorganization of the amber industry.

Regional interests

The regional interests proper have different aspects. The region is certainly interested in a rapid reconstruction of its economy, in bringing it into compliance with the new economic and geopolitical reality. That is why the region's attitude towards both Russian and foreign investment in its specialization sectors is very positive. However, one should bear in mind ecological, social and other limitations regulated by the regional authorities in accordance with the local interests, taking into account normal every-day activities of the region's population.

At the same time the industries that provide for every-day needs of the population require special attention at the regional level. These are the food industry, the production of consumer goods and consumer services, trade and housing, communal and social services. The objective of the regional authorities is budget financing of NGOs and creating favourable economic conditions for commercial companies.

The international interests

The international interests with reference to the subject of the Russian Federation are to be taken into account proceeding from the special geopolitical location of the region and its historic past.

The Kaliningrad region is a subject, a actor of international cooperation, other actors being the Russian Federation and foreign countries (in particular, the countries of the Baltic Sea region), and international organizations. The Russian Federation is a member of many of them - the United Nations, the Organization for Security and Cooperation in Europe (OSCE), The Council of the Baltic Sea states (CBSS). Other organizations are external partners, for instance, such important partners as NATO and the EU, to a lesser degree - subregional organizations, such as the Nordic Council. It is necessary to name the CIS and the Union of Russia and Belarus, but their role as actors on the international arena, at least, in the Baltic Sea region is minimal.

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Besides the states and international organizations it is necessary to consider new actors of the world politics - NGOs, transnational corporations and banks, separate groups and individuals, international criminal organisations, etc. Regions are to be put on the list of political and economic actors as well, e.g. administrative and territorial units of the states which are more and more active on the international arena. They form inter-regional bodies - associations, euroregions, etc., playing a crucial role in the development of cross-border cooperation. The Kaliningrad region and its municipalities are becoming full participants of international activities in the Baltic Sea basin.

The Kaliningrad area as the centre

of the EU-Russia partnership in the Baltic Sea region

Kaliningrad is becoming an important centre of international contacts. It has become the object of numerous projects and programmes jointly implemented by Russian and western experts. The enlargement of the EU to the east and the transformation of the Kaliningrad region into an enclave inside the European Union cause a lot of economic, social and political problems. The way these problems are addressed and dealt with reflects the real state of development of international cooperation of Russia with its West-European partners. The Kaliningrad experience, both positive, and negative one, may appear rather useful for the perfection and further elaboration of the Russian foreign strategy and foreign economic policy.

Under the conditions of publicly declared partnership between Russia and the European Union the settlement of political, legal and economic problems of the Kaliningrad region, entailed by the EU enlargement, are becoming of particular importance. The way the Kaliningrad problems are dealt with is a objective and clear indicator of the readiness of both parties - Russia, and EU - to translate joint political declarations of partnership into practical steps. The solution of acute international legal problems (including technical ones, for instance, the visa issue) is not the final aim as

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such. It is only a precondition for creating favourable conditions for accelerated economic development of the Kaliningrad region as a region of cooperation between the EURussia in XXI century. President V.V.Putin stated that “…the future of EU-Russia relations32 depends of the solution to the problem of Kaliningrad, which affects vital interests of the residents of the oblast. The goal set by both Russia and the European Union is turning the Kaliningrad region “into a good example of cooperation between Russia with the enlarging Europe”33.

The position of the European Union on the Kaliningrad region

To begin with, the interest of the European Union in “the Kaliningrad problem” has naturally been connected with the enlargement of the EU in 2004. No wonder that the "peak" of the discussion of the problem occurred some time prior to the enlargement of 2001-2002. In general, the EU sees a serious problem in the very existence of the Kaliningrad enclave inside of its territory, making the process of enlargement even more complicated. This is the essence of conceptual contradictions between the EU and Russia. Russia regards Kaliningrad as a potential “enhanced cooperation” territory and the ace in the hole in the negotiations with the EU. The position of the EU is more pragmatic in its character: the European Union considers Kaliningrad from the point of view of its own safety, as a source of “soft risks” (for instance, organized crime, illegal migration, drug trafficking, pollution of the environment, AIDS, etc.) . And these risks are very often exaggerated.

Secondly, these conceptual contradictions predetermine different approaches to the solution of the Kaliningrad problem. Russia regards Kaliningrad as a political problem, seen in a wider context: the Russian Federation expresses its concern about its subject, which has become an enclave in the EU, being located in the European political, economic and legal spaces, functioning according to different rules of the game. There is natural apprehension, that the

32Ofitsialnoe internet-predstavitelstvo Prezidenta Rossii 29 maia 2002 goda http://www/kremlin/ru/text/news/2002/05/38203.shtml

33Ofitsialnoe internet-predstavitelstvo Prezidenta Rossii 27 iunia 2003 goda http://www/kremlin/ru/text/news/2003/06/47945.shtml

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present situation may lead to weakening the ties of the Kaliningrad region with the mainland Russia and the region may “drift to the West” Therefore, in the federal documents on the Kaliningrad region the major emphasis is laid to the necessity to provide favourable external conditions for the viability and development of Kaliningrad as an integral part of the Russian Federation. This task can be fulfilled only if the Kaliningrad region becomes an active participant of cross-border and regional cooperation and turns into the Russian region of cooperation with the European Union in XXI century34. As for the EU, negotiations on Kaliningrad are more focused on practical, technical issues.

Thirdly, all major bodies and organizations of the EU have been involved in the discussion of the problem of Kaliningrad - the European Council, European Commission, European Parliament etc. It is quite obvious that the official stance of different European bodies and major organization on the Kaliningrad puzzle differs greatly and varies from a rather “soft” flexible position of the European Parliament to a more rigid and position of the European Commission. It is the official stance of the European Commission that has been aired during the EU-Russia talks on Kaliningrad. This proves an slightly subordinate role of the European Parliament in the system of the institution of the EU.

Fourthly, the rigidity of the EU position is clearly seen if it is compared with that of other international actors. For example, the report of the Parliamentary Assembly of NATO had a much more liberal character concerning visa regulations for Kaliningrad, than the European Commission. Moreover, the report called on the EU to soften its position regarding Kaliningrad, at the same time stressing, that the approach of the EU to the enlargement formulated as “everything or nothing” only complicates achieving success at negotiations with Russia.

Finally, it is necessary to note, that the “degree” of interest in the Kaliningrad region is determined by the internal development

34 Strategiia razvitiia otnoshenii Rossiiskoi Federacii s Evropeiskim Souzom na srednesrochnuu perspektivu (2000—2010 godi) // Ivanov I.S. Novaia rossiiskaia diplomatiia. Desiat let vneshnei politiki strain. M.: OLMA-PRESS, 2002. S. 293—294.

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of the European Union, particularly, by the fact, what country holds presidency. So, the interest in Kaliningrad rose during Swedish presidency, the country involved in solving the problem of Kaliningrad by virtue of its geographical proximity to Russia and Russia’s participation in the activities of the “Northern Dimension” Initiative. In all likelihood German presidency will generate more interest in the region.

The EU renders technical (primary consulting) assistance to the development of the Kaliningrad region. Since 1991 more than 80 various projects (first of all, within TACIS programme) have been implemented in the region. The total investment into them amounted to more than 100 million euros35.

TACIS programme (the validity of the agreement expired in 2006 ) focused on a number of key directions36:

private sector;

cross-border cooperation;

environment;

public health care and education.

The EU continues to pay special attention to the Kaliningrad region both in the context of its initiatives in the Baltic Sea region, and in the context of enlargement. The EU expresses its readiness to promote economic development of Kaliningrad, first of all by providing support for SMEs. In March, 2003 the European Commission, together with other donors, launched a special programme with the budget of 25 million euros, aimed at supporting the Federal Target Programme of Russia of the development of the Kaliningrad region for 2004-2006.

The priorities of the special programme are the following ones:

development of the administrative potential of the region;

improvement of the system of general and preventive public health care services;

35Kaliningrad // Predstavitelstvo Evropeiskoi komissii http://www. delrus/cec. eu. int/ri/cis_2.htm

36Kaliningrad I rasshirenie ES: granitsa, no ne barer. Predstavitelstvo Evropeiskoi komissii http://www. delrus/cec. eu. int/ri/cis_2.htm

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development of intellectual potential of the region and training specialists according to the needs of the regional labour market;

facilitating cross-border cooperation by supporting joint projects between Kaliningrad, Poland and Lithuania in the framework of the initiative “Wider Europe - New Neighbourhood” which includes a concrete programme for Kaliningrad, called “Neighbourhood - Lithuania, Poland and the Kaliningrad region of the Russian Federation”. The implementation phases started in 2006. (the first round of projects was in the autumn of 2005). Financing for Poland and Lithuania is provided by the programme INTERREG 3A, and for the Kaliningrad region by - by TACIS programme.

From 2004 to 2006 the total amount of investments within the framework of the Special programme and the volume of the regional investments in the realization of the “Neighbourhood” programme and in facilitating cross-border cooperation exceeded 50 million euros.

The international dimension of the problem of the Kaliningrad region

The cooperation of Russia and the EU in the Kaliningrad region did not start from scratch. The mechanism of the Free, and later Special Economic Zone, as a matter of fact, has already turned the region into an experimental test ground, where new cooperation and integration mechanisms are tested. The same role is played by the development of various spatial forms of cross-border cooperation. More than 3000 enterprises with participation of foreign capital have been set up in the region. These enterprises promote the development of foreign trade activities. Numerous international projects aimed at the development of industrial and social infrastructure, necessary for attracting investments are being realized. Recently cross-border cooperation with Poland and Lithuania, new EU member states has extended, it is worth mentioning the euroregions “Baltic”, “Neman, “Saule”, “Sheshupe”, “Lyna-Lava”. Contacts with Germany have became more active again. The region began to participate in the projects of inter-regional coopera-

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tion in the Baltic Sea region, including the “Northern dimension” projects of the EU.

The approaches of Russia and the EU to the development of economic cooperation with the Kaliningrad region are similar to each other in two respects: the region should not be economically isolated; the potential of the region creates good opportunities for cooperation between Russia and the EU.

In addition to it, Russia considers the Kaliningrad region as a special economic zone offering simplified legal (customs, taxation and registration) procedures that will certainly make the region more attractive to foreign and Russian investors. The newest economic tools and technologies or well forgotten old ones (for instance, foreign concessions) can be tested here. It is in the Kaliningrad region that the WTO rules can be tried out. .

The capacity of the internal Kaliningrad market is not certainly high enough to consider it an essential factor for the development of the economy of all Russia. The Kaliningrad region is developing now as a transit point and a place for building up import substituting assembly production in Russia. Export production is also increasing and has good prospects.

For foreign investors (first of all, from the EU countries) the Kaliningrad region can be of great interest not so much in terms of the setting up of export-oriented enterprises, but as a conveniently located region providing access to a booming Russian market. The setting up of new joint ventures on the basis of the already operating ones, and the foundation of new joint ventures are the goal to be fulfilled in the near future.

However, the reached level of international cooperation, does not realize to the full the huge potential of the region for international cooperation. A comprehensive and complex approach is needed in order to solve the problems of the Kaliningrad region entailed by the EU enlargement as these problems cannot be dealt with unilaterally. The solution can not be exclusively “Russian” or “European”. It presupposes, as it has already been specified above, a balance and harmonisation of the three groups of interests: Russian (the federal and regional ones) and external (those of the

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