Viktor Romanovsky, Andrei Stepanov and Mikhail Tsikel 1
Kaliningrad is now surrounded by states that are members of both the EU and NATO, the eurozone and the Schengen area. Kaliningrad is relevant to the enlargement of these institutions and the processes of integration. It will be impossible to create a unified Europe without determining the place and role of this Russian enclave in the future European security structure. It is a controversial issue at a time when the people of Kaliningrad are beginning to get a sense of the internal transformations taking place within the accession countries. Poland’s and Lithuania’s adoption of European regulations, particularly with respect to border controls, visas and trade, will directly affect Kaliningrad’s livelihood, freedom of movement, cross-border cooperation and the implementation of transport, energy and environmental projects. For the people of Kaliningrad, these issues are not the stuff of high politics, but of daily life. The region’s social and economic welfare will depend upon finding timely solutions.
The overall opinion amongst the Kaliningrad élite is that EU enlargement should not advantage some, while being a source of problems to others. The emergence of dividing lines and a new ‘Berlin Wall’ would be unacceptable in twenty-first century Europe. At the same time, the case of Kaliningrad can also be viewed as a shared opportunity to create another stable element along the path of Russian integration into the common European economic and social space. It is good news for the region that the subject of sustaining and developing Kaliningrad has become a key part of the political dialogue between Russia and the EU.
The Russia–EU Negotiations on Kaliningrad oblast
Russia and the EU went through difficult and complex negotiations on the free movement of Russian citizens to and from Kaliningrad before reaching a mutually-acceptable understanding at the Russia–EU summit in Brussels in November 2002.
Neither the general public nor the academic community has a clear picture of the negotiations between Russia and the EU on Kaliningrad. Many political scientists and journalists are labouring under the impression that the entire Russia–EU dialogue on the region solely concerns transit issues. Kaliningrad has come to be regarded as a special and unique problem, calling for serious solutions and innovative approaches. This goes some way towards explaining why even apparently technical difficulties concerning transit could be resolved only at the highest political levels in Russia and the EU.
The first point is that those who drafted the Partnership and Cooperation Agreement (PCA) between Russia and the EU were unable to predict the consequences for Russia of EU enlargement. The agreement, which was signed in Greece on 24 June 1994, contains no mention of Kaliningrad oblast. The working bodies established under the PCA (the Cooperation Council and, above all, the Cooperation Committee) were set up in such a way that they were unable to make an adequate contribution to the negotiations on Kaliningrad. The Russia–EU Cooperation Committee for example, comprises nine specialised sub-committees and this reflects the fragmented rather than holistic approach to decision-making on Kaliningrad within the Russia–EU dialogue.
By 1999, both Moscow and Kaliningrad had begun to realise the difficulties that the region would encounter from the EU’s eastward enlargement. This was reflected in the Medium-term Strategy for Development of Relations between the Russian Federation and the EU (2000–10)2. The Strategy aimed at: ensuring the necessary external conditions for the functioning and development of Kaliningrad oblast as an integral part of the Russian Federation and active participant in cross-border and interregional cooperation, taking into account its unique geographical and economic situation; determining the optimum long-term economic, energy and transport profiles of the oblast, to function effectively under the new conditions; developing reliable transport links with mainland Russia; and working towards a special agreement, if appropriate, with the EU safeguarding the interests of Kaliningrad oblast as a subject of the Russian Federation during European Union enlargement and the transformation of the oblast into a pilot region for cooperation between Russia and the European Union in the twenty first century.
In May 2000, the Russian government ratified Russia’s negotiating position with respect to Kaliningrad. By October 2000, Russia had drafted a document on the future of Kaliningrad post EU enlargement but it did not generate any response from Brussels; it was not until 2001 that the EU sought consultation outside the framework of the PCA when initiating discussion on Kaliningrad. Russia itself, however, did not suggest a separate dialogue on issues related to the oblast until the middle of 2001.
Opinions on Kaliningrad oblast’s problems began to be exchanged at Russia–EU summits from 2000 onwards, and in February 2001 a mechanism for in-depth political dialogue was put in place during a visit to Moscow by Chris Patten, External Relations Commissioner of the European Commission and the late Anna Lindh, then Foreign Minister of Sweden who held the presidency of the EU at the time. The need for a special negotiating mechanism to discuss issues pertaining to Kaliningrad oblast had become clear, since the Cooperation Council was too unwieldy to ensure regular and, more importantly, obligatory consultations. Nonetheless, Russia’s European partners rejected President Vladimir Putin’s proposal at the Russia–EU summit in Brussels on 3 October 2001 to establish a special working group on Kaliningrad. Russia was strongly advised to pursue dialogue within the framework of the relevant PCA bodies.
In November 2001, discussion of the Kaliningrad issue was elevated to the level of the Russia–EU Cooperation Committee, where senior officials hold ad hoc meetings and of the Russia–EU Joint Parliamentary Cooperation Committee (PCC) at its regular meetings between parliamentarians on current issues of concern between the EU and Russia. These represented a significant new level in the bi-lateral political dialogue. When the Kaliningrad question was brought before a Cooperation Committee meeting, Russia pressed for future negotiations to be conducted within the framework of a special group. However, the PCC insisted that dialogue should continue within the framework of the PCA, and initiated a special session of the Cooperation Committee in Kaliningrad in spring 2002. This meeting, held in the city of Svetlogorsk on 15 May 2002, did not result in progress. Negotiations reached a stalemate on the main issue, namely the transit of people and goods.
The firm stance adopted by Russia at the Moscow summit on 29 May 2002 effectively spurred the European Council and the PCC to seek more objective forms of dialogue. A format for high-level expert consultations on the transit of people was put into operation with the consent of both sides between July and November 2002. Three rounds of consultations were held in Brussels and Moscow. Sergei Razov, a Deputy Minister for Foreign Affairs, headed the Russian delegation, while the PCC delegation was led by his Danish counterpart, Friis Arne Petersen. The consultations were instrumental to the understanding on transit that was reached at the Russia-EU summit held in Brussels on 11 November 2002. Dmitry Rogozin, Putin’s special envoy on Kaliningrad issues, deserves credit for his considerable efforts between July and November that year.
From 11 November 2002, work began on implementing the ‘Joint Statement on Transit between the Kaliningrad oblast and the Rest of the Russian Federation’, which was issued at the Brussels summit. Once again, negotiations assumed a bilateral form, this time between Russia and Lithuania. The Russian delegation, led by Razov, met with its Lithuanian counterparts on three occasions, in November and December 2002 and in January 2003. The parties succeeded in concluding a new agreement on the movement of people to and from the oblast, reaching a difficult compromise on a transit regime for the period 1 January to 30 June 2003, resolving the issue of an increased consular presence on both sides and concluding readmission talks with Lithuania. It became apparent that consultations on the movement of people using the so-called Facilitated Transit Document scheme should be trilateral (Russia, EU and Lithuania).
The history of the issue shows how difficult solving the Kaliningrad transit problem has been, and highlights how all the parties involved have sought compromises through a process of trial and error. It is possible that discussion of the transit of goods will take a similar course. It has proved a huge additional task to developing regulations acceptable to Russia on the transit of goods over the new EU border into and out of Kaliningrad (due to be completed by 1 May 2004). Initial attempts to find common ground within the framework of the Cooperation Committee have been unsuccessful. A separate negotiating mechanism is required; it is important that it should be trilateral. Meanwhile, Russia and the EU have approached the issues of readmission and fisheries from the standpoint that appropriate agreements must be concluded from the outset. Work is under way to involve representatives of the oblast in these negotiations.
What have been the outcomes of this multi-layered process of negotiations? It was not possible to formulate an official legal stance on the travel and transit of people through Lithuania before 16 April 2003 when the accession agreements were signed. However, the Russia-EU consultation process on the Kaliningrad issue has not been fully synchronised with the EU accession negotiations of Russia’s neighbours. Nevertheless, a positive development was the adjustment of the Schengen visa regime to fit the unique situation arising from Kaliningrad’s enclave position. In the opinion of the office of the President’s plenipotentiary to Kaliningrad, the transit agreement is an example of true partnership between the EU and Russia. In amending the Schengen visa rules in order for compromise to be reached the European Commission took a huge step since it works on the basis of consensus and is not generally inclined to adopt new forms of cooperation rapidly. Through working together, Russia and the EU should be able to overcome all the obstacles to visa-free transit for short-stay business and tourist travel within the next seven to ten years. This was discussed at the February 2003 meeting between Russian President Vladimir Putin and Romano Prodi, the President of the European Commission.
The economic viability of Kaliningrad
The problems engendered by the eastward enlargement of the EU and of NATO are not confined simply to the movement of people and goods. Russia’s concerns with respect to Kaliningrad also include such issues as energy supply to the region, the implementation of environmental measures and the expansion of transport and border-control infrastructure. All these matters directly concern the economic viability and development of the oblast.
It is important that the actual state of affairs, together with Russian interests and the potential for Russian involvement in common European processes, should all be taken into account while the conceptual foundations of the EU’s new neighbourhood policy are being put in place. The attempts by Brussels and some of the accession countries to develop new policies with respect to their future neighbours – the direct neighbourhood concept, the so-called Eastern Dimension, the EU’s Wider Europe communiqué – are all of concern to Kaliningrad. The bulk of responsibility for solving the region’s problems lies, of course, with Russia.
Of all the border regions, Kaliningrad is highest on the Russian government’s list of priorities. The attention being paid to the region is due to the enlargement of the EU since it will impact on Kaliningrad’s development. Thanks to the coordinated measures taken by the federal government and the Kontrabandisty administration, the social and economic life of the region has noticeably improved. The positive changes include dynamic industrial development, a significant increase in industrial output and the development of transport and energy systems. The overall unemployment rate has fallen, there has been an (albeit small) increase in general income levels, and a middle class is emerging.
The president, the State Duma and the Russian government have repeatedly sought to address the region’s problems, for example, through a special federal programme for regional development. This runs until 2010 with the goal of creating the conditions for stable social and economic development within the region. This programme includes major strategic projects in the fields of energy, transport, telecommunications and the environment. As a result, there are plans to equip the region with its own source of electrical energy by building a thermoelectric power station in the city of Kaliningrad. Construction work began in October 2002 and the start-up of the first power unit, with a capacity of 450kW, is scheduled for 2005. Russia proposes to include this project in its energy dialogue with the EU.
The drafting of a new version of the Law on the Special Economic Zone (SEZ) in Kaliningrad is an important part of federal policy on the region. When the original law on the SEZ was adopted in 1996, its aims and objectives were dictated by the need to maintain a certain standard of living in Kaliningrad and to ensure the region had the essential goods and services, given its isolation from the Russian mainland. On the whole, the existing law has met these objectives. The new law (expected to be adopted by the Federal Assembly in 2004) should seek to stimulate, rather than compensate. It should be geared towards establishing an effective working basis for economic relations, which will ensure that Kaliningrad rapidly develops as a pilot region for Russian-European economic integration. It should be possible to achieve this by liberalising economic activity in the region; ensuring stable and durable operating terms within the SEZ; applying European regulations and standards where this may enable the local economy to be more competitive; encouraging the production and export of goods to European countries; and setting up effective financial institutions.
The Common European Economic Space with Russia (CEES) would facilitate these economic goals. The Russia-EU summit in May 2001 established a joint High-Level Group on a CEES and decided its overall aim should be to establish privileged relations between the EU and Russia, particularly for greater legislative proximity and regulatory convergence, as well as to promote trade and investment. Regulatory convergence is an ambitious and desirable goal, which should bring significant benefits both to the EU and Russia, not least because economic actors will be able to operate according to common rules and under identical conditions.
At the moment the onus is on the Russian state to facilitate a more condusive business environment for example by refraining from undue interference in economic and business affairs. The administrative obstacles that businesses may encounter in the SEZ should be reduced. In this regard, there is still a lot of room for efforts by federal government bodies as well as by the regional administration and municipal authorities. At the same time, the state’s role should be strengthened in establishing such basic market conditions as protection of property rights, fair competition, dialogue between the authorities and the business community, and social partnership.
Progress on these points will make the region more attractive to investors. Russian and foreign businesses are beginning to set up in Kaliningrad oblast. Examples of this are a food-production plant, a project involving European Bank for Reconstruction and Development (EBRD) funding and private capital from Croatia. By the end of 2003, foreign investment amounted to almost $28m. Kaliningrad could be a convenient base for Western companies wishing to expand into the rest of Russia. In this sense, the region makes an ideal showcase. The oblast’s unique potential and resources might appeal to investors from the countries of the Baltic Sea region, particularly Germany, Denmark, Sweden, Poland and Lithuania.
Negative economic consequences
EU enlargement will not only open up new possibilities for Kaliningrad’s economic development, but it will also create new problems. The more negative economic scenario is especially likely in the short term before Russia makes significant progress towards convergence with EU norms and before it attracts more new investment. Kaliningrad will be cut off from the Russian mainland by high travel costs and obstacles arising from internal EU regulations, such as the strict environmental rules regarding transport. Second, despite its proximity, it will be isolated from Europe by the visa system. As a result, economically the region could lag still further behind its neighbours and other parts of Russia; the region’s attractiveness to investors could decline; and the amount of state spending required to support the region’s economy could increase. Extensive EU support for Poland and Lithuania after accession will also put Kaliningrad’s neighbours in a more favourable position in terms of attracting investment and dealing with environmental problems and infrastructure development. The immediate negative consequences are likely to be a possible reduction in the volume of exports from local businesses to Poland and Lithuania once they have adopted EU regulations; a fall in both the volume of imports and the number of businesses involved in import activities due to new customs regulations and tariffs imposed by neighbouring states; and a decrease in the volume of cross-border trade.
The increasing disparity between the level of social and economic development of Kaliningrad oblast and that of its neighbours, Lithuania and Poland, will have far-reaching consequences. The region will be a so-called ‘double periphery’, in both economic and social terms following Poland’s and Lithuania’s accession to the EU.
Without significant external support, it will not be easy for Kaliningrad oblast to develop. If Russia is prepared to make significant additional outlays to stimulate the development of its most western territory, then the EU should also set up special financial instruments to support the region. It would be extremely beneficial for Kaliningrad if the EU were involved in the implementation of projects in the federal programme, or in major cross-border infrastructure projects.
It is crucial that transportation infrastructure is modernised, developed and better integrated with Europe to facilitate trade. Since 2000, there has been a pronounced increase in goods traffic. In 2002 alone, the region’s ports handled 4.1 million tons (i.e. 70.7%) more goods than in the previous year. Kaliningrad should be integrated as soon as possible into the pan-European transport corridor network that is emerging in the Baltic region since two of the corridors pass through Kaliningrad.3
Kaliningraders hope that increased Tacis funding from the EU will be made available to improve infrastructure in the oblast. It is to be hoped that the procedures and resources of the EU funding instruments Tacis (aimed at Russia in this case) and Interreg (aimed at the EU accession states, Poland and Lithuania, in this case) will be consolidated for the purposes of facilitating cross-border cooperation.
Indeed, the EU promised to ‘continue to support technically and financially Russian efforts to promote the economic development of the Kaliningrad Region and to strengthen cross-border cooperation along the borders of the enlarged EU with Russia’ at the EU-Russia summit on 11 November 2002.4 A joint statement issued by Russia and the EU at the close of the summit also declared that the development of Kaliningrad is important for the overall development of the wider Baltic Sea region. The European Commission proposed setting up a special development fund for Kaliningrad. This would enable the region’s economy to develop by, among other things, generating further investment from EU countries, imposing international standards on potential investment projects and making financial operations more transparent.
Looking Forward
Kaliningrad’s unique position and attendant problems present Russia and the EU with opportunities to explore new and innovative ways of solving the range of difficulties. The pursuit of long-term partnership with the EU is a strategic priority for Russia and Kaliningrad is set to become a pilot region for this partnership in action. The region may serve as a centre where effective mechanisms for cooperation between Russia and the EU are developed, for example with respect to the pan-European transport network, a Russian–European economic space and a joint security system.
Although these pilot forms of partnership might overstep existing agreements and regulatory frameworks, this is no reason to toss them aside. Policy practitioners and academics should look for concrete ways of furthering the idea of Kaliningrad as a pilot region for true partnership. A joint Russian–EU action plan on the all-round development of Kaliningrad should be drawn up, and a permanent Russian-European expert group established. Now is the time to make the most of the real opportunities for turning the task of sustaining and developing Kaliningrad into a concrete example of how Russia and the EU are able to solve problems in a spirit of trust, genuine partnership and neighbourly relations. Kaliningrad should not become a burden upon relations between Russia and the EU. On the contrary, we should seek new ways of cooperating in the context of enlargement.
Footnotes
1 Viktor Romanovsky is Head of Department for International Contacts for Kaliningrad oblast Administration, Andrei Stepanov is Deputy Plenipotentiary of the Russian President to the North-West Federal District and Mikhail Tsikel is First Deputy Governor of Kaliningrad oblast. Mr Romanovsky wrote the section on the transit negotiations. The rest of the paper draws on the comments of Mr Stepanov and Mr Tsikel on Kaliningrad's problems and prospects in the context of EU-Russia relations.
2 http://europa.eu.int/comm/external_relations/russia/russian_medium_term_strategy/
3 The spur route of Via Baltica (Corridor I) runs from Riga to Kaliningrad and on to Gdansk while Corridor IX runs from Kaliningrad to Kaunas in Lithuania and on through Belarus, Ukraine, Moldova, Romania, Bulgaria to Greece.
4 Joint statement of the European Union and the Russian Federation on Transit between Kaliningrad Region and the Rest of the Russian Federation, available on line at: http://www.eur.ru/en/images/iText_pict/8/sum63.doc 
