Kaliningrad: model of cooperation with EU?

On Saturday, Russia denied that nuclear weapons had been moved to the region.

A tiny Russian enclave on the Baltic Sea, the Kaliningrad region has slumbered for the past 10 years in relative isolation, seemingly forgotten by both Moscow and the West.

But reports last week that Moscow has moved short-range nuclear weapons here serve as a reminder that Kaliningrad is not merely an anomaly on the map of Europe, but a Russian outpost of strategic importance.

Although President Vladimir Putin on Saturday flatly denied Russia had broken its pledge to keep the region nuclear-free, the reports have caused consternation among the three Baltic nations - Latvia, Lithuania, and Estonia - which are striving to enter NATO as quickly as possible.

Formerly the westernmost tip of the USSR, Kaliningrad grew out of what was known for centuries as Konigsberg, a town founded in the 13th century by German knights. During and after the Middle Ages, the city blossomed as a member of the Hanseatic League, a prosperous northern European trade association. Seized by the Red Army at the end of World War II, it was renamed after a Stalin-era leader.

Kaliningrad became a Russian enclave after the 1991 break-up of the Soviet Union. Surrounded by neighbors striving to leave Moscow's orbit, Kaliningrad was separated by three borders from Russia proper.

Once off-limits to foreigners because of the strong Soviet military presence - including the Baltic Fleet - Kaliningrad opened to the outside world with the collapse of Communist rule.

Russian entrepreneurs dreamed of capitalizing on Kaliningrad's unique position to turn it into a "Hong Kong on the Baltic." Despite the region's status as a "special economic zone," that vision has largely failed.

Should reports on the deployment of nuclear weapons prove true, they would confirm suspicions both here and abroad that Moscow cares more about turning the region into the first redoubt against an eastward expansion of NATO, rather than a model of economic success.

While NATO aspirants in the region are casting a worried look at Kaliningrad, the European Union has likewise shown a new interest in mother Russia's lost child, which is twice as far from Moscow as it is from Berlin. As Kaliningrad's two neighbors, Lithuania and Poland, stand on the threshold of deeper Western integration, both local and Western leaders are becoming aware that the region could soon become an island of poverty - or a prototype of cooperation between the EU and Russia.

Kaliningraders, for their part, are more concerned with their economic future than the debate over the alleged presence of nuclear weapons.

"Kaliningrad could be the best location in Russia - paradise. But we must be open to Europe like Poland or Lithuania," says Viktor Hoffmann, a successful local businessman. "Kaliningrad could be a bridge, the warehouse for all of Russia. The future lies in a free-trade zone, but it's not working."

Progressives here are placing their bets on Adm. Vladimir Yegorov, who commanded the Baltic Fleet until being elected as the region's governor in November. Frequent visits abroad have shaped Admiral Yegorov's liberal economic views, and many here hope that he will use his influence in Moscow to win the secure status that the region needs to develop.

In the past decade, the once hermetically sealed region has opened up. Yet the seemingly arbitrary nature of Russian law has deterred foreign investors from taking advantage of Kaliningrad's status as a "special economic zone."

Little seems to distinguish Kaliningrad city from any other provincial town in the Russian heartland: shabby gray apartment blocks sit among colorful bits of Western-style advertising, crumbling buildings of the pre-Soviet era, and a centrally located Lenin statue. Businesses from neighboring Lithuania are the most active in Kaliningrad, but their investments only total $10 million, most of which has flowed into a caramel factory and a sausage plant.

Mr. Hoffmann, an entrepreneur who buys decommissioned ships from the Baltic Fleet and sells the scrap to the West, says that the constantly shifting legal situation is scaring off his German business partners. The region's most lucrative industry, Hoffmann claims, is the production of cigarettes and vodka that are smuggled over the border to Poland and Lithuania.

"Kaliningrad can only be as good as Russia's laws," says Sergei Henke, director of the German-Russian House, a central meeting place for West and East. "One could do a lot here - I'm thinking of Hong Kong. The region could be [Russia's] gateway for Western technology and goods."

Mr. Henke rattles off Kaliningrad's advantages: the only ice-free port in western Russia; the proximity to German markets; the small size of the territory.

The flip side is that two countries - Lithuania and Belarus - separate Kaliningrad's port from Russia proper. The closeness to more-developed markets has made the region heavily dependent on imports. The city's hinterland, roughly the size of New Jersey, has been unable to compete with cheap agricultural products from its larger neighbors.

As a reaction to Western competition, the previous administration of Gov. Leonid Gorbenko forced importers to buy government-set quotas - in effect a hidden tax. Kaliningrad began to stagnate in self-imposed isolation, mostly to the benefit of the shadow economy.

"The reputation became one of a criminalized region. It's one of the merits of the outgoing administration," Alexander Songal, a former head of the region's Department for External Relations, says bitterly.

"The crucial problem is the relation we have to Moscow. Our first task will be to establish a framework of relations with the center," says Mr. Songal. "The region is in a peculiar situation and needs a customized structure." A first roundtable meeting in Moscow is scheduled to take place later this month.

From Moscow's perspective, Kaliningrad is only one of 89 federal units - and a potential source of economic competition. People here grumble that politicians in the capital are ignorant, even indifferent, about their region.

"Moscow has no interest in developing Kaliningrad especially. It wants one level of development in all of Russia," says Ricardas Slepavicius, a Lithuanian diplomat based in the enclave. Yet, he adds that "Kaliningraders don't compare themselves with [Russian regions like] Tambov or Kursk, they compare themselves with Lithuania or Poland."

Today, Kaliningraders are more likely to pop across the border for a day trip than make the long journey back to the motherland. Both neighbors have made visa-free travel possible for residents of the enclave. Yet as Poland prepares to join the EU in the next few years and Lithuania hurries in the same direction, the two countries must abolish their de facto open borders.

"Kaliningrad is an exception by geography. And through EU enlargement, it will become a Russian island in the EU," says Mr. Slepavicius. "Naturally, Kaliningrad needs a special status."

The Catch-22 is that if Kaliningrad succeeds as a special economic zone, Russia will have to limit internal migration to the region. But if it continues to falter, there is the risk of separatism.

The majority of Kaliningrad's voters evidently think Yegorov can prevent the region's isolation. Rather than increase tensions with the Baltic Fleet, NATO's presence has so far appeared to increase the spirit of cooperation. Should Lithuania - next in line for NATO membership - join the alliance, Kaliningrad would become a Russian enclave within the military bloc.

"The main question is not if Lithuania is in NATO, but what kind of relation with NATO Moscow has," says Capt. Anatolii Lobskii, with the Baltic Fleet. "It's impossible to be overly open."

Yegorov, who was seen as the Kremlin's favorite in the elections, intends to turn Kaliningrad into a "pilot region" for relations between the West and Russia. The enclave's Scandinavian neighbors have similar intentions. This year, the rotating EU presidency went to Sweden, a proponent of greater cooperation with Kaliningrad.

(c) Copyright 2001. The Christian Science Publishing Society

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