Towards the Kaliningrad partnership in EU-Russia relations

RECEP, 27 April 2005

Area 15,100 sq. km Population 950 000 Distance from Moscow 1289 km Major cities

Kaliningrad 428 000 Sovetsk 50 000 Chernyakhovsk 43 000 Baltiysk 31 500 Gusev 28 000

Share in the RF total: Area 0,1% Population 0,7% GDP 0,4% Retail trade 0,5% Exports 0,4% Imports 3,7% FDI 0,1%

Two phases of research

Phase 1 (November 2004 – April 2005) Request from the Administration of the President, study the Kaliningrad region in the context of EU-Russia

relations, build scenarios

Phase 2 (starting April 2005) Request from the State Duma scenarios of the socioeconomic development

Phase 1: Report outline1. Introduction (Christer Pursiainen)2. Scenarios (Sergei Medvedev)

Russian Scenarios EU Scenarios EU-Russia Scenarios Kaliningrad Scenarios

3. Road Maps (Christer Pursiainen) Towards a Common Economic Space The EU-Russia Partnership Road Map The Kaliningrad Partnership Road Map

4. Legal Instruments (Mark Entin)5. Statistics and Bibliography (Marina Cherkovets)

Europeanscenarios

Russian scenarios

RE1

RE2

RE3

K1

K2

K3

Kaliningrad PartnershipKaliningrad

Road map

E1

E2

E3

R1

R2

R3

Legal instruments

Research methodology

Scenario template

StatistRegulated

LiberalGlobal

Centralized/Integrated

Decentralized/Networked

Economic axis

Poli

tica

l axi

s

Russian scenarios

StatistRegulated

LiberalGlobal

Centralized/Integrated

Decentralized/Networked

R1: Administrative Modernization

R2: Liberal Modernization

R3: Bureaucratic Capitalism

EU scenarios

StatistRegulated

LiberalGlobal

Centralized/Integrated

Decentralized/Networked

E1: Global Actor

E2: NetworkEurope

E3: FortressEurope

Russia-EU scenario matrix

Russia

Europe

Liberal Modernization

Administrative Modernization

BureaucraticCapitalism

Global Actor PartnershipMuddlingThrough

Cold Peace

Network Europe

MuddlingThrough

MuddlingThrough

Cold Peace

Fortress Europe

Cold Peace Cold Peace Cold Peace

Kaliningrad in Russia-EU scenarios

Russia

Europe

Liberal Modernization

Administrative Modernization

BureaucraticCapitalism

Global ActorKaliningrad partnership

Stagnation/Preferences

Outpost

Network Europe

Stagnation/Preferences

Stagnation/Preferences

Outpost

Fortress Europe

Outpost Outpost Outpost

Kaliningrad in Russia-EU scenarios

Russia

Europe

Liberal Modernization

Administrative Modernization

BureaucraticCapitalism

Global ActorKaliningrad partnership

Stagnation/Preferences

Outpost

Network Europe

Stagnation/Preferences

Stagnation/Preferences

Outpost

Fortress Europe

Outpost Outpost Outpost

Kaliningrad partnership

Guidelines for Kaliningrad Partnership

Integration into the European economic space Creating the institutional base of cooperation Modifying the SEZ regime Improving federal and regional governance Improving business climate and lowering administrative

barriers Development of infrastructure Export incentives Supporting small and medium business

Impact of Kaliningrad Partnership

From being a mere corollary, the Partnership can become a shaping factor of EU-Russia relations

Forward implementation of European Economic Space Adaptation by Russia of part of the acquis Improving EU-Russia compatibility through a common interface

Promoting cooperative regionality and cross-border networks

Linkage to existing regional institutions (CBSS, NCM)

Tapping into the existing EU instruments (Northern Dimension, INTERREG, ENI) without creating new institutions and ad-hoc structures

Kaliningrad Partnership Road Map• Creating a joint EU-RF list of policy priorities for Kaliningrad.

• Done in connection with drafting the third Northern Dimension Action Plan (2007-2009), e.g., in the form of ND Kaliningrad Partnership

• Connecting to regional organizations (CBSS, the Nordic Council of Ministers)• Detailing policy priorities, developing concrete projects at regional and local levels by local governments, businesses and NGOs from Kaliningrad and the larger Baltic Sea region

Securing linkage between the local and regional projects and the financial instruments: the European Neighborhood Instrument (ENI, replacing TACIS in 2007), INTERREG programs, Euroregions, IFIs (EBRD, NIB etc.)

• Establishing Kaliningrad Partnership • Project implementation• Project evaluation• New action plan for 2010-2012

2005

2006

2007

2010

2009

Legal Instruments

Comparing legal models for the development of Kaliningrad Selecting an optimal model

Various methods for legal regulation Using the newly adopted Russian legislation

Concession Law Anti-monopoly Law Tax Law Customs Law Legal regulation of Foreign Economic Activity Law on Special Economic Zones

Phase 2: Research Issues

Study of the shaping factors EU enlargement New Russian law on the SEZ (from 2006 on) The forthcoming Common Economic Space

Scenarios of socioeconomic development Desired outcomes Road maps Economic/legal instruments

Appendix: Kaliningrad Stats

Population Dynamics

-10

-8

-6

-4

-2

0

2

4

1990 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004%0

Russian Federation

North-West Federal District

Kaliningrad Region

-2

0

2

4

6

8

10

12

14

16

1990 1995 1996 1997 1998 1999 2000 2001 2002

%0

Russian Federation

North-West FederalDistrictKaliningrad Region

Natural change, per 1000 population (‰) Net migration, per 1000

population (‰)

Population Dynamics

Life expectancy at birth Infant mortality rate (infant deaths under 1 year per 1000 live births)

61

62

63

64

65

66

67

68

69

70

1990 1995 1996 1997 1998 1999 2000 2001 2002 2003

year

s

Russian Federation

North-West Federal District

Kaliningrad Region

8

10

12

14

16

18

20

1990 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

%0

Russian Federation

North-West Federal District

Kaliningrad Region

Economy

Unemployment rate GRP index (% to the previous year)

0

2

4

6

8

10

12

14

16

18

1992 1995 1996 1997 1998 1999 2000 2001 2002 2003

%

Russian Federation

North West FederalDistrictKaliningrad region

70

80

90

100

110

120

130

1997 1998 1999 2000 2001 2002

%

Russian Federation

Kaliningrad region

Standard of living

Changes in real monetary income, % change on previous year

Change in real wage, % change on previous year

50

60

70

80

90

100

110

120

130

1995 1997 1998 1999 2000 2001 2002 2003

%

Russian Federation

Kainingrad region

50

60

70

80

90

100

110

120

130

1995 1997 1998 1999 2000 2001 2002 2003

%

Russian Federation

Kainingrad region

Industry

Real industrial production index, % on the previous year

Goods Production Index

50

60

70

80

90

100

110

120

130

140

1990

1995

1996

1997

1998

1999

2000

2001

2002

2003

1H20

04

%

Russian Federation

Kaliningrad

0

100

200

300

400

500

600

700

1995 1996 1997 1998 1999 2000 2001 2002 2003

% Energy production

Oil and gascondensatePassenger cars

TV sets

Paper

Meat

Fish and seafood

Canned fish

Investment Climate(Kaliningrad in the Rating of Investment Potential and Risk among 89 regions of the

Russian Federation)

Investment Potential Investment Risk

Rating 2003-2004 37 22

Change in rating

2003-2004 to 2003-2002

-2 -9

2003-2004 to 1998-1999

5 -17

Rating of the components

Labour potential 52 Legal risk 45

Consumption potential 58 Political risk 68

Production potential 53 Economic risk 29

Financial potential 52 Financial risk 6

Institutional potential 29 Social risk 12

Innovation potential 54 Criminal risk 72

Infrastructure potential 3 Environmental risk 36

Natural resources potential

40

Investment Climate

Real index of investment in fixed capital, % change to the previous year

Investment in fixed capital

0

20

40

60

80

100

120

140

160

180

1990 1995 1996 1997 1998 1999 2000 2001 2002 2003

%

Russian Federation

North-West Federal District

Kaliningrad region

0,0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

0,8

1990

1995

1997

1998

1999

2000

2001

2002

2003

%

Kaliningrad %in the RF total

Foreign Investment

Foreign investment in the Kaliningrad Region

Direct Foreign investment in the Kaliningrad Region

16

23,5

11,3

39,4

18,3 19,1

24,6

47,7

56,2

0

10

20

30

40

50

60

1995 1996 1997 1998 1999 2000 2001 2002 2003

US

D m

ln

0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

0,8

%

Kainingrad region

% of the RF total

12,7

21,5

10,69,2

4,1

6,6

3,2

5,9

14

0

5

10

15

20

25

1995 1996 1997 1998 1999 2000 2001 2002 2003

mln

US

D

External Trade

Machinery&parts

45%

Other goods

16%

Metals7%

Petrochemicals

8%

Foodstuffs

24%

Machinery parts

16%

Oil&oil products

51%

Other goods

22%

Wood&furniture11%

Goods structure of Kaliningrad’s import and export (first half of 2004)

Import Export

External Trade

Import and Export Dynamics in Kaliningrad Region

Trade turnover between Kaliningrad region and Lithuania in 1998–2003 (mln USD)

0

500

1000

1500

2000

2500

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

mln

US

D

Import

Export 167,5

60,6 67,4

103,8

150,7

184,8

18,58,4

25,115,1 13,25 16,6

149

52,242,3

88,7

137,4

168,3186

69

92,5

118,9

163,9

201,4

0

50

100

150

200

250

1998 1999 2000 2001 2002 2003

Import

Export

Balance

Turnover