Towards the Kaliningrad partnership in EU-Russia relations

1. Towards the Kaliningrad partnership in EU-Russia relations RECEP, 27 April 2005

2. 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%

3. 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

4. Phase 1: Report outline • Introduction (Christer Pursiainen) • Scenarios (Sergei Medvedev) • Russian Scenarios • EU Scenarios • EU-Russia Scenarios • Kaliningrad Scenarios • Road Maps (Christer Pursiainen) • Towards a Common Economic Space • The EU-Russia Partnership Road Map • The Kaliningrad Partnership Road Map • Legal Instruments (Mark Entin) • Statistics and Bibliography (Marina Cherkovets)

5. Research methodology European scenarios Russian scenarios R1 R2 R3 E1 E2 E3 RE1 K1 RE2 K2 RE3 K3 Kaliningrad Partnership Kaliningrad Road map Legal instruments

6. Scenario template Centralized/ Integrated Economic axis Statist Regulated Liberal Global Political axis Decentralized/ Networked

7. Russian scenarios Centralized/ Integrated R3: Bureaucratic Capitalism R1: Administrative Modernization Statist Regulated Liberal Global R2: Liberal Modernization Decentralized/ Networked

8. EU scenarios Centralized/ Integrated E3: Fortress Europe E1: Global Actor Statist Regulated Liberal Global E2: Network Europe Decentralized/ Networked

9. Russia-EU scenario matrix

10. Kaliningrad in Russia-EU scenarios

11. Kaliningrad in Russia-EU scenarios Kaliningrad partnership

12. 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

13. 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

14. 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 2005 • 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 2006 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.) 2007 2009 • Establishing Kaliningrad Partnership • Project implementation • Project evaluation • New action plan for 2010-2012 2010

15. 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

16. 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

17. Appendix: Kaliningrad Stats

18. Population Dynamics Natural change, per 1000 population (‰) Net migration, per 1000 population (‰)

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

20. Economy Unemployment rate GRP index (% to the previous year)

21. Standard of living Changes in real monetary income, % change on previous year Change in real wage, % change on previous year

22. Industry Real industrial production index, % on the previous year Goods Production Index

23. Investment Climate(Kaliningrad in the Rating of Investment Potential and Risk among 89 regions of the Russian Federation)

24. Investment Climate Real index of investment in fixed capital, % change to the previous year Investment in fixed capital

25. Foreign Investment Direct Foreign investment in the Kaliningrad Region Foreign investment in the Kaliningrad Region

26. External Trade Import Export Goods structure of Kaliningrad’s import and export (first half of 2004)

27. External Trade Trade turnover between Kaliningrad region and Lithuania in 1998–2003 (mln USD) Import and Export Dynamics in Kaliningrad Region