Despite Kaliningrad’s apparently advantageous position on the Baltic coast, its agricultural and industrial potential, and its status as a special economic zone, the vision of turning Kaliningrad into a Baltic Hong Kong has so far largely failed. According to EU entrepreneurs, the seemingly arbitrary nature of Russian law has deterred foreign investors from taking advantage of Kaliningrad ’s position. Even though foreign direct investment in Kaliningrad is higher than in Russia as a whole, it is still much lower than in the neighboring Baltic countries. In addition, problems abound in the Russian enclave. Residents of Kaliningrad are 65 times poorer than EU citizens, and also considerably poorer than people living elsewhere in Russia. Almost one-third of the population lives below the subsistence level. Poverty is aggravated by economic isolation and one of the highest AIDS and tuberculosis rates in Russia. In addition, Kaliningrad is a center of organized crime, smuggling, drug trafficking, and prostitution. Massive environmental pollution is another endemic feature of the enclave. After St. Petersburg, Kaliningrad is the biggest single polluter of the Baltic Sea, because of its high levels of nuclear waste and water and air pollution. Instead of improving, the situation seems to be deteriorating because of endemic corruption and political stalemate.

With major parts of the Russian Baltic Fleet still based there, Kaliningrad will also become a Russian military outpost completely surrounded by EU and NATO territory if Lithuania is invited to join the defense pact at the Prague summit in 2002, as is widely expected.

With the future EU accession of Lithuania and Poland, Kaliningrad’s long list of problems will also become EU problems, given the obvious cross-border implications of crime, pollution, and health issues. The EU is extremely concerned about migration flows once the rules regarding free cross-border movement of citizens in member states are applied in the region. Currently some 1 million Kaliningrad Russians enjoy visa-free access to Lithuania, but not for long. By 2003 at the latest, Lithuania will introduce a special visa regime for the residents of Kaliningrad.

Luckily for the city, Kaliningrad has recently become the linchpin of the new ambitions to deepen EU-Russian cooperation, which offers some hope of improving the situation. Discussions on Kaliningrad’s future have already taken place in various multilateral settings and arenas, including the high-level EU-Russia summit held in Moscow in May 2001. The document "The European Commission’s Communication to the [European] Council—the EU and Kaliningrad," issued in Brussels in early 2001, outlines some of the most urgent issues as well as the corresponding proposals (see http://europa.eu.int/search/s97.vts). In addition, the agreements with Poland and Lithuania have taken up these issues, which were also partly addressed by the EU’s new Northern Dimension Action Plan. The following suggestions were put on the table:

The Kaliningrad issue certainly upgraded Lithuania’s position in relation to Russia, but also in relation to the EU, not only because Lithuania provides infrastructure and energy links between Kaliningrad and Russia, but also because out of all the Baltic countries, it has the best relations with Russia. (Unlike Estonia and Latvia, it did not inherit a large Russian-speaking population.)

To date Kaliningrad has received €15 million of TACIS assistance, with another €15 million in the pipeline. (The EU’s TACIS program provides assistance for the newly independent states and Mongolia.) Planned projects include improving Kaliningrad ’s border crossing, waste management, and health service; developing its port facilities; supporting innovative small and medium enterprises; and promoting trade and investment. Current and future EU member states are also providing support, mainly in areas such as administrative and health reform and environmental protection. This comes on top of bilateral funds from the Nordic countries. The new EU focus is symbolized by the opening of a TACIS office in Kaliningrad and the preparation of a TACIS study on the energy needs of the region, to be launched during 2001. Nevertheless, the EU will need to find ways of providing Kaliningrad with development aid beyond the fairly limited ambit of TACIS.