Doc. 9524

15 July 2002

Ensuring a prosperous future for the Kaliningrad Region: the need for European solidarity

Report

Committee on Economic Affairs and Development

Rapporteur: Ms Sigita Burbienė, Lithuania, Socialist Group

Summary

As the European Union enlarges East, the Kaliningrad Region of the Russian Federation - situated between Lithuania and Poland and separated from the rest of Russia – faces many challenges that call for European solidarity and special attention on the part of the Russian Federal authorities as well as the neighbouring states, the European Union, the Council of Europe and other institutions, including in the financial field.

Among the recommendations made in the report is further improvement in the functioning of Kaliningrad’s Special Economic Zone in order to promote new enterprises and investment, not least against the background of Russia’s future membership of the World Trade Organisation.

Furthermore, says the report, all parties concerned must find mutually acceptable solutions to the issue of the movement of people and goods to and from the Kaliningrad Region through Lithuania and Poland. Finally, multilateral aid agencies need to better co-ordinate their efforts to finance projects in Kaliningrad together with the Russian regional and federal authorities. EU enlargement, the report concludes, should be seen as a “window of opportunity” not only for the Kaliningrad Region, but also for the overall stability and prosperity of the Baltic Sea region and for increasingly close relations between Russia and the European Union.

I.        Draft resolution

1.        As the European Union undergoes enlargement, the economic, social, public health and environmental problems of the Russian Region of Kaliningrad - situated between Lithuania and Poland and separated from the rest of the Russian Federation – are becoming acute. It is now for the member states of the Council of Europe – including those belonging to the European Union – to do their utmost to ensure that the situation of the Kaliningrad Region be rapidly improved in close co-operation between all parties concerned. Kaliningrad’s unique geographical position constitutes a singular opportunity for Europe to build economic prosperity and political stability in the Baltic Sea Region and beyond.

2.       The Assembly welcomes the efforts of the Russian Federation to reduce the importance of the military sector in the Kaliningrad Region economy and to transform the latter through innovative steps such as the establishment of a Special Economic Zone (SEZ). It believes that legal provisions governing the functioning of the SEZ could be further improved in order to stimulate entrepreneurial activity in the Region, to attract more foreign direct investment, to increase the competitiveness of locally produced goods and services and to permit the region to share fully the benefits of the Russian Federation’s future membership of the World Trade Organisation. Every effort must be made to preserve the viability of the SEZ, such as by defining more clearly the division of competences between the federal and regional authorities, and by considering to establish a federal agency for the development of the SEZ.

3.       The Assembly strongly supports multilateral efforts to promote regional co-operation involving the Kaliningrad Region, such as those undertaken in consultations between the European Union, the Nordic Council, the Council of Baltic Sea States and the Baltic Assembly on the one hand and the Russian Federation on the other, as well as in direct contacts between the Kaliningrad Region and the neighbouring countries of Lithuania and Poland. It encourages the Council of Europe, the European Union and the Nordic Council to establish, at the earliest opportunity and with the approval and assistance of the Russian Federal authorities, their information offices in Kaliningrad. Furthermore it encourages the opening or expansion, as the case may be, of the consulates of Lithuania and Poland in the Kaliningrad Region of Russia and the opening or expansion of Russian consulates in Lithuania and Poland, on the basis of a common agreement and as soon as possible.

4.        With the approaching accession of Lithuania and Poland to the European Union, it is becoming urgent for all parties involved to reach a mutually acceptable solution as regards the movement of persons and goods to and from the Kaliningrad Region through the territories of Lithuania and Poland. Taking into account the existing economic and cultural ties as well as the human contacts between Lithuania, Poland and the Kaliningrad Region of the Russian Federation, all parties should be ready to participate in such discussions on the understanding that the agreements reached should be compatible with the high standards of the Council of Europe and international agreements.

5.       The Assembly calls on the European Union and its member states to assist the authorities of the countries concerned in preparing for the issuance, in due course, of multi-entry long-term visas at reasonable cost, with the possibility of their being made gratuitous for students and young people. It also invites the Russian federal authorities to facilitate the issuance of passports valid for foreign travel to its citizens, in particular those residing in the Kaliningrad Region and asks the EU to provide financial assistance toward this process. This would also serve to promote cross-border economic co-operation.

6.       The Assembly calls for an upgrading of the physical infrastructure and procedures at Kaliningrad border crossings and asks the European Union to enhance its assistance to the federal and Kaliningrad authorities in this field.

7.       The Assembly welcomes the ambitious Targeted Federal Programme for the Development of the Kaliningrad Region up to 2010 elaborated by the Russian Government and hopes that the Russian federal authorities, as well as the Kaliningrad administration and Duma, will ensure the allocation of adequate budgetary funds for the implementation of this Programme in line with commitments. In view of Kaliningrad’s pronounced dependency on imported energy and raw materials and its need to develop international trade, the Assembly considers the development of its energy and transport sectors to be of particular importance.

8.       The shortage of investment in the Kaliningrad Region, aggravated by decades of under-investment, is a major brake to its development. The Assembly therefore asks the European Bank for Reconstruction and Development and the European Investment Bank to consider establishing, jointly with the federal and Kaliningrad authorities and the Region’s business sector, a multilateral insurance fund for the protection of investment within the framework of the SEZ and the Target Federal Programme. It also hopes for a speedy conclusion of the negotiations for treaties on the protection of investment and on the avoidance of double taxation between the Russian Federation on the one hand and Lithuania and Poland on the other, with special reference to the Kaliningrad Region.

9.       The standard of living in the Kaliningrad Region is still substantially below that of the neighbouring states. Multilateral aid agencies concerned must therefore do their utmost to secure adequate financing for development projects in the Region. The European Union should co-ordinate the use of PHARE, TACIS and INTERREG programmes for the co-financing of projects in Kaliningrad together with Russian federal and regional authorities, draw up the list of priority projects and envisage the creation of a separate budget line for the Kaliningrad Region within the TACIS programme for the Russian Federation.

10.        Following recent consultations between the European Union and the Russian Federation, in which the parties expressed concern over the problems of the Kaliningrad Region and especially the visa and goods transit issues, the Parliamentary Assembly hopes that all problems will be solved without prejudice to the sovereignty of either the Russian Federation or the neighbouring countries. The Assembly calls on all parties concerned to take an active part in the quest for the best possible solutions for all.

II. Explanatory Memorandum by the Rapporteur

Table of contents

       Paragraphs

1.        Introduction       1-3

2.       Background       4-12

3.       Social and economic problems       13-33

4.       Targeted Federal Programme for the development of Kaliningrad Region       34-42

5.       Kaliningrad Region: testing ground and pilot region?       43-46

6.       Future enlargement of the EU and visa issues       47-56

7.       Relations with neighbours       57-60

8.        A way forward       61      

Appendix

*

* *

1.       INTRODUCTION

1.        As Lithuania and Poland prepare for European Union membership, the economic and social difficulties of the Russian Region of Kaliningrad - situated between these two countries – are becoming more acute. Geographically separated from the rest of Russia, the Kaliningrad enclave on the Baltic Sea is facing serious economic and social hardships, which in turn have led to precariously low living standards and to a much reduced flow of incoming investment compared with both the two aforementioned countries and the rest of Russia.

2.        In this situation, it is important that the member states of the Council of Europe in general – and of the European Union in particular – should do their utmost to ensure the best possible conditions for active economic and social co-operation between Kaliningrad and its immediate and close neighbours in ways that would also serve to promote the economic and social development of the Baltic Sea region as a whole. This was the basic message in the Motion for a Resolution1 submitted by several members of the Assembly following the fact-finding visit of the Sub-Committee on International Economic Relations (of the Committee on Economic Affairs and Development) to the Kaliningrad Region in October 2001. The Rapporteur wishes to take this opportunity to thank the Sub-Committee’s Russian hosts - whether from the Kaliningrad Region or from Moscow – for their great hospitality on this occasion. The visit permitted exchanges of views that have been of great use to her in the preparation of the present memorandum.

3.        This report will look at the many challenges - including in the social, economic, environmental, political and security field - that shape the development of the Kaliningrad Region. The Rapporteur will aim to present as objective as possible a vision of the prospects for regional co-operation among the main stakeholders, on the basis of her many interviews with the authorities of the Kaliningrad Region, Lithuania and Poland.

2.       BACKGROUND

4.        The Kaliningrad Region, a Russian exclave with a population of one million and an area of 15,000 km², is entirely separated from the rest of the Russian Federation. The Kaliningrad exclave was originally formed through the Potsdam Treaty at the end of World War II and has more recently been profoundly affected by the epoch-shaping changes in the relations between the East and the West following the collapse of the Soviet Union. Kaliningrad's peculiarity is thus both geographical and political. The region borders with Poland in the south-west, with Lithuania from the south-east to the north and has its sea border in the Baltic Sea in the west. As the European Union (EU) undertakes the next wave of enlargement, Kaliningrad’s unique position may offer opportunities to counter its current disadvantages.

5.        The present Kaliningrad Region was created in 1946, when the northern part of the former East Prussia was divided into two parts. The north including the city of Kaliningrad, formerly the German city of Königsberg, became Soviet territory, while the south went to Poland. Today, 400 000 out of the region’s one million live in the city of Kaliningrad.

6.        The Baltic peoples – Lithuanians and Prussians - originally inhabited the territory until the Teutonic incursions in the 13th century. The original Prussians lost their land, language and their very name. Since the Germanic occupation, ‘Prussian’ has become for many a synonym of German. Königsberg was established as a German city and indeed became a famous centre of German learning, being among other things the home of Immanuel Kant. Königsberg was also part of the Hansa trading league and played a vital role in the economy of Baltic Sea states. At the end of the 18th century it was, for about a decade, part of the Russian empire. Before World War II when the region formed part of East Prussia and Germany, it had a slightly anomalous position in that the Treaty of Versailles cut German East Prussia off from the rest of Germany and established the so-called “Polish Corridor” between them.

7.        At the 1945 Potsdam Conference, it was decided that the northern part of Eastern Prussia was to be handed over to the jurisdiction of the USSR. The region then became a part of the Russian Soviet Socialist Federal Republic, as it was called at that time. The Kaliningrad Region then came to play an important role in Baltic Sea security affairs due to its geographical position and military build-up. Although the Region was separated from the rest of Russia by the territories of neighbouring republics, Russia always had direct and free access to it by sea, air and land, as there were no true borders between the Soviet Republics at that time.

8.        Due to the Region's strategic location, the Baltic Navy of the Russian Federation remained there after World War II. Kaliningrad became a closed military base of the Soviet Union, hosting the only ice-free Baltic port of the Russian Federation. There is still a significant military presence of about 25,000 troops, a fleet and military bases. Despite recent progress in demilitarisation since the end of the Cold War, Kaliningrad still has a long way to go in converting its militarised economy into civilian production. The collapse of the USSR was the most decisive turning point in the recent history of the Region. As a part of economic reforms initiated in the 1990s, the Russian government reduced the amount of subsidies previously earmarked for the Kaliningrad Region. Although a special economic zone has been created, the Region still suffers from economic recession and high unemployment.

9.        Since the fall of the Iron Curtain, relations with the Baltic countries and special agreements with other neighbouring countries have provided the basis for the Region's external relations. These relationships will change when Poland and the Baltic countries join the European Union, since then because the Kaliningrad Region will be a Russian area inside the EU. Similar difficulties will occur as NATO expands eastwards. Kaliningrad's neighbour Poland has already joined NATO, and any subsequent expansion of NATO is likely to embrace the three Baltic States. Kaliningrad could then become a tension flashpoint, as it would be separated from the rest of Russia by a ‘belt’ of NATO countries. This would be reminiscent of the situation of West Berlin during the Cold War, with its inherent problems, such as military and civil transit rights – an important difference being that there is no longer any Cold War.

10.        To fully understand the Region’s problems one should note that, after World War II, the area was almost empty of population and subsequently populated with Russian nationals and those from the Soviet Republics. A large variety of nationalities living within the Region indeed reflects the multinational set-up of the former Soviet Union (30 different nationalities live in today’s Kaliningrad Region, with Russians making up to 78 % of the population).

11.        Almost all the Germans living in the East Prussian Region of Königsberg up until 1945 left for Germany proper, but in the late 1980s ethnic Germans from other parts of the then USSR started going there. Later in 1990s some even returned from Germany. Lithuanians today account for 4% of the population of the Kaliningrad Region and may be considered an original minority of the area. Some of them are ancestors of Lithuanians that lived there for centuries. Others settled after World War II. As some victims of Stalin’s repression were not allowed to return to their native land Lithuania, they preferred to settle in the Region because of its vicinity to Lithuania. Others simply found jobs or united with their spouses coming from the Region. Some 10,000 of the Region’s population are Germans, with more than a half living in the capital. German organisations take a keen interest in the Region and contribute to the maintenance of pre-Soviet monuments. The restoration and reopening of the Kaliningrad/Königsberg Cathedral in October 1998 is a good example.

12.        The population structure of the Kaliningrad Region is as follows: 2000 Jewish, 5000 Tartars, 10,000 Germans, 10,000-12,000 Poles, 18,000 Lithuanians and 80,000 Belarusans. Each ethnic community faces its own problems and needs. For instance, that of the Germans arise from their status. When ethnic Germans, having left the former USSR republics, return to Russia, they often choose the Kaliningrad Region. However, they are then often treated as foreigners. Education and culture-related problems are the main preoccupations of Lithuanians, who also wish to obtain a cultural autonomy status that would qualify them for federal allocations. Visas form the issue most important to the Jewish population, since these are issued in Moscow. Many Poles are concerned about co-operation with Poland, with their entrance into that country permitted if they hold a so-called ‘Polish card’. Tartars want teaching of Turkic languages, while Belarusans wish for the establishment of a minority association. All ethnic communities complain about the shortage of financing for their cultural and educational activities and are unanimous in their appreciation of both Germany’s and the German community’s active contribution to the Region2.

3.       SOCIAL AND ECONOMIC PROBLEMS

13.        The one million population of the Kaliningrad Region is shrinking due to a mortality rate well above the birth rate. Cardiovascular diseases and unnatural deaths - because of traumas, poisoning, etc.- are common. Moreover, the incidence of diseases linked to a precarious social and economic situation, drug abuse and prostitution – as expressed, for instance, in tuberculosis, diphtheria, viral hepatitis and infectious diseases - is on the rise. HIV is widespread and its incidence in the Region is 2.5 times the Russian average. Life expectancy is worsening. It now stands at 57.6 years for men and 70.7 years for women – with the large difference explained as being due to accidents and the high suicide rate among young males.

14.        Kaliningrad has a good level of basic education. However, although vocational schools and higher education institutions abound in the Region, supply does not meet demand in the changing times we are witnessing. Sectors such as microelectronics, biotechnology, new manufacturing technologies and business administration are particularly affected.

15.        The region’s social and economic problems are many and complex. They relate mainly to health care, the environment, sanitary conditions, housing, cultural activities, and, especially, unemployment. Although the administration of the Kaliningrad Region pays due attention to the resolution of these problems - notably by increasing allocations for social purposes - the situation remains preoccupying.

Major social indicators:

 

Indicators

Units

Kaliningrad Region

Russian Federation

1

Official unemployment

%

1.5

1.4

2

Average wage (gross)

USD

90

103

3

Subsistence level

USD

53

50

4

Difference between the highest and the lowest income deciles

Times

9.3

14

16.        If the official unemployment rate as shown here looks modest, it would have been 14% if ILO methodology had been used. Unemployment in the countryside is much higher, above 50 %. The situation is even worse – often between 80% and 90% - in former military townships, where former military people and their families are often not offered retraining opportunities. Not surprisingly, many Kaliningrad households have come to rely on unregistered economic activities as a source of income.

17.        Forecasts predict that due to the unemployment situation, increasing prices and the irregular payment of wages, about 35 % of the population live below the subsistence level. The seemingly high level of consumption that can be observed in western-style supermarkets and restaurants is largely explained by the fact that a significant proportion of the Region's population are involved in some kind of informal activity. The latter is facilitated by the proximity of borders and price differences between countries. Informal economic activities are estimated to account for over a half of the Region’s GDP, and about 10,000 people are believed to be involved in regular cross-border shuttle trading. The growth of the informal sector has contributed to an increase in organised crime, to a rate believed to be about 20 % above the Russian average. The most frequent criminal activities are trafficking in human beings, illicit trading in drugs and stolen vehicles, and illegal migration. Smuggling mainly applies to goods such as raw amber, alcohol and cigarettes. All these activities thrive on weak institutions and corrupt clientele networks. Lessons of how to integrate the flourishing “black” or “grey” economy into the mainstream can be learnt from the experience of other countries.

18.        The Kaliningrad Region is rich in mineral resources and has a considerable intellectual, scientific, technical, industrial and agricultural potential. The geographic position of the Region is both a disadvantage and an advantage. It is an advantage when it comes to developing economic links with the countries of central and eastern Europe. The Region boasts huge amber fields – an estimated 90 % of the world’s amber reserves - and oil deposits. Offshore oil, 1 million tons of which is being extracted every year and sent to Lithuania for refining, is of high quality. The Region, however, is almost wholly dependent on energy imports from Russia. Other mineral resources include brown coal, peat, mine salt, and wood. Agriculture has not been developed enough and carries little economic weight despite the availability of fertile land.

19.        In spite of its military legacy, Kaliningrad’s industry is quite diversified. It includes fishing, food and fish processing, shipbuilding and ship repairs, pulp and paper production, furniture manufacturing, machine-building, computer software development, electronics, electrical engineering and construction. The Kaliningrad Region’s uniquely beautiful seacoast offers conditions suitable for the development of tourism and recreation. The sea is also used for port and shipping activities. The local network of seaports facilitates transit activities but is not sufficiently competitive to handle Russia’s internal trade.

20.        The regional economy was badly affected by the Russian financial crisis of 1998, due to its high dependence on foreign trade. Several sectors experienced a drop of as much as 80% (light industry, building materials industry). Other sectors saw their activities decline by 40-60 % (fishing, paper and pulp, machinery and metal works). The worst consequence of the crisis was an increase in the proportion of trade in raw materials to the detriment of high technology.

21.        Although many of Region’s economic problems are common to the whole of Russia, Kaliningrad’s development is increasingly being seen as something apart from that of the Russian Federation. Kaliningrad is now viewed in the light of its own unique challenges and potentials. It is in the interest of both Russia and the whole of Europe that Kaliningrad should accelerate the development in the economic and social fields. Major obstacles are shortfalls in governance and a lack of a stable economic environment. However, with sound investment and regional co-operation programmes in place, the Region has the potential to become a pivotal economic and transport centre between the Russian Federation, certain other CIS (Commonwealth of Independent States) countries and the European Union (EU).

22.        In order to stimulate foreign investment, a series of legislative steps have been taken by the Russian State Duma. They include the Targeted Federal Programme for the Development of the Kaliningrad Region until 2010 (December 2001) and the Federal Law on the Special Economic Zone (SEZ) in the Kaliningrad Region (November 1995). This legal framework establishes the special rights and privileges of the exclave and provides a basis for the protection of investment and entrepreneurial activity. In addition, the Region possesses a considerable pool of relatively low-cost labour. (As unemployment increased in the decade after the collapse of the USSR, per capita income decreased to an estimated one-third of that of Russia, one-eighth of that of Poland and one-fifth of that of Lithuania.)

23.        As a result of various legal measures, including the Law on the Special Economic Zone and the Federal Programme for the Region, and in view of the Region’s geographic position, per capita investment in Kaliningrad stood at 50 % higher than in the rest of Russia in the late 1990s. Foreign trade exceeded $800 million annually. Inflation was lower than in other regions of Russia. The Kaliningrad Region ranks third in Russia in terms of the number of private cars and SMEs per capita. Foreign direct investment into all production sectors in the Region is permitted and legal or natural persons are allowed to lease land. Eligible companies are exempted from the usual requirement that 50 % of hard currency earnings from export sales be exchanged into roubles before repatriation. Thus, companies based in the Region are spared the complications of having to exchange their earnings twice, and thereby save 1-2 % in exchange fees.

24.        The Russian Federal government has made clear its belief that the main responsibility for the development of the Kaliningrad Region lies primarily with Russia, even though the Region, too, is working actively to attract foreign capital. Foreign investment needs to be directed toward sustainable development projects to counteract the state-controlled and lopsided pattern of the Region’s economy which has had such undesirable environmental, social and institutional consequences. It is worth noting that the Hamburg Chamber of Commerce has opened an office in Kaliningrad, not only reviving memories of the Region’s successful Hansa trading past, but also raising hopes for increased pan-Baltic trade. It is, somewhat unfortunately, trade rather than manufacturing that attracts most of the foreign investment. According to the data provided by the Administration of Kaliningrad, foreign investment in the Region totalled $80 million by 2002, with Lithuanian investment making up 16 % of the total. Significantly enough, Lithuanian investment flowed mainly into industry rather than trade, with food, sewing, and knitwear being the preferred sectors.

25.        The Kaliningrad Region’s foreign trade balance is negative, with the value of imports being three times that of exports. The main imports are food, raw materials for the manufacturing industry and cars. Major exports are raw oil, metals, fish and pulp, as well as fertilisers that are re-exported. The volume of foreign trade is growing by about 11 % a year and reached nearly $1,500 million in 2001. Trade with the immediate neighbours Poland (20 %) and Lithuania (10 %), makes up almost one-third of total foreign trade. Poland, Lithuania and Germany are Kaliningrad’s most important trading partners.

26.        The Regional Administration has so far not received sufficient allocations from the federal government for the development of the Region. Most noticeable are deficits in the financing of infrastructure and logistics. This being said, the Region’s efforts to introduce more favourable economic conditions are intensifying and its economy develops faster than is the case in many other regions of the Russian Federation. The Region’s GDP was 32 billion roubles ($1 billion) and, according to a Russian member of the Economic Committee coming from Kaliningrad, it grew by 12 % in 2001. (The Rapporteur has also been given a lower figure. Estimates and comparisons may be difficult as economic growth figures are normally collected for countries as such, and not for regions.) The GDP growth rates in the Kaliningrad Region over 2000-2001 period may therefore be – if we take the estimate just mentioned as a basis - about two times higher than in the rest of Russia. GDP per capita is about $1,000, or considerably less than in Lithuania ($3,064) and Poland ($4,108)3.

27.        Environmental protection is urgently needed. Kaliningrad ranks second after St. Petersburg in terms of pollution in the Baltic Sea region and its sanitary conditions are deplorable. It generates more than 400,000 tons of domestic and industrial waste annually. Extremely high water pollution has been detected in 9 ‘hot spots’ that have an impact on the entire Baltic Sea. Air pollution also remains high. The water supply and sewerage situation is appalling in the city of Kaliningrad. Large investment is needed to renovate the sewage system. Although a loan for this purpose has been negotiated with the EBRD and the European Investment Bank, its disbursement is uncertain as the Region has difficulties finding sufficient funds for co-financing.

28.        Foreign trade and other related activities in the Region are regulated by the regime of the Special Economic Zone (SEZ) in the Kaliningrad Region. It consists of the following legal acts:

29.        The Federal Law on the SEZ in the Kaliningrad Region provides the central legal and economic basis for the development of the Region, in view of its special geographical location and role in safeguarding the national interests of Russia. The Law establishes a privileged regime for investment and business activities, including foreign trade in the SEZ. As regards the collection of customs duties and other payments (including taxes) imposed on imported and exported goods, the SEZ is treated as a territory located in the customs regime of a free economic zone, the peculiarities of which are determined in the Federal Law on the SEZ. The federal Government together with the administration of the Kaliningrad Region is now preparing amendments and additions meant to improve this Law in the light of the new circumstances resulting from co-operation with the EU.

30.        The following legal provisions form the core of the SEZ in the Kaliningrad Region. 1) The right to land tenure for foreign natural and legal persons, international organisations with the participation of Russian and international natural and legal persons on the territory of the SEZ is given exclusively on the basis of lease contracts (without the right of redemption). 2) A product is considered to be produced in the SEZ if the amount of value added is not less than 30%. (Not be less than 15% for electronic devices and complex consumer appliances.) 3) The regulatory bodies of the Kaliningrad Region have to ensure privileged conditions for the relocation and settlement on its territory of former citizens of the USSR coming from Lithuania, Latvia and Estonia and whose native language is Russian.

31.        The Decree "On the Federal Programme for the Development of the SEZ in the Kaliningrad Region for the Period 1998 - 2005" envisages a complex series of measures aimed at ensuring the viability of the Region. The Programme among other things determines a number of strategic priority sectors: transport, fuel and energy, agro-food entities, communications and telecommunications. As this Programme proved relatively unsuccessful, a new one has been passed by the Russian Duma and endorsed by the Government (see the chapter below).

32.        The Decree of the Government of the Russian Federation "On the Establishment of Quantitative Restrictions on Some Types of Goods Imported from Other Countries to the Territory of the SEZ" was adopted on the initiative of the Administration of the Kaliningrad Region with the aim to protect local producers. This decision was ambiguous for two reasons. First, it provoked price rises in the Region, especially for goods covered by the Decree. Second, the Decree included goods that were not produced in the Kaliningrad Region, such as grape wines and vermouths, high-octane engine petrol, and cars more than 5 years old. These effects gave rise to attempts to amend the Law "On the Special Economic Zone in the Kaliningrad Region".

33.        Provided the Law on the SEZ is fully enforced, federal and regional interests are meant to be reconciled, and preconditions necessary for macroeconomic stability ensured. The new edition of the Law being drafted should take into account the following goals:

4.       TARGETED FEDERAL PROGRAMME FOR THE DEVELOPMENT OF KALININGRAD REGION

34.        The Targeted Federal Programme for the Development of the Kaliningrad Region up to 2010 was approved by the state Duma at the end of 2001 and subsequently endorsed by the Government. That was the document long awaited by both the political classes and the general population of the Kaliningrad Region. There is, however, a good deal of scepticism as regards the implementation of the Programme, as several previous versions failed to deliver the desired results. Allocations from the federal budget will be crucial for the implementation of the Programme, which is seen by many politicians in the Kaliningrad Region as the expression of Russian President’s view of the Kaliningrad Region as an integral and inseparable part of Russia. The monitoring of the implementation of the Programme should in principle be ensured by the treasury authorities.

35.        The federal policy in respect of the Kaliningrad Region endeavours to consolidate the status of the Region as a federal subject, boost its links with other parts of Russia, secure the competitive advantages of the enclave in Europe, transform its economic structure into one oriented toward exports, and upgrade the standard of living in the Region to those of its neighbours. The Programme also aims to achieve a rise in GDP (by 2.4 times) and employment (with up to 15 thousand jobs to be created by 2010). The financing of $3 billion has been earmarked for the implementation of the Programme (with $26 million having been foreseen for 2001):

Sources of financing in million Roubles

 

Period

2002–2010

Of which

Share of total financing, %

2002

2003

2004

2005

2006–2010

Total

93050

9126

11916

12955

12917

46144

100

Federal Budget

7828

802

872

849

913

4392

8.41

Kaliningrad Region Budget

2868

258

325

386

497

1402

3.08

Own funds of enterprises and organisations

20658

1869

2277

2551

2570

11391

22.2

Bank loans (RF)

6733

657

1394

720

677

3285

7.24

Foreign bank loans

13168

1423

1296

1797

1806

6846

14.15

Other sources (large enterprises of federal significance, e.g. in electricity, gas sectors, etc.)

41794

4117

5753

6652

6453

18819

44.92

36.        As Kaliningrad is almost totally dependent on imported energy (regional energy production covers only 20 % of needs), enhancing independence in energy matters is very important. This implies, among other things, the construction of a thermal power plant in order to secure a stable power supply and the conclusion of long-term agreements with Lithuania and Belarus on power transit. The Targeted Federal Programme provides for the construction of Unit 2 (Unit 1 is 450 MWT) of the Kaliningrad Thermal Power Plant, the modernisation of the old power plant, the reconstruction of a gas pipeline from Russia and the construction of a new branch thereof.

37.        The Federal Programme could also facilitate the improvement of the environmental situation in the Region, in view of Russia’s international commitments, as laid down in to the Helsinki Convention on the Protection of the Marine Environment of the Baltic Sea Area and other agreements. Priority must be given to the construction of wastewater treatment facilities, the reconstruction of water supply and sewage systems in residential areas, the recycling of household and industrial waste, engineering works to protect against flooding and the strengthening of the eroding Baltic Sea coast.

38.        As regards transport, the Federal Programme pays special attention to transit tariffs. The harmonisation of those tariffs should if possible be undertaken in line with Lithuania’s efforts to adopt EU rules and norms. The Kaliningrad Region should align its tariffs in order to protect local businesses from being hurt by extra costs due to frequent crossing of the territories of other countries. A better and more extensive road network would help to attract more investment to the Region. Building interconnections with major European road networks and developing transport infrastructure is particularly important. Without this, it is nearly impossible efficiently to tackle other related matters. One of the main tasks thus is to put into operation the Via Hanseatica highway (Pan-European transport corridor 1 A) and the road Grodno-Gusev for heavy transport.

39.        Due to its geographic location, the region may become an important hub for telecommunications, ensuring better connections not only Russia but also different parts of the Baltic region with the rest of Europe. The Programme foresees the laying of optical fibre cables, the installation of radio and television broadcasting equipment and the development of telephony networks.

40.        Other tasks of regional significance concern the development of agriculture and the fish processing industry, as well as social reforms. As the Region has very fertile land, reform of the agrarian sector would allow an increase in productivity. Further development of the tourism-recreation sector might give an impetus to more speedy economic reform. The fish processing industry and sea-port development have good prospects but the Region is looking for supplementary funds needed for the modernisation of facilities.

41.        A task of particular importance in the social field is to build more housing, although many west Europeans may be surprised that should be a task for the government. The situation in the Region is so precarious, however – because of general poverty, the absence of a residential premises market and a shortage of flats – that it may cause a social disaster. The public construction works in the Kaliningrad Region should be seen as similar to the construction and provision of municipal housing for socially vulnerable people in most European countries. Significantly, the majority of the Region’s population rely on social benefits. Besides, the honouring of commitments undertaken by previous governments (with regard to former military servicemen or workers engaged in the clean-up after Chernobyl) is often still pending.

42.        The cultivation of a business environment better able to attract investment calls for a speedy implementation of the existing Law on the Special Economic Zone and the consideration of special interests of the Region in the process of EU enlargement. This goes hand in hand with the development of transport and infrastructure; a flexible visa regime applicable to the residents of both the Kaliningrad Region and foreign countries; and cargo insurance contracts (with possible state involvement). The involvement of the federal government will be important, especially in negotiating the necessary international agreements and maintaining the stability of investment and tax policies highlighted in the Programme.

5.       KALININGRAD REGION: TESTING GROUND AND PILOT REGION?

43.        The Strategy for Relations between the Russian Federation and the EU4 foresees that the Region could become the ‘pilot region’ for Russia-EU co-operation in the 21st century. The idea is supported by some politicians and the business community of the Kaliningrad Region. The concept of a pilot region essentially represents the wish to bring the standards and rules for economic life in the Region as close to those of the EU and neighbouring countries as possible. There is, however, no ‘pilot’ as such behind the project, since nobody has suggested a truly viable strategy for the Region so far.

44.        The EU, in turn, is expecting guidelines to be formulated by Russia and says it cannot determine the destiny of a foreign country. The creation of a ‘single economic area’ between the EU and Russia could indeed start in the Kaliningrad Region, thereby giving the Pilot Region project a practical expression. Some politicians of the Region claim that if resolute steps are not taken immediately in that direction, anti-centralist views may become more pronounced in the Region. The Region’s Administration suggests that federal authorities should take a clearer position as regards the Region’s relations with neighbouring countries and the EU.

45.        The only document so far approved in the Russian Federation to that end is the ‘Targeted Federal Programme for the Development of the Kaliningrad Region up to 2010’, but only a few general provisions of the Programme may be considered strategic. (These include further elaboration of the SEZ regime, giving manufacturing more of an export orientation, and a speedier introduction of a liberal market economy.) At present several documents on the Region’s concerns about the EU enlargement are being prepared. However, even if such documents are approved by the federal authorities, it will not be easy to implement them, as the EU enlargement strategy does not foresee any special adjustments concerning the Region.

46.        It has to be noted, though, that on 28 January 2002 during the meeting of EU Foreign Ministers in Brussels, Josep Piquet, the Spanish Minister of Foreign Affairs, stated that the EU wished the future status of the Kaliningrad Region to be addressed as soon as possible together with Russia, and that Moscow’s wish concerning a visa-free regime for the exclave should be considered. He also recognised the need to bear the interests of neighbouring states – i.e. Poland and Lithuania - in mind. The Minister hoped that the Russia-EU summit, to be held in May 2002, would bring progress. EU Foreign Affairs Commissioner Chris Patten has identified the communications sector as the priority for co-operation and has singled out the power supply and fisheries as major challenges that need to be tackled. On the whole, however, consultations between the EU and Russia on a number of aspects connected with the approaching EU enlargement proceed extremely slowly.

6.       FUTURE ENLARGEMENT OF THE EU AND VISA ISSUES

47.        With the eastward enlargement of the EU, and with Lithuania and Poland preparing to join it, the present visa-free regime applicable to the Kaliningrad Region will have to be reconsidered. How is, however, still unclear. Kaliningrad business people tend to see the need for better laws as more urgent than that for the visa issue. The Kaliningrad authorities, however, are more anxious to tackle the visa problem early on. The Rapporteur for her part believes that the visa issue is just one of many, and that there are many ways of dealing with it.

48.        The Region is at present the only area of Russia vis-à-vis which Lithuania applies a visa-free regime, whereas Poland uses such an arrangement for the whole of Russia. As Russian citizens do not need transit visas to cross the territory of Belarus, the inhabitants of the Kaliningrad Region do not encounter any major barriers when travelling to other parts of Russia. Pursuant to the Schengen agreement, however, a visa regime is meant to be introduced on 1 July 2003. Many local officials and politicians understand that the decision on the introduction of visas was not taken unilaterally by Poland or Lithuania and that the only way forward is to find reasonable ways to address the issue. However, many ordinary Kaliningraders fear becoming increasingly isolated following the introduction of visas. Moreover, reinforced border controls along with the introduction of a visa regime in line with EU demands would deal a serious blow to the informal economy and in particular to cross-border smuggling of consumer goods and certain raw materials, such as amber, which provides subsistence to some people on both sides of the border.

49.        A special problem is that many inhabitants of the Kaliningrad Region do not have a passport valid for foreign travel (a so-called ‘internal passport’, which is a sort of identity document not valid for travel abroad). The cost of some $ 25-30 to obtain a passport valid for foreign travel appears to be too high for many citizens. The Russian federal authorities should therefore consider, as a matter of priority, issuing such passports at a more reasonable price for applicants from the Kaliningrad Region. At the EU-Russia Summit on 29 May 2002 a number of high EU officials stated that the EU would be ready to assist Russia in this respect and also to establish a diplomatic presence of the EU in the Region.

50.        Unfortunately no tangible progress on the issue of visas was reached at the EU-Russia Summit. President Putin declared that relations between the Russian Federation and the EU will depend on the resolution of problems related to the Kaliningrad Region, especially as regards the free movement of Russian citizens between the Region and the rest of Russia. Introduction of a visa regime is seen by the Russian Government as a violation of the fundamental right to unimpeded travel within one’s own country. The Rapporteur notes however that the sovereignty of all countries - including Lithuania, Poland, Russia and the countries of the EU – is at play.

51.        One possible path would be to conclude special financial and political agreements between the Russian Federation and the EU. Financial agreements should ensure the use of different EU programmes. The TACIS programme is already in place. However, the local population involved in TACIS complain that the programme is too bureaucratic. They feel that too large a share of the funds is used for writing reports, lecturing or holding workshops that are often conducted by inadequately prepared experts, and that, unfortunately, too little is done at the practical level. They hope that the PHARE programme might suit the needs of the Region better, even though PHARE and TACIS are very similar in nature. The reconstruction of the Bagrationovsk border crossing point, co-financed on a fifty-fifty basis by TACIS and Russia, is a good example of how funds can be used for worthwhile projects. Another example is the Kaliningrad Zoo, which has also benefited from TACIS funds.

52.        As for a political solution, the prospects are less clear. European Union law does not provide for exceptions or reservations on behalf of regions of countries; nor does Russia seem overly eager to offer the Kaliningrad Region any special status. The Federal Programme does not solve the problem. As a result, the SEZ cannot function properly. The Russia-EU dialogue has so far not produced the desired results. The absence of any signed or ratified agreements is a further obstacle.

53.        In our search for solutions to mitigate the visa problem, we should not forget the idea of a ‘pilot region’. It is obvious that putting in place such a project might ease tensions. By adopting at least some technical EU standards, the Kaliningrad authorities would considerably help co-operation between businesses. Some Russian politicians feel that some kind of compensatory funding from the federal budget may be helpful in order to alleviate the burden of extra costs incurred by the Region due to its being cut off from the rest of Russia.

54.        It is also urgent to invest more in the Region’s physical infrastructure. This applies in particular to the modernisation of road and railway networks and to the building of highways and to ‘missing links’5 to ensure better interconnection with European transport corridors. Modernisation of the 23 border crossing points (including those at the airport and seaports) in terms of infrastructure, quality of service and traffic management is also pressing6. As on many border crossing points traffic flows exceed capacity by three or four times, waiting times can be 24 hours or more. This applies to both cargo vehicles and passenger cars. Moreover, roads leading to the border are so narrow that cargo vehicles occupy half their width. In case of a fire or accidents, the access of ambulances or fire brigades may therefore be seriously obstructed. More funds are needed, for instance, to renovate the Sovietsk–Panemunė border crossing point. (There is, for instance, a bridge across the Nemunas river that is in urgent need of repair before it collapses one day. The border crossing itself could to advantage be moved outside the city of Sovietsk). The situation at the Chernyshevskoye–Kybartai border crossing - where the traffic density between Lithuania and the Kaliningrad Region is at its highest - is dramatic and calls for immediate action. At least € 3 million need to be invested by the Kaliningrad party as the Lithuanian party has already done its share of the investment on the Kybartai side.

55.        The large number of “product carriers” who engage in cross-border traffic of food and oil products between Russian, Polish or Lithuanian shops (between which prices sometimes vary considerably) places an extra burden on customs and local authorities. Special parking plots have had to be built at the borders to accommodate queuing vehicles before they can cross the border. These parking plots built by the municipalities involved are meant to lower the incidence of crimes and the environmental impact of the many vehicles in border areas. However, they may also become a source of corruption, tension or conflicts.

56.        Improving consular services should be a priority, since the introduction of a visa regime would considerably increase the workload of Lithuanian, Polish and Russian consulates. No country wishes to make life more difficult for travellers or to restrict cross-border movements of cargo, but each faces different challenges in trying to simplify the border crossing procedures. Polish consular services plan to install auxiliary premises in order to solve the problem of office space and thereby perhaps avoid having to open new consulates in the Region. Lithuania would like to expand its consulate in Kaliningrad7 and to open at least one new office, probably in Sovetsk. The Lithuanian side toward this end submitted a request for special permits to be issued by the Foreign Affairs Ministry of the Russian Federation. Time flies but there is, unfortunately, still no reaction on the part of Russia to this request. One may even gain the impression that Russia somehow wishes to avoid the introduction of visas. From time to time one can even hear proposals to have special “corridors” set up across Lithuania or Poland, meant to facilitate Russian passenger and cargo transit. However, such proposals are neither realistic nor based on common sense. They have been deemed unacceptable by both these two countries and the European Union. It is now becoming urgent that the Russian federal authorities should take a number of practical steps to facilitate the operation of consular services on the territory of the Kaliningrad Region.

7.       RELATIONS WITH NEIGHBOURS

57.        Since the end of the Cold War, close bilateral links with the Baltic countries have provided the basis for the Region’s external contacts. However, recent geopolitical developments may be negatively affecting the climate of trust in the area. Difficulties are likely to arise as NATO enlarges eastwards. Kaliningrad’s Polish neighbour has already joined the Alliance and Lithuania is likely to do so soon. Kaliningrad would thus be separated from the rest of Russia by NATO countries and the question of military transit rights might become acute. A unilateral decision of the United States to withdraw from the 1972 Anti-Ballistic Missile Treaty is an additional complicating factor. This could fuel a new conventional arms race in addition to the problem of managing the existing nuclear arsenals of the United States, Russia, China, India, Israel, Pakistan and other nations. A recent signature (May 2002) by the Russian Federation and the United States of an agreement to reduce the stocks of nuclear weapons is an encouraging sign in this context.

58.        This notwithstanding, the Kaliningrad authorities are reported to be far more relaxed about their territory's relations with the surrounding parts of Europe than was the case only a few years ago. They actively encourage trade with neighbours and allow workers and capital to move relatively freely across the region's borders. Kaliningrad, though part of Russia, is now de facto developing closer links with the rest of Europe than it was ever able or allowed to do in the days of the Soviet Union. The political and institutional framework should be further strengthened and made more transparent. Both regional and local budget management systems and procedures need technical support if they are to become less bureaucratic and rigid. EU support - such as through the TACIS Local Support Office, the partnership programmes and people-to-people activities - is valuable in offering fresh momentum to much needed reform in the Region.

59.        The Council of the Baltic Sea States (CBSS), born ten years ago, plays an important political role in fostering multi-level dialogue among the nations in the region. On the understanding that shared responsibility for the future of the Baltic Sea rests on the mutual understanding and solidarity, this body has been attentive also to the challenges faced by the Kaliningrad Region. The CBSS – Kaliningrad links thus focus around the issues of regional economic co-operation (especially in the fields of investment, development of SMEs, transport and energy infrastructures), democratic reforms, justice and security matters (in particular as regards migration and crime)8.

60.        Lithuania, Poland and the Kaliningrad Region perceive the upcoming enlargement of the European Union as a historical necessity and a stage of the age-old process of the European integration. The European integration offers – for the first time in the history – a chance to make the Baltic Sea region a hub of stability, growth and prosperity. The integration of Lithuania and Poland into the EU and the parallel process of deepening EU-Russia relations according to the recently adopted co-operation strategies open new prospects for boosting links with the Kaliningrad Region which may become a “window of opportunity” for both Russia and ‘the greater EU’. The Kaliningrad Region would no doubt benefit from Lithuania’s and Poland’s membership in the European Union. Enlargement of the EU will also render regional initiatives, such as EU’s “Northern Dimension”, even more relevant for practical co-operation.

8.       A WAY FORWARD

61.        With a view to strengthening social, cultural and economic co-operation between the Kaliningrad Region and the neighbouring states, and in order to ensure sustainable development of the Region, the Rapporteur would like to stress the importance of the following measures:

-       Striving to avoid the isolation of the Kaliningrad Region after its immediate neighbours - Lithuania and Poland - join the EU in 2004 means that there is an urgent need to enhance the development of transport networks and to upgrade the infrastructure of border crossings in the Region. Notably, the construction of transport corridors (such as Via Hanseatica9, corridor IXD and the branch of Rail Baltica10 via Kaliningrad Region), gas pipelines and electricity transmission lines through Lithuania and Kaliningrad Region to western Europe, enhanced co-operation and division of labour between the ports of Kaliningrad and Klaipeda (Lithuania) is essential. Moreover, the nearing introduction of a visa regime for Russian citizens travelling to and from Kaliningrad by road or rail calls for improvements in the operation of consular services and border crossings; issuance of passports valid for foreign travel for the Region’s inhabitants; signature of bilateral treaties between Russian Federation, Lithuania and Poland regarding readmission and joint verification procedures at border crossing points and the ratification by the Russian Parliament of relevant border agreements (see Appendix).

-       Efforts to enhance the implementation of joint Lithuanian-Russian (about 40 undertakings are under way) or Polish-Russian projects related to the Kaliningrad Region should ensure better interaction among the parties involved. Work on these projects, partly financed by PHARE, ISPA, TACIS and SAPARD funds, has too often been suspended because of insufficient financial contribution to the project implementation in Kaliningrad. Situation could improve if such common projects would be financed from PHARE and TACIS programmes simultaneously and the interaction between those two programmes would be increased. The recent initiative of the European Commission to launch the “Development of a Project Pipeline for Cross-Border Co-operation between Lithuania and Kaliningrad” is particularly welcome as it considers the use of both PHARE and TACIS funds for the implementation of projects concerned.

-       Attempting to secure adequate financing for development projects in Kaliningrad should lead to the establishment of a separate budget line for the Kaliningrad Region within the TACIS programme for Russia. Because TACIS programme for the Russian Federation includes so many projects and the funds need to be used more efficiently, it is necessary to draw up a list of priority projects in Kaliningrad and to concentrate efforts for their implementation.

-       Additional means should be foreseen for Kaliningrad region within the framework of the Northern Dimension Initiative of the European Union11. Although at the first meeting of the Steering Group of Northern Dimension Environment Partnership (NDEP), held in Stockholm on 12 September 2001, the list of priority projects in the field of environment and energy was established (it includes two projects for the Kaliningrad Region), the NDEP Fund that is supposed to finance these projects is not yet established, because of the disagreement of parties on co-financing. One way to solve the problem at least partially would be to set up a sub-programme under the Northern Dimension Initiative to support co-operation projects in Kaliningrad region.

-       Assisting the development of the Kaliningrad Region in the regional context calls for the inclusion of Kaliningrad-related projects into the INTERREG programmes that are for the time being open only to EU members and candidate countries. The participation of the Region in the INTERREG programmes, especially as regards projects in the filed of transport, environmental and border infrastructures, would be highly useful. The implementation of these projects would have a great impact also on the neighbouring countries.

-        Facilitating cross-border co-operation among the Kaliningrad Region, Lithuania and Poland is indeed of special importance in the context of European integration. EU member states should establish as soon as possible some sort of a diplomatic presence in Kaliningrad in order to facilitate contacts and the issuing of visas, so that Kaliningrad citizens would not have to travel to Moscow to get them. With a view to supporting national initiatives in favour of cross-border exchanges, the European Commission could take a number of practical steps on the basis of the proposals outlined above. Not only would such measures help improve the development prospects of the Kaliningrad Region but would also show that genuine solidarity in the ‘Greater Europe’ means acts, not just words.

Appendix

Main treaties and agreements between Lithuania and the Russian Federation, concerning Kaliningrad

1. Agreement between the Government of the Republic of Lithuania and the Government of the Russian Federation on cooperation principles and provisions for reciprocal relations in the sphere of transport ; signed and entered in force on 12.02.1992

2. Consular convention between the Republic of Lithuania and the Russian Federation ; signed on 08.09.1992, entered in force on 30.11.1995
  

3. Agreement between the Republic of Lithuania and the Russian Federation for the cooperation in the economic, social and cultural development of the Kaliningrad Region ; entered in force on 04.06.1992

4. Agreement between the Government of the Republic of Lithuania and the Government of the Russian Federation on trade and economic relations ; signed on 18.11.1993, entered in force on 18.01.1995

5. Agreement between the Government of the Republic of Lithuania and the Government of the Russian Federation on merchant navigation ; signed on 18.11.1993, entered in force on 18.01.1994

6. Agreement between the Government of the Republic of Lithuania and the Government of the Russian Federation on international road transport ; signed on 18.11.1993, entered in force on 19.01.1994

7. Agreement between the Government of the Republic of Lithuania and the Government of the Russian Federation regarding cooperation and mutual assistance in customs matters ; signed on 24.02.1995, entered in force on 08.07.1995

8. Temporary Agreement between the Government of the Republic of Lithuania and the Government of the Russian Federation on travels of nationals of both states ; signed on 24.02.1995, entered in force on 24.06.1995
 

9. Agreement between the Government of the Republic of Lithuania and the Government of the Russian Federation concerning the crossing posts of the state border between the Republic of Lithuania and the Russian Federation ; signed and entered in force on 24.02.1995

10. Joint Communiqué of the Prime Minister of the Republic of Lithuania and the Chairman of the Government of the Russian Federation on the measures for the liberalisation of trade between the Republic of Lithuania and the Russian Federation ; issued on 29.06.1999

11. Agreement between the Government of the Republic of Lithuania and the Government of the Russian Federation on the cooperation in the field of environment ; signed on 29.06.1999, entered in force on 27.10.1999

12. Agreement between the Government of the Republic of Lithuania and the Government of the Russian Federation on the long-term cooperation between the regions of the Republic of Lithuania and the Kaliningrad Region of the Russian Federation ; signed on 29.06.1999, entered in force on 26.01.2000

13. Agreement between the Government of the Republic of Lithuania and the Government of the Russian Federation on the cooperation in the field of tourism ; signed on 29.06.1999, entered in force on 02.10.2001

So far there are no treaties on the protection of investment, the avoidance of double taxation, readmission, joint verification procedures at border crossing points, etc. Situation is similar in respect of treaties between Poland and the Russian Federation.

Main treaties and agreements between the European Union and the Russian Federation, concerning Kaliningrad

Agreement the Government of the Russian Federation and the European Union on partnership and co-operation (PCA), entered into force on 01.12.1997

The Common Strategy of the European Union on Russia, adopted by the European Council in Cologne on 04.06.1999

The Communication from the Commission to the Council on a Northern Dimension for the policies of the Union (COM(1998) 589 - C4-0067/1999) and the Feira Action Plan relating thereto

The Communication from the Commission to the Council on the EU and Kaliningrad (COM(2001) 26 – C5-0099/2001)

Programme of EU technical aid (TACIS) to the Russian Federation

Russia's 'medium-term strategy for development of relations between the Russian Federation and the European Union (2000-2010)' presented at the EU-Russia summit in Helsinki

Main treaties and agreements between Poland and the Russian Federation, concerning Kaliningrad

Protocol between the Government of the Republic of Poland and the Government of the Russian Federation on Revoking in the Relations between the Republic of Poland and the Russian Federation the Convention between the Polish The People's Republic and the Government of the USSR on Prevention of the Cases of Multiple Nationality, signed in Warsaw on 31 March 1965

Agreement between the Government of the Republic of Poland and the Government of the Russian Federation on mutual employment

Trade and Economic Co-operation Treaty between the Government of the Republic of Poland and the Government of the Russian Federation, signed on 25 August 1993, ratified on 13 February 1995.

Regional and transfrontier co-operation agreement between the Government of the Republic of Poland and the Government of the Russian Federation, 1992

Investment Agreement between the Government of the Republic of Poland and the Government of the Russian Federation, signed in 1993, still to be ratified by the Russian Parliament

1991-1992 Bilateral Co-operation Agreements between the Kaliningrad Region and Polish Regions of Olsztyn, Szczecin, Elblon, Suwalki and Gdansk; and an additional agreement in 2001 with Varmia-Mozuria Region after reforms in the administrative division of Poland

Consular convention between the Government of the Republic of Poland and the Government of the Russian Federation

The Agreement between the Kaliningrad Region and Poland on Co-operation in Tourism Sector, signed in 2002

(the list is not exhaustive)

Agreement on a pilot project on Polish-Lithuanian-Russian co-operation in the training of business executives and border guards

Reporting committee: Committee on Economic Affairs and Development.

Reference to committee: Doc. 9280 and Reference No. 2681 of 21 January 2002

Draft resololution adopted by the committee on 27 June 2002.

Members of the committee: Mrs Zapfl-Helbling (Chairperson), Mrs Stepova (Vice-chairperson), Mr Kirilov, Mr Blaauw (Vice-chairmen), Mr Adam, Mr Agius, Mr Agramunt (Alternate: Mr Yanez Barnuevo), Mrs Akgönenç, Mr I. Aliyev, MM. Anacoreta Correia, Arnau (Alternate: Mr Acosta), Mr Assis Miranda (Alternate: Mr Braga), Mr Aylward, Mr Berceanu, Mr Billing,  Mr Braun, Mr Brunhart, Mr Budin, Mr Budisa, Mrs Burbiené, Mrs Calner, Mr Cerrahoglu, Mr Cosarciuc, Mr Crema, Mr Djupedal, Mr Elo, Mr Eyskens, Mr Felici, Mr Galoyan, Mr Grachev (Alternate: Ms Yarygina), Mr Gülek, Mr Gusenbauer, Mr Haupert, Mrs Hoffmann, Mr Hrebenciuc, Mr Jung (Alternate: Mrs Durrieu), Mr Kacin, Mrs Kestelijn-Sierens, Mr Klympush, Mr Leers, Mr Liapis (Alternate: Mr Koulouris), Mr Makhachev (Alternate: Mr Slutsky), Mr Mateju, Mr Mikkelsen, Mr Mitterrand, Mr Naumov (Alternate: Mr Lomakin-Rumiantse), Mr Palis, Mrs Patarkalishvili, Mr Pavlidis, Mrs Pericleous-Papadopoulos, Mrs Pintat Rossell, Mr Pleshakov (Alternate: Mr Tulaev), Mr Podgorski, Mr Popa, Mr Popovski, Mr Prokes, Mr Puche, Mrs Ragnarsdottir, Mr Ramponi, Mr Reimann (Alternate: Frey), Mr Rivolta, Lord Russell-Johnston (Alternate: Mr Marshall), Mr Rybak, Mr Schmitz, Mrs Schoettel-Delacher (Alternate: Mr Grissemann), Mr Schreiner, Mr Seyidov, Ms Smith, Mr Stefanov, Mr Tosic, Mrs Vadai, Mr Valleix, Mr Voog, Mr Walter, Mr Wielowieyski, Mr Wikinsk, Mr Zhevago, ZZ... (United Kingdom) (Alternate: Baroness Hooper).

N.B. The names of those members present at the meeting are printed in italics.

Head of Secretariat: Mr Torbiörn

Secretaries to the committee: Mr Bertozzi, Ms Ramanauskaite and Ms Kopaçi-Di Michele

1 Doc. 9280 of 14 November 2001

2 Germany and the authorities of Kaliningrad co-finance the functioning of the culture house in Kaliningrad which houses activities and concerts of different ethnic communities

3 EBRD data in respect of Lithuania and Poland for 2000.

4 The document was presented during the Helsinki Council of the EU by Vladimir Putin, then Prime Minister of the Russian Federation, to EU leaders on 22 October 1999.

5 The Region’s air links with western Europe suffered a serious blow, when the SAS cancelled flights from Copenhagen to Kaliningrad at the end of October 2001, only a few days after the meeting of the Sub-Committee on International Economic Relations in Kaliningrad took place.

6 At present there are about 9 million border crossings each year between the Kaliningrad Region and Lithuania/ Poland

7 The Lithuanian consular office there needs to extend and reorganise its facilities.

8 The Committee on Economic Affairs and Development held an exchange of views on the future of the Kaliningrad Region with the CBSS Commissioner for Democratic Development Ms Helle Degn on 23 April 2002.

9 The Via Hanseatica project aims to establish an international transport corridor linking St. Petersburg with Berlin via Tallinn, Riga, Siauliai, Sovetsk, Kaliningrad and Gdansk. The realization of this project implies, among other things, the building of a new bridge across the Nemunas river on the Lithuania-Kaliningrad border.

10 The implementation of this project calls for substantial investment and the harmonization of tariffs applicable to cargo movements by rail between Kaliningrad and Lithuania.

11 The ‘Northern Dimension’ draws together all EU policies vis-à-vis northern Europe. It aims to deliver maximum benefit for the countries around the Baltic Sea by ensuring coherence between relevant EU instruments. It is also a key element in EU relations with Russia and several EU candidate countries.