Staunton, February 27 – One month before Kaliningrad is to lose many of the tariff concessions they have benefited from over the last decade, Prime Minister Dmitry Medvedev and virtually the entire Russian government travelled to the Russian enclave to discuss the situation, a measure of Moscow’s nervousness about what could happen there after April 1.
Yesterday, the Russian government came to Kaliningrad to see what might be put in place of the concessions so that the almost two-thirds of the exclave’s economy dependent on them will not collapse, Russian financial journalist Aleksey Tsarevsky says (finobzor.ru/show-7145-vizit-medvedeva-v-kaliningrad-kak-zhit-posle-otmeny-tamozhennyh-lgot.html).
Officials and business leaders both in Moscow and Kaliningrad have known about this deadline for ten years: it was part of the special arrangements made for the exclave as part of its status as a special economic zone; and they have known that many Russian and Belarusian firms are unhappy with the advantages these tariff concessions have given Kaliningrad firms.
But at a time when the federal budget is itself in trouble, the idea of transferring 67 billion rubles (one billion US dollars) to firms in Kaliningrad in order to compensate for what they will lose in April may be a non-starter; and Medvedev, his ministers and the leaders of Kaliningrad discussed what else might be done.
If a strategy isn’t worked out and soon, it is entirely possible that production in Kaliningrad will collapse, unemployment will rise, and enterprises there will either move to other parts of the Russian Federation or to foreign countries. If that happens, the economic crisis could spark a political one and at a minimum restart the autonomy movement there.
Medvedev for his part said that “federal and regional powers must do everything possible in order to defend enterprises from negative consequences connected with the end of the transition period.” Some money is available, he said; but many of the programs are still at the planning stage and time is running out.
Other federal ministers “acknowledged that the compensation mechanism is a temporary measure at best. In the future, the Kaliningrad economy must undergo radical changes” if it is to grow or even maintain its current level of production and employment. But it is not clear, they suggested, that either the enterprises or the ministries were ready to take such steps.
What that means is that in the weeks after April 1, the situation in Kaliningrad could be truly dire, something that will be especially infuriating to the local population who will be inclined to blame Moscow for their woes especially because they increasingly compare themselves not with the rest of Russia but with Poland and Lithuania.
To the extent that happens, those in the exclave who have talked about Kaliningrad or Koenigsberg as they often prefer to call it as “the fourth Baltic republic” are likely to reemerge, something that at a minimum could complicate the Duma elections there now scheduled for September.
But there is an even more serious lesson from Friday’s visit by Medvedev et al. For Kaliningrad as for Russia’s other regions, Moscow does not have a policy. Instead, it operates like a fire department rushing from one problem to another. But with the worsening economy, there may soon be too many fires for the current regime to be able to put out.