Kaliningrad Oblast 2016

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from Moscow, for governor of Kaliningrad Oblast. Boos was tasked with strengthening the influence of the central government. However, by focusing on promoting Moscow’s interests and ostentatiously disregarding the local elites and public, he brought about massive protests, which resulted in his dismissal. Boos was replaced by another weak governor, Nikolay Tsukanov, a local resident who had no political support base in Moscow. Tsukanov managed to ensure social stability even though he also provided ostentatious examples of ineffective governance and – according to media reports – became involved in numerous corruption scandals. The new challenges the region needs to face are: Russia’s dwindling financial resources, the 2018 FIFA World Cup, and the intensifying militarisation of Russia. These have led to the Kremlin deciding to take direct control of the oblast. The first step was to nominate Yevgeny Zinichev as acting governor – he was an FSB officer and a former trusted bodyguard of President Putin Next they replaced him with Anton Alikhanov, a young economist from the Ministry of Industry and Trade of the Russian Federation (for more information on Alikhanov see: The political situation). PRACE OSW REPORT OSW 09/2012 12/2016 9
II. Current situation in the region – major trends 1. The economic situation The region’s current economic situation is affected above all by the continuing economic crisis in Russia and the changing conditions of doing business in the oblast. This is partly due to the discontinuation of tariff concessions on 1 April 2016 which used to apply as part of the Special Economic Zone established in 1996. The new approach to managing Kaliningrad’s economy is also having an impact. Anton Alikhanov began implementing this policy a year ago on behalf of the Kremlin, initially as deputy prime minister and acting prime minister of the oblast and currently as acting governor. The drop in oil prices which coincided with Western economic sanctions and Russian counter-sanctions (goods shortages and increasing prices) have also had a strong adverse effect on the economy of Kaliningrad Oblast (although the region’s socio-economic indicators match average levels for Russia as a whole). Gross regional product (GRP) in 2015 fell by 7.6% (and is expected to fall a further 1.3% in 2016; for more information on this, see Appendix 1). All potential growth factors remain negative at present. Investments in the region have decreased for the fourth year in a row (by 10% annually on average), and the residents’ real incomes have been falling since 2015 as well (by around 6%). The economic situation is still very tough, especially in the primary sector, the car industry (Kaliningrad’s Avtotor reduced its production by 50% in 2015), and trade and transport. However, some symptoms of an improvement of the situation have been observed in the processing industry (mainly the food sector), agriculture (which was to a great extent a result of the embargo on imports of food and agricultural products and the import substitution policy implemented) and the constructions sector (partly in effect of the preparations for the 2018 FIFA World Cup). PRACE OSW REPORT OSW 09/2012 12/2016 Attempts to boost Kaliningrad’s economy have so far been unsuccessful. According to Alikhanov’s estimates, when the 1996 Special Economic Zone applied, the state budget ‘lost’ around 0.5 trillion roubles (up to US$15 billion) on customs duty exemptions and indirect taxes, and the oblast turned into a grey trans-shipment zone; only 109 residents have been registered in the 2006 Special Economic Zone to date, principally all of them also benefited from tariff concessions, and their total investments are estimated to have reached around 90 billion roubles (up to around US$2.5 billion). Over the past few years, the 10
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Kaliningrad Oblast 2016

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