Yantar, Kaliningrad

The Yantar Special Economic Zone has been established in 1996 in the Kaliningrad Region of the Russian Federation.

"Yantar" means amber in Russian. Amber has been collected along the Baltic coasts of present day Kaliningrad Oblast since ancient times, and some sites are still worked today although the yield is relatively modest.

Yantar Special Economic Zone

Kaliningrad Region, Russian Federation

Background

After the split up of the former Soviet Union (USSR) in 1992/1993 the Russian Socialist Federal Republic (RSFSR) remained as the largest of the 15 republics of the former USSR. It comprises nearly 75% of the territory of the former USSR. In 1994 it was renamed the "Russian Federation" (RF). The Kaliningrad Region (Kaliningrad Oblast) is one of the 89 provinces (so-called "subjects of the federation") that make up the RF.

Each of these provinces has its own constitution as well as its own provincial parliament. They have, however, very different status, ranging from the status of Republics within the RF (e.g. Tatarstan) over Greater Regions ( "kraya" ) and Regions ( "oblasti" ), Autonomous Districts ( "avtonomnye rajony" ) and so-called Metropolitan Areas of Federal Significance (the cities of Moscow and St Petersburg).

An opaque feature of Russian federalism is that the federation and the subjects of the federation have the power to specify, limit and even re-arrange and shift their competencies through treaties and arrangements. The Kaliningrad Oblast concluded such an arrangement with the Russian Federation on January 12, 1996. This includes among others detailed stipulations for the later Special Economic Zone (SEZ) in the Kaliningrad Region (the SEZ Yantar).

The Kaliningrad Region (Kaliningrad Oblast)

The Kaliningrad Region is one of the smallest provinces (subject of the federation) of the Russian Federation. It is also the most Western part of the Russian Federation and has no direct connection with the federation itself, but forms an exclave bordering the Baltic Sea (West), Lithuania (North and East), and Poland (South). It comprises a surface of roughly 15,000 square kilometers with a population of about 1 million.

Historically, the present Kaliningrad Oblast has been part of Prussia since the 13th century and subsequently became part of the German Empire (Deutsche Reich), forming its most Eastern province (Eastern Prussia - Ostpreussen) with the capital Königsberg (now Kaliningrad). After World War II the region has been annexed by the USSR in accordance with the Potsdam Agreement (July/August 1945) and its five million German residents were expelled. In 1946, the USSR incorporated the region into the RSFSR under the name "Kaliningrad Oblast". For the following 45 years the region was predominantly used as a military base. Kaliningrad is located 600km from Berlin, 300 km from Warsaw and 1,000km from Moscow.

The concept of Free Economic Zones in Russia and the Yantar Special Economic Zone

Beginning from the early 1990s, Free Economic Zones mushroomed in the Russian Federation. However, as a result of poor planning, most were doomed to fail. Today, only a few of them can be said to have had moderate success, among them - at least temporarily - the Yantar Special Economic Zone (SEZ).

The Yantar SEZ provides a customs free zone, as well as low-tax provisions with regard to corporate profit tax and corporate property tax. These provisions are, however, spread over several provincial (Oblast) and federal statutes. Further, the various acts suffer from poor legal drafting and contain a number of ambiguities. Finally, the customs free regime of the Yantar SEZ has several times been challenged by hostile federal law. In 2006, yet another restrictive federal law governing the Yantar SEZ has been enacted. It limits the life span of the Yantar SEZ to 25 years, i.e. up to 2030 (Section 21 of the Act).

The prospects of the Yantar SEZ are uncertain: In the early years after its establishment, roughly during the period 1995-1997, it seemed to evolve into an an emerging Russian province (the much-talked-about "Hong Kong at the Baltic Sea"), thanks to its proximity to the European Union. Contrary to legislative intention, however, it did not develop into an export zone (product assembly), but turned into an import zone for German and Polish consumable goods. After the Russian financial crisis in mid-1998 it rapidly turned into a near-failure. Overall, this was mainly due to a combination of both administrative inefficiency and the federal and Oblast's governments' unwillingness to make the Yantar SEZ sufficiently attractive with regard to tax incentives. Most recent studies (2003), however, indicate a moderate economic upswing.

Its main trading partner has been Germany and the bulk of foreign investment in the Yantar SEZ comes from German enterprises.

References

Heinz Timmermann: "Das Kaliningrader Gebiet", in: Georg Brunner (ed.): Der russische Föderalismus: Bilanz eines Jahrzehnts, Recht in Ostmittel-, Suedost- und Osteuropa/CIS, vol. 1, published in: Verlag Berlin Hamburg/Muenster (2004)

Evgeny Vinokurov: "Economic prospects for Kaliningrad": Between EU enlargement and Russia's integration into the world economy, published in: Brussels. Centre for European Policy Studies Brussels (CEPS), June 2004 (Online only)

Stephan Stein: "Aufstieg, Fall und Neuanfang: Zehn Jahre Sonderwirtschaftszone Kaliningrad", published in: Osteuropa: Zeitschrift fuer Gegenwartsfragen des Ostens (German Law Journal). - Berlin: Berliner Wissenschaftsverlag, vol. 53 (2003), pp. 353-367 (English summary)

Ingmar Oldberg: "The Kaliningrad Oblast – A troublesome exclave", published in: Daniel Kempton/Terry Clark (eds.), Center-Periphery Relations in the Former Soviet Union (2002)

Robert Schmidt: "Sonderwirtschaftszone Jantar(Kaliningrader Gebiet): Konkurrenzfaehig gegenueber den litauischen Freien Wirtschaftszonen Klaipeda (Memel), Diauliai (Schaulen) und Kaunas?", published in: Osteuropa: Zeitschrift fuer Gegenwartsfragen des Ostens (German Law Journal). - Berlin: Berliner Wissenschaftsverlag, vol. 46 (2001), pp. 217-238 (English summary)(See also: Robert Schmidt: "The Special Economic Zone Yantar (Kaliningrad oblast): Is it competitive vis-á-vis the Lithuanian Free Economic Zones Klaipeda, Diauliai and Kaunas?", in: International Bibliography of Economics 2001 (No. 897))

Robert Schmidt: "Die juengste Entwicklung in der Sonderwirtschaftszone Jantar", published in: Wirtschaft und Recht in Osteuropa (WiRO) (German Law Journal). - Munich: Beck-Verlag, vol. 10 (2001), pp. 297-300

Robert Schmidt: "Das Kaliningrader Gebiet (Sonderwirtschaftszone Jantar): Kompetenzabgrenzungsvertrag einerseits und Foederalgesetz “Ueber die Sonderwirtschaftszone Jantar” anderseits – Ein harmonisches Nebeneinander?" , published in: Osteuropa: Zeitschrift fuer Gegenwartsfragen des Ostens (German Law Journal). - Berlin: Berliner Wissenschaftsverlag, vol. 47 (2001), pp. 1-14

Robert Schmidt: "Russische Foederation: Gebietsgesetz ueber lokale freie Wirtschaftszonen im Kaliningrader Gebiet. Textdokumentation mit Einfuehrung.", published in: Wirtschaft und Recht in Osteuropa (WiRO) (German Law Journal). - Munich: Beck-Verlag, vol. 9 (2000), pp. 22-28 (Commented translation of Kaliningrad Region Acts)

Robert Schmidt: "Das Kaliningrader Gebiet (Sonderwirtschaftszone Jantar)", published in: Wirtschaft und Recht in Osteuropa (WiRO) (German Law Journal). - Munich: Beck-Verlag, vol. 9 (2000), pp. 1-14

Heinz Timmermann: "Die russische Exklave Kaliningrad im Kontext regionaler Kooperation", published in: Bundesinstitut fuer Ostwissenschaft und Internationale Studien, Bonn (2000)(English summary)

Philip Hanson and Douglas Sutherland: "Economic restructuring in Kaliningrad", published in: Working paper series / Russian Regional Research Group, vol. 16 (1999) Birmingham

Christian Wellmann: "Russia's Kaliningrad Exclave at the Crossroads - The Interrelation between Economic Development and Security Politics", published in: Cooperation and Conflict, vol. 31, No. 2, (1996), pp. 161-183

Dörrenbacher, Heike: "Die Sonderwirtschaftszone Jantar von Kaliningrad (Königsberg). Bilanz und Perspektiven", published in: Bonn: Europa Union Verlag (1994)

Dörrenbacher, Heike: "Die Sonderwirtschaftszone Jantar", published in: Wirtschaft und Recht in Osteuropa (WiRO) (German Law Journal). - Munich: Beck-Verlag, vol. 1, (1994), pp. 27-41.