Among the many challenges the Baltic countries currently face is a redefinition of their relationship with Russia. Not only do they all share a common border with Russia, but the Russian enclave of Kaliningrad is squeezed between Lithuania’s western border and Poland’s eastern border. On the one hand, with the forthcoming European Union (EU) enlargement, the Russian oblast of Kaliningrad threatens to become an isolated island of poverty in the EU, a bizarre prospect that has caused many headaches in the international community. On the other hand, its presence is handy for Russia, because its location compels the EU to pay more attention to Kaliningrad and to relations with Russia. Indeed, the EU is keen to invest heavily in the enclave to make it a pilot for EU-Russian cooperation.
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...