Kaliningrad in EURussia relations: Scenario exercise

1
Kaliningrad in EU-Russia relationsScenario
exercise

• Sergei Medvedev
• RECEP, Moscow

2
Research objectives

• Define key global trends relevant for Russia-EU
  relations and on Kaliningrad
• Define key parameters to forecast the future of
  Russia-EU relations and of Kaliningrad
• Define four sets of scenarios for
• Russia
• The European Union
• Russia-EU relations
• Kaliningrad
• Define the most desirable scenario for
  Kaliningrad (Pilot Region) and outline
  practical policy steps for its implementation
  (Road Map)

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GLOBAL TRENDS Globalization and accommodation
KEY PARAMETER Role of the nation-state
European scenarios
Russian scenarios
R1 R2 R3
E1 E2 E3
RE1
K1
RE2
K2
RE3
K3
Pilot region
Road map
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Globalization and accommodation

• Re-Nationalization
• Fragmentation
• Regionalization, localization
• Resistance/Identity
• State as an anchor of identity
• Anti-Americanism
• Old Economy,
• oil, resources, hierarchy
• State intervention
• Global terrorism
• Regional instability

• De-Nationalization
• Integration
• EU federalism
• Homogeneity
• Markets, liberalism
• Americanization
• New Economy
• networks
• Crisis of the welfare state
• Liberal imperialism
• New World Order

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Key parameters

• Role of the Nation-State
• In the economy
• Liberal/ globalized / private / de-regulated/,
  or
• Statist / Public / Regulated / protectionist
• In politics
• Decentralized / networked / confederal, or
• Centralized / integrated / unitary
• Scales of evaluation
• Economic axis
• Statist / regulated lt---gt Liberal / Global
• Political axis
• Centralized/integrated lt---gt Decentralized/netwo
  rked

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Generic chart
Centralized/ Integrated
Economic axis
Statist Regulated
Liberal Global
Political axis
Decentralized/ Networked
7
Russias options
Centralized/ Integrated
R1 Administrative Modernization
R3 Bureaucratic Capitalism
Statist Regulated
Liberal Global
R2 Liberal Modernization
Decentralized/ Networked
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Russian scenarios

• R1 Administrative modernization
• Model South Korea
• R2 Liberal modernization
• Model Czech Republic
• R3 Bureaucratic capitalism
• Model Mexico, Indonesia

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R1 Administrative modernization

• Political centralization
• Administrative vertical, managed democracy
• Limits on federalism and local autonomy
• East Asian models South Korea1960s-70s?
• Liberal economic and social agenda
• Corporatism / re-distribution of resource rent
• Capital-intensive modernization projects
• Dismantling the paternalist social system
• Eventual WTO membership, OECD application?
• Generally pro-Western foreign policy
• Extended cooperation with the US (terrorism,
  Iraq?)
• Friction with EU, CoE, OSCE
• Liberal imperialism in the CIS

10
R2 Liberal modernization

• Political pluralism
• Resurgence of liberal parties/projects (support
  by the Kremlin?)
• Modernization from below, civil society
  development
• Extended federalism and regionalism
• Cross-border cooperation
• Full economic liberalization, de-monopolization
• Fighting the Dutch disease and resource
  dependence
• Development of the small and medium business
• Central European model (Poland, Czech Republic)
• Enhanced dialogue with the EU
• Not just economic interests, but normative
  affinity and legal harmonization

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R3 Bureaucratic Capitalism

• Informal state capitalism
• Corporations are private but de facto controlled
  by the state
• High ownership concentration / monopolies
  (Gazprom)
• Postponement of structural reform / stagnation
• Dependence on natural resources/ oil exports
  Russia as petro-state (Petrocracy)
• Authoritarian drift
• Privileged role for the bureaucratic
  corporation/security elite
• One-party rule (like in Japan, Mexico)
• A unitary territorial structure (merger of
  regions)
• Neo-imperialism in the CIS
• Cold peace with the West

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EU options
Centralized/ Integrated
E1 Global Actor
E3 Fortress Europe
Statist Regulated
Liberal Global
E2 Network Europe
Decentralized/ Networked
13
EU scenarios

• E1 Global actor
• E2 Network Europe
• E3 Fortress Europe

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E1 Global actor

• Success of constitutional referenda and
  institutional reform
• Deepening and widening of the EU (accession of
  Turkey, Ukraine, etc.)
• Liberal economic policy opening up EU markets to
  globalization
• Consolidated foreign and security policy
• Enhanced Neighborhood Policy
• Global role out of the area

15
E2 Network Europe

• Failure of the Constitution and of institutional
  reform
• Weakening of central institutions,
  re-nationalization and regionalization
• Emergence of a core Europe of rich nations
• Proliferation of bilateralism
• Globalization and liberalization of national and
  subregional markets
• Low-profile global role of the EU
• Failure of CFSP and of consolidated neighborhood
  projects

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E3 Fortress Europe

• Powerful external variables /globalization gone
  bad
• Global terrorism, WMD
• Role of the US and/or Russia
• climate change, catastrophic migration
• Enlargement stops at 25 BG, ROM, CRO
• Limited institutional reform, with impact on JHA
• Securitization of polity, stricter
  immigration/border control
• Economy protectionism and state intervention
• Foreign policy Isolationism, no global
  commitment
• Failure of subregionalism and of neighborhood
  projects

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Russia-EU scenario matrix
18
Russia-EU scenarios

• RE1 Cold Peace
• RE2 Muddling through
• RE3 Full partnership

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RE1 Cold Peace

• A combination of worst-case scenarios
• deteriorating global conditions terrorism, WMD,
  migration
• global security alert, geopolitics, competition
  for resources
• Fortress Europe in the EU and/or bureaucratic
  capitalism in Russia
• EU and Russia increasingly alienated
• US-Russia cooperation possible, over the head of
  the EU
• Russias unsuccessful attempts to divide the EU
• Raising visa and border barriers
• failure of cross-border regionalism
• Trade disputes, delayed Russian entry into the WTO

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RE2 Muddling through

• Continuation of present trends, stagnation of
  EU-Russia relations
• Loose institutions, hollow summits, bureaucratic
  squabbling between EU and Russia
• Lack of cohesion, rival visions of Russia in the
  EU
• Failure of CSR
• Bilateralism with Russia (France, Germany, UK)
• Of four common spaces, only some cooperation in
  the First (economy) and Fourth (humanitarian)
• no large EU investment
• frictions in internal security (visas,
  re-admission)
• competition in foreign policy (rivalry in the
  CIS Ukraine, Moldova, Belarus, South Caucasus)
• stagnation of cross-border regionalism

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RE3 Full partnership

• Development of EU-Russia institutions beyond the
  traditional neighborhood policy
• a Special Partner status for Russia?
• acceptance by Russia of part of the acquis,
  institutional adaptation
• Full cooperation in four common spaces
• Economy EU investment, participation in the
  modernization of Russia
• CFSP Cooperative security with Russia, replacing
  NATO as preferred partner
• JHA full cooperation (counterterrorism),
  visa-free for RF?
• Cultural exchange, Bologna process

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Kaliningrad scenariospassive mode
(policy-taking)
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Kaliningrad scenariosactive mode (policy-making)
Pilot region
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K1 Outpost

• Deterioration of global conditions and EU-Russia
  relations
• geopolitical thinking, isolationism, enemy
  construction
• higher transit costs, security tax, lifting of
  preferences
• militarization of the Baltic Sea area, hard
  security risks
• Kaliningrad as a double periphery
• Alienation from Europe
• Vicious circle of dependence on mainland Russia
• Kaliningrad as an island economy
• Curtailing imports from Europe
• Collapse of the local informal economy
• Drastic deterioration of social conditions

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K2 Stagnation/ preferences

• Continuation of present trends high vested
  interests
• Local rentier behavior, shadow economy (up to 90
  ?)
• Poland, Lithuania, transit economies of the
  Baltic and CEE
• Russian business Dutch disease
• Russian bureaucracy selling preferences,
  administrative rent
• Drug addiction to preferences in the SEZ
• No export, huge imports
• No structural investment short-term high-risk
  investment
• Vicious circle of parasitism and underdevelopment
• Kaliningrad as a waste of national resources,
  value subtracted
• Susceptible to world oil prices and Russian
  balance of account
• Soft security risks complicating EU-Russia
  relations
• Environment, drugs, AIDS, smuggling, migration

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K3 Pilot Region

• Transnational economic and policy project
• EU and Russia as key stakeholders
• Special institutions needed (special reps, High
  Level Group)
• Export-oriented industrial policy, sustainable
  growth
• Orientation to (a) EU markets and (b) Russian
  market
• Gradual removal of current preferences,
  re-orienting incentives to export of goods and
  services
• Making local industries competitive without
  subsidies
• Double integration of Kaliningrad as a
  competitive advantage
• Transition period needed to prepare local
  business to
• a revised regime of preferences
• liberalized energy tariffs
• new certification requirements
• Road Map with a timeline needed

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Logic of the Pilot Region

• From passive mode (Kaliningrad as a policy-taker)
  to pro-active approach (Pilot Region as a
  policy-maker)
• Pilot Region as a harbinger of change
• Overcoming unfavorable trends in EU-Russia
  relations
• Pilot Region feasible under various scenarios
  except overtly isolationist and/or
  confrontational
• Forward implementation of European Economic
  Space Improving EU-Russia compatibility through
  a common interface
• Adaptation by Russia of part of the acquis
• The logic of gradualism creating a Road Map
  with a timeline for specific benchmarks

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Institutional base of the Pilot Region

• Russian Law on the Guidelines of the Federal
  Policy towards Kaliningrad Oblast
• Stipulating the status of a foreign territory
  of the RF
• A Special Agreement between Russia and the EU on
  Kaliningrad
• Introducing the Kaliningrad factor into Four
  Common Spaces

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Guidelines of the Federal Policy towards
Kaliningrad

• Integration into the European economic space
• Creating the institutional base of cooperation
• Modifying the SEZ regime
• Improving federal and regional governance
• Improving business climate and lowering
  administrative barriers
• Development of infrastructure
• Export incentives
• Supporting small and medium business

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Impact of the Pilot Region

• Active shaping of the EU-Russia agenda (a
  policy-maker approach)
• Addressing key bottlenecks of the EU-Russia
  relations
• Improving the geopolitical situation in Europe
  after the double enlargement of the EU and NATO
• Promoting the Global Actor scenario in the EU,
  fostering ESDI
• Promoting modernizing attitudes in Russia,
  signaling Russia's adherence to long-term
  liberalization
• Checking the rentier behavior of the Russian
  bureaucracy
• Kaliningrad as a test case for the successful
  globalization of Russia