After the dissolution of the former Soviet Union in 1992/1993 the Russian Socialist Federal Republic remained as the largest of the original 15 republics. It comprised nearly 75% of the territory of the former USSR. In 1994 it was renamed the "Russian Federation". The Kaliningrad Region is one of the 89 provinces that make up the RF. Each of these provinces has its own constitution as well as its own provincial parliament. However, they vary greatly in status, ranging from that of Republics within the RF over Greater Regions and Regions, Autonomous Districts and so-called "Metropolitan Areas of Federal Significance". 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 their competencies through treaties and arrangements. The Kaliningrad Oblast concluded such an arrangement with the Russian Federation on January 12, 1996. This included detailed stipulations, among others, for the later Special Economic Zone in the Kaliningrad Region.
The Kaliningrad Region (Kaliningrad Oblast)
The Kaliningrad Region is one of the smallest provinces of the Russian Federation. It is also the most Western part of the Russian Federation and has no land border with the federation itself, forming an exclave bordering the Baltic Sea, Lithuania, and Poland. It comprises an area of roughly 15,000 square kilometers with a population of about 1 million. Historically, this region had been part of Prussia since the early 13th century and subsequently became part of the German Empire, forming its most Eastern province with the capital Königsberg. After World War II the region was annexed by the USSR in accordance with the Potsdam Agreement 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 600 km from Berlin, 300 km from Warsaw, 831 km from St. Petersburg, and 1,000 km 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 of them failed. Today, only a few of them can be said to have had moderate success, among them the Yantar Special Economic Zone. 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 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 been challenged by hostile federal law several times. In 2006, yet another restrictive federal law governing the Yantar SEZ was enacted. It limits the life span of the Yantar SEZ to 25 years, i.e. up to 2030. The prospects of the Yantar SEZ are uncertain: In the early years after its establishment, during the period 1995-1997, it seemed to evolve into an emerging Russian province, thanks to its proximity to the European Union. Contrary to legislative intention, however, it did not develop into an export zone, but instead 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. 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 tax incentives. More recent studies, 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.
The Yantar projects
The Yantar projects are based mainly on the local factories. The facilities are situated in Kaliningrad. This article states the FEZ's legal and economic situation as at the end of 2004.
