Kaliningrad: from Russian relic to Baltic boom town

Once famous for brutalist Soviet architecture and soaring Aids rates, this tiny enclave is emerging as Putin's answer to Hong Kong

Once it was a home of philosophy, a European capital and a centre of Baltic prosperity. These days those who have heard of Kaliningrad associate it with drugs, prostitution and the Russian Aids epidemic.

Jutting out into the Baltic, the region of Kaliningrad is an accident of history, a part of Russia now literally cut off from the rest of the motherland by Lithuanian territory. But this small, Russian fifth column inside an expanding EU is mounting a surprise comeback. Buoyed by something of an economic boom, the region's extrovert, 42-year-old governor, Georgy Boos, has ambitious plans to turn the enclave into the Hong Kong of the Baltic. He also wants to transform the city once known as Königsberg into one of Europe's least likely tourist destinations.

When you arrive on the snow-covered tarmac of Kaliningrad's airport there is little sign that this is the next Baltic boom town. For one thing there are no other planes unless you count military aircraft. Only one airline flies regularly between Kaliningrad and western Europe - the newly-launched KD Avia - and it will be a few years before the fledgling carrier takes on Easyjet. To fly with them you have first to get to Berlin, the only international destination currently served by Kaliningrad's flagship carrier.

Inside the terminal there is little by way of shopping, apart from stalls selling amber souvenirs - the enclave is home to 90 per cent of the world's amber deposits. Meanwhile the local press still has that distinctly Soviet feel. Kaliningradskaya Pravda's front page story on the ubiquitous, bear-like Mr Boos and his United Russia party, carries the headline: "Together with the president, together with United Russia, we will make the Kaliningrad area one of the best regions in the world."

But if it is history you are looking for, Kaliningrad has plenty. Founded by the Teutonic Knights in the 13th century, the city's prosperity grew with the creation of the Hanseatic League, an association of Germanic cities which controlled trade in the Baltic and which, by the end of the 15th century, had a fleet of more than 100 vessels. By 1660, Königsberg was under Prussian control and, in 1701 Frederick III von Hohenzollern was crowned the first king of Prussia in the cathedral of Königsberg, taking the name Frederick I.

The city was at the heart of trade between Russia and Germany and was capital of Prussia before Berlin took its place. It was a famous centre of education (the Albertina University was founded in 1544) and its most famous son, Immanuel Kant, whose three best-known works helped shape modern philosophy, spent all his life in Königsberg, dying there in 1804.

The 20th century wrought extraordinary changes. Germany's defeat in the First World War left Königsberg and East Prussia separated from the rest of the country by the Polish Corridor. This prompted Hitler's desire to reunite the territory, one of the triggers for the next conflagration. The region was taken by the Red Army in 1945 amid some of the fiercest fighting of the Second World War and became part of the Soviet Union, renamed in honour of Mikhail Kalinin, president of the Supreme Soviet.

The German population disappeared, never to return. Those that survived either fled, were sent to Siberia or exiled to East Germany. In their place Russians were brought in from across the Soviet Union, many to work at nearby Baltiysk, the headquarters of the Baltic Fleet.

The city centre was destroyed by Allied bombing raids and today remnants of the its golden age are scarce. Instead, visitors are more likely to notice the most famous architectural legacy of the USSR, the House of the Soviets, thought by many to be the ugliest building on Russian soil. But the historic cathedral, reduced to ruins by the RAF, has been rebuilt and, in the city's leafier districts, the Soviet architecture gives way to grander, pre-war German houses.

The aftermath of the collapse of the Soviet Union was not kind to Kaliningrad and the economic and social malaise of the 1990s still hangs over this oblast, or region. In her small, Spartan office by the city's port, Nina Voronkova, head of the support centre for families and children, can reel off a list of the city's social problems with alarming speed. "Alcohol, drugs, HIV-Aids, family problems, psychological problems, lack of employment, teenage pregnancy, people with low self-esteem," she says.

Male life expectancy is 58, and the support centre sees around 30,000 people a year, but, with several years of double-digit economic growth, things have eased. Ms Voronkova, who was born in Kazakhstan and raised her daughter in Ukraine, says the economic situation here is much better than in the 1990s.

Kaliningrad is beginning to shake off its reputation as the Aids capital of Russia. New cases have stabilised, falling from 52 per 100,000 population in 2001 to 41 in 2004 (compared with 81 per 100,000 in St Petersburg).

Economic growth is improving living conditions for the one million people of the region. In January 1996, Kaliningrad was designated a Special Economic Zone, bringing key tax advantages which have lured investors. A year later the first KIA car was assembled in Kaliningrad. The region now boasts a BMW assembly plant and a thriving furniture business as well as a fishing and oil extraction industry.

The authorities say growth overall hit 11.5 per cent in 2004 with industrial output rising 25.8 per cent. Meanwhile the EU has realised that it has a stake in preventing any further decay in an enclave bordering both Lithuania and Poland and Kaliningrad benefits from grants from Brussels to the tune of nearly €50m. The EU has ploughed €16m into 17 projects which are already completed, and has staked a further €32m on current work with a further €40m earmarked for future schemes.

During a recent visit, Benita-Ferrero Waldner, the EU commissioner for external relations, argued: "We would like to contribute to the economic development of the area. It is in our own interest to create stability in our region." But problems are looming and many believe that the progress made by Kaliningrad is artificial and fragile.

Moreover, Russia is due to become a member of the World Trade Organisation and, while that should benefit investment in general, it will mean that some of the tax breaks currently enjoyed by business in Kaliningrad will have to be phased out over the next decade. At present companies that import material, assemble furniture, then export it to mainland Russia, pay no customs duties. The region boasts no fewer than 120 furniture-makers who have an uncertain long-term future.

Meanwhile Kaliningrad's location, cut off from the rest of Russia, will inevitably complicate development. For years before neighbouring Lithuania and Poland joined the EU, Brussels was locked in interminable negotiations with Moscow on how Russians could transit through EU territory, particularly Lithuania. These talks were hardly eased by the fact that Russia's first lady, Lyudmila Putin, was brought up in Kaliningrad and took a special interest.

The end result was the creation of a special travel document which is cheaper and easier to use than a visa. There was also a promise to study the possibility of building a high-speed train link to cut through Lithuania.

Though the travel document appears to be working, Kaliningrad's residents fret about how the rules will change when Poland and Lithuania join the EU's passport-free Schengen zone, probably before the end of the decade. That will mean tighter restrictions. The costly high-speed train project has been quietly shunted into the sidings.

For Europeans, too, the border question is also neuralgic. If you play word-association games with a Russian and mention Kaliningrad, the chances are they will respond: "Narkotiki." Ms Ferrero-Waldner remains diplomatic but concedes that she raises the issue of drug-trafficking regularly with the Kaliningrad authorities. "There is a lot of smuggling of cigarettes and drugs and alcohol. It is always an issue when we hold talks," she says.

And some wonder whether it is really in Moscow's interests for Kaliningrad to be too successful. At present there is little separatist sentiment but, were the enclave to become more prosperous than the mainland, its citizens might start looking more to the EU than to Moscow.

For the time being, however, the region is experiencing the unfamiliar taste of modest success. Outside the centre for children and families, Djana Pestova says that, even for those on one income, life here is "definitely better than in the central areas of Russia", and possibly in many other parts of the world too. "My husband is a sailor and, he visits many countries," she says before adding emphatically: "We are happy that we live here."

10 things to know about Kaliningrad

* IMMANUEL KANT

The German philosopher spent his whole, celebrated life in his hometown. Often considered as one of the greatest, and most influential, thinkers of modern Europe, Kant was the last major philosopher of the Enlightenment. His essay "What is Enlightenment?" defined an age with the motto, "Dare to know". Daring meant thinking autonomously.

* THE MONSTER

The grand Teutonic fortress of Königsberg has gone, demolished in the 1960s as a "monument to fascism". In its place stands the Hall of the Soviets. Its rooms have never been used, the walls and floors have been stripped bare and it's known unaffectionately to locals as "the monster".

* AMBER

Home to 90 per cent of the world's amber deposits, Kaliningrad is awash with the orange resin. Most of it is illegally extracted as the enclave's giant mine had to shut down after losing two-thirds of production to thieves. Kaliningrad was reputedly the source of Catherine the Great's legendary Amber Room, in her palace in St Petersburg.

* THE BALTIC FLEET

The once-mighty Soviet Baltic fleet is still moored in the endless docks of Kaliningrad. But these days the ghost ships are little more than forlorn sun decks for shaven-headed Russian sailors. The rusting destroyers and submarines are too expensive for Moscow to operate. In the fields around the harbour, thousands of ancient tanks hunker under camouflage, while slowly sinking into the soil.

* THE NAMESAKE ...

Despite the fact that the former president of the Supreme Soviet, Mikhail Kalinin, never even visited the region, Stalin insisted on renaming the conquered Prussian city of Königsberg after the veteran Bolshevik revolutionary. Remembered during his lifetime as the "Kind Grandfather", Kalinin is now known as the man who ordered the Katyn massacre - the mass execution of the Polish officer class by Soviet forces in 1940.

* ... AND AN ALTERNATIVE

Many residents of Kaliningrad are uncomfortable with their region's name and have suggested suitable alternatives that recognise both Kaliningrad's Russian and German heritage. As the earlier name of Königsberg conjures unpleasant memories of Prussia and German conquest, some feel that Kantgrad is the only acceptable solution.

* FAMOUS WIVES

Two daughters of Kaliningrad have become the wives of powerful world leaders. Leah Rabin, wife of Yitzak, was born in then Königsberg in 1928 - her family emigrated to Palestine five years later. Vladimir Putin's wife Lyudmila also grew up in the city before meeting her husband in St Petersburg.

* COMMUNIST HERITAGE

Just because Kaliningrad is surrounded by Europe does not mean the Russian outpost is ashamed of its Soviet past. The city raised a few eyebrows in November by bucking revisionist trends and re-erecting a statue of Lenin. And no one has dared touch the 13-metre bronze statue of Kalinin outside the railway station.

* SECRET SOCIETY

For much of the Cold War, Kaliningrad was closed to visitors and a notoriously secretive place. As French President Jacques Chirac discovered last year, things are a little different now. It was while in Kaliningrad that Chirac famously called British cooking the second worst in the world (after Finland). His comments were instantly leaked to the press.

*SPITTING IMAGE

Kaliningrad is sheltered from the Baltic by the Curonian Spit, the highest drifting sand dune in Europe. Formed more than 5,000 years ago, the 52km-long Unesco world heritage site provides Kaliningrad with the Baltic's only ice-free winter port.

Jerome Taylor