Economic the economic sanctions by the west and counter-sanctions

Economic situationThe region’s economic situation is influenced by the proceeding economic crisis in Russia and the changing conditions of doing business in the oblast. This is partly due to the termination of tariff concessions on April 1, 2016 which used be a part of the Special Economic Zone established in 1996. The approach to administer Kaliningrad’s economy is also having an influence. Anton Alikhanov began implementing this policy on behalf of the Kremlin, initially as deputy prime minister and acting prime minister of the oblast and then as acting governor.The fall in oil prices which match with the economic sanctions by the west and counter-sanctions by Russia has also had a strong adverse effect on the economy of the Oblast (although the region’s socio-economic indicators match average levels for Russia as a whole). Gross regional product in 2015 fell by 7.6%. All potential growth factors remain non-positive at present. Investments in the area have fallen for the fourth year in a row (by 10% annually), and the residents’ real incomes have been falling since 2015 as well (by 6%). The economic situation is still very tough, especially in the primary sector, the car industry, trade and transport. Attempts to boost Kaliningrad’s economy have so far not been fruitful. According to Alikhanov’s estimates, when the SEZ applied, the state budget ‘lost’ around US$15 billion on customs duty exemptions and indirect taxes, and the oblast turned into a grey trans-shipment zone. Russian government has been trying to change the oblast’s economy from one based on trans-shipment to one on production and exports, above all by liquidating customs privileges granted in 1996.The ambers sector is also perfect for exhausting public funds from the area as its greater part has in fact been functioning in the grey for 20+ years. In 2015, the Kaliningrad Amber Factory located in Yantarny extracted 313 tonnes of amber, and its income from sale reached around US$21 million. The estimated amount of illegal manufacturing in Kaliningrad is currently around 150 tonnes every year. Until 2012, the amber factory was owned by the Russian Ministry of Finance, illegal amber production flourished, and the trade was controlled by organised crime (Viktor Bogdan, who currently resides in Poland, was allegedly one of their main leaders).Social situationThe continuing economic crisis in Russia has affected the social situation in the oblast. The issue has also brought about a degradation of public sentiment shown above all through dissatisfaction with local socio-economic situation and the freefalling evaluations of people’s own economical situation. This is reflected in the results of different surveys (for example, the amount of those not satisfied with the situation in the region increased by 12 percentage between November 2014 and April 2015). Residents of the oblast also declare that they have noticed increased dissatisfaction with the government’s actions among the general populace due to the increase in prices during the crisis. This has not led to any outbreaks.For Kaliningrad, keeping an open border with its neighbours is a factor for reducing social tension. This is a kind of a valve which enables, for example, for the shortages in the region’s resources and supplies to be made up by shopping and medical tourism, mainly to Poland, and development of entrepreneurship based on cross-border co-operation.The Russian government’s anti-Western propaganda appeals less to residents of the oblast than to those of other regions of the Russia. Social surveys reveal that residents have a positive attitude towards their immediate neighbours. On the other hand, Moscow’s fears that overly relations between residents of Kaliningrad Oblast and their neighbours may result in anti-Kremlin sentiments have proven unfounded. The Kremlin’s activity continues to be evaluated very positively in Kaliningrad Oblast The annexation of Crimea met with massive approval (88%). The opinions are even better in those cities where the Baltic Fleet is stationed.Similarly, the Polish government’s decision to suspend small border traffic  between Poland and Russia, even though it is viewed as an inconvenience by residents of the oblast, has not provoked any marked emotion because they have relatively easy access to EU member states’ visas, and this allows them to maintain intensive external contacts.Political situationThe contortions in managing funds, the examples being the Baltic Fleet, the stadium construction and the airport development, recently revealed by prosecution authorities are an element of the central government’s broader policy aimed at disciplining the local elites. This is also linked to the political calendar (the parliamentary election in September 2016 and, above all, the presidential election planned for March 2018).The parliamentary and local elections on 18 September 2016 were the first effectiveness test for the new government. Although the government did not achieve a result with respect to that of Russia, it passed the test. United Russia officially garnered 43.4% of the vote (54.2% in the Russian Federation as a whole) and its candidates won in both single member constituencies in the oblast.Numerous cases of manipulation and electoral fraud were seen during the elections (as in other parts of Russia). The election campaign in the oblast was almost unnoticeable, which was proof of the attempt to discourage citizens from political activity. In effect of this, voter turnout was low – officially 44% (compared to 47.9% on the nationwide scale) and was most likely significantly overstated by the government.Military situationThe Russian government’s using the atmosphere of threat allegedly posed by NATO member states to the oblast is used as an excuse for the organisational changes in the Baltic Fleet launched in spring 2016. On 1st April the decision was taken to reform the 11th Army Corps on the base of existing ground units, and supplies of new weapons were promised. The Russian side has so far limited itself to creating the command structures and the staff for the new corps, but no new combat units have been developed. The deployment of new weapons systems has significantly expanded the spectrum of the Russian troops’ attack capabilities and has enabled the creation of a so-called Anti-Access/Area Denial (A2/AD) zone based on Kaliningrad Oblast. If the zone is created, the territories and airspaces of the neighbouring NATO member states and, considering the range of Kalibr missiles, also the entire Central Europe and Scandinavia will be within the range of Russian weapons. One consequence of the increasing militarisation of the oblast is the intensified activity of the secret services and other institutions of force. A special role is played by the structures of the Federal Security Service (FSB) and the Federal Protective Service (FSO) which are in charge of the oblast’s counter-intelligence protection and governmental special communication. Over the past few years the oblast has been playing an increasingly important role as a staging base for carrying out intelligence tasks in Lithuania and Poland. One proof that intelligence activity has intensified is found in the fact that tasks which have the nature of classical political intelligence are carried out by the FSB which, according to the competences act, is only tasked with shallow trans-border intelligence. The fact that proves that such actions are taking place is the indictment brought against the FSB officer Nikolai Filipchenko who was detained in Lithuania on charges of attempting to recruit officers of the Lithuanian services tasked with protecting the premises used by the president of Lithuania.


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