The part of the Special Economic Zone established in

The 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).

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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).