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'An Economic Target': Russia's Kaliningrad Exclave Confronts New Levels Of Isolation

People wait in line at a currency exchange office in Kaliningrad, where residents are nervously watching the unfolding political situation surrounding Ukraine and the alarming collapse of the ruble.
People wait in line at a currency exchange office in Kaliningrad, where residents are nervously watching the unfolding political situation surrounding Ukraine and the alarming collapse of the ruble.

KALININGRAD, Russia -- Igor Pleshkov owns a concrete factory in this Russian Baltic Sea exclave encircled by European Union members Lithuania and Poland. As tensions burn red hot between Russia and the West over Moscow’s military invasion of Ukraine, he is worried.

“What will come next is hard to say,” he shrugged. “The situation is changing every minute -- for the worse.”

Like Pleshkov’s factory, most businesses in the region of about 1 million people, depend on imports for raw materials, spare parts, and equipment. Residents are nervously watching the unfolding political situation and the alarming collapse of the value of ruble.

“What can we expect?” Pleshkov said. “It will be a catastrophe, complete collapse. Within a week, every housewife will be feeling it.”

“Businesses are already feeling it now,” he added.

Since Moscow’s unprovoked attack on Ukraine, Western countries have imposed waves of unprecedented sanctions, including shutting some Russian banks out of the SWIFT financial-transactions system. Most European countries have closed their airspace to Russian planes.

Flights from Kaliningrad to Moscow since February 27 have been flying over the Baltic Sea to the Leningrad region before turning sharply south. The new route has added about 40 minutes to the flying time, making it a two-hour journey.

So far, prices have been stable, at about 2,600 rubles ($22) each way.

But without government intervention that may not last, said Solomon Ginzburg, head of Regional Strategy, a local think tank.

“The flight time has increased…because of the northeastern bend,” he said. “That costs money. It is easy to calculate that ticket prices will rise 35 to 40 percent.”

In a video posted to Instagram on March 1, Kaliningrad Governor Anton Alikhanov attempted to head off such fears.

“If ticket prices rise, we have already spoken to the federal government, and we will ask for additional support so that tickets won’t become significantly more expensive and will continue to be affordable,” he said.

'I'll Have To Take The Loss'

Passenger rail links between the exclave and the rest of Russia pass through Lithuania under a 2003 agreement with the EU. Lithuanian Prime Minister Ingrida Simonyte said on February 27 that no changes to that agreement were under consideration.

Nonetheless, imports brought into the region by truck are already being affected. In fact, local businesspeople say, the region has been under economic pressure at least since January, when tensions flared between Belarus and neighboring Poland and Lithuania over a migrant crisis along their borders. Hundreds of trucks bound for Kaliningrad got hung up at the border, and the delays never eased up.

“In some places it is better and in others it is worse,” said Leonid Stepanyuk, vice president of the DSB-Transport trucking firm. “One of my trucks got through the border in five days, another in seven, and yet another in 10.”

“The situation is best on the Russian-Latvian border,” he added. “It is worse on the Lithuanian-Belarusian border.”

A trucker who asked to be identified only as Sergei told RFE/RL that he had recently returned from Russia after spending 12 days at the Salcininkai-Benyakoni border crossing between Belarus and Lithuania. He spent the entire time living in his truck.

“Of course, it was hard,” he said. “I was able to buy food and I have a refrigerator in the truck. The Belarusians brought food -- they cook it at home and sell it in portions. You could ask them to bring you water too.”

“Earlier, I’d make the trip to Moscow about three times a month,” he added. “That is normal. This time it took me 20 days to go to [the western Russian city of] Bryansk and back.”

A truck waits in line at Kaliningrad's state border. (file photo)
A truck waits in line at Kaliningrad's state border. (file photo)

Pyotr, a Kaliningrad entrepreneur who asked to be identified only by his first name, imports furniture from Poland. For him, as the value of the ruble declines, each day is lost money. On February 28, the ruble declined from 19 Polish zloty to 30, costing him 360,000 rubles ($3,300).

“I have more than 40 orders of furniture sitting ready in Poland now,” he told RFE/RL’s North.Realities. “They were supposed to be shipped last week, but now they are saying it left on [March 1]. The Poles refused to load it right way because they were waiting for their president to announce sanctions against Russia…. They are in shock themselves -- just in one city there are 70 factories working almost exclusively for Russia.”

“In the end, on March 1, I lost more money because of the exchange rate,” he said. “The furniture is all prepaid, so I have to sell it for the old price. I can’t retroactively raise the prices. I’ll have to take the loss.”

The city of Kaliningrad (file photo)
The city of Kaliningrad (file photo)

Suppliers 'Acting Emotionally'

Analyst Ginzburg says that Kaliningrad’s dependence on imports makes it an “economic target,” saying the region’s poultry farms are 90 percent dependent on eggs imported from the Netherlands and the United States while the agriculture sector is 80 percent dependent on imported seed.

“And what about Avtotor?” he asked, mentioning the region’s largest automobile producer, which employs more than 2,000 people directly and claims on its website to contribute a total of 30,000 jobs to the region. “In my view, it will simply shut down.”

The company assembles cars for BMW, Kia, Hyundai, and foreign companies.

Igor Pleshkov
Igor Pleshkov

Construction-sector companies complained to the website New Kaliningrad that suppliers in Lithuania, “acting emotionally,” have been refusing to accept orders from Russia.

Concrete-plant owner Pleshkov has had similar experiences with his suppliers in Poland.

“Today they refused to ship spare parts from a warehouse in Poland,” he said on March 1. “They just informed us that they weren’t going to ship, even though everything is already paid for.”

He added that he has a front loader, also paid for, sitting in a warehouse in Belgium.

“It is being checked to see if it counts as ‘dual-use’ equipment,” he said.

Written by Robert Coalson based on reporting from Kaliningrad by RFE/RL North.Realities correspondent Yulia Paramonova.

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