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Vladimir Putin: Good afternoon.

Today we are scheduled to discuss the development of the Kaliningrad Region. You and we both know that it is a unique area within Russia. Its defining features are its status as an exclave and its closeness to other countries. Its remoteness from the central parts of Russia thrusts into the foreground the issues of lines of communication, liaison and transport corridors with the mainland of Russia. It is now a matter of ensuring a normal life for the region and its residents. Lastly, the way things are run in the region is largely responsible for security in all northwestern Russia and the country as a whole.

I would like to say a few words about the economic situation in the region. The first point I want to make is that it is far from being at the forefront. Investment in fixed capital there is half as much as the average for the country. We have positive momentum across the country and acceptable rates of economic development. At the same time the decline in production in the Kaliningrad Region is a recorded fact and is evident in practically all branches of industry. Possessing almost 90% of the world’s amber, for example, the region has not even come within the world benchmark for that material. And this despite its closeness to European markets.

The region has a standard of living 1.4 times lower than the average for Russia. The plight of elderly people is particularly bad. We know that separation from close relatives living in other parts of Russia does not allow them to receive support through family channels, and the elderly can only look to social support from the state. Socially dangerous diseases – TB, drug addiction and AIDS – are rampant in the region. Another problem that plagues the region and defeats all efforts to combat it is a high crime rate, including financial crime. And all this, strangely enough, is occurring at a time when the federal centre seems to be paying constant attention to the area’s headaches. Laws are passed, the Government adopts resolutions, we discuss matters at the Security Council… There are some improvements, of course, but the gulf between bureaucratic bustle and the real state of affairs and real returns from that bustle is still very, very wide.

Today we must look again at the concept for the development of the Kaliningrad Region adopted several years ago. We must look at it through the prism of new European realities and new opportunities for the Russian economy. There is now a real chance to try out a new pattern of cooperation between Russia and Europe in the Kaliningrad Region. We know that very soon Kaliningrad Region’s closest neighbours will join the EU, making it an enclave in a united Europe and territorially divorced from the Russian Federation.

The move has its minuses, but these minuses can be turned into pluses. One need only anticipate them. Such an approach meets our country’s prime national interests. At the same time one cannot forget that only the Russian Federation is, of course, exclusively responsible for the solution of Kaliningrad’s problems.

Hence one of the objectives is ultimately to coordinate precisely the efforts of ministries and government departments on matters relating to life support for the Kaliningrad Region. Departmental disarray has more than once led to unpleasant consequences. I have already spoken of the generally low efficiency of our work. One of the more recent examples is the introduction in January of this year of new customs tariffs, which set the region’s population agog.

I would like to stress this: our fundamental task is to create reliable legal and administrative conditions for Russian and overseas capital arriving in Kaliningrad and for its own regional business. The key issue is the effective interface between all levels of authority, between region and Federation, between all tiers of power within the region. We must clearly and neatly divide powers and responsibility between the federal centre and the Kaliningrad Region. And take steps to reinforce contacts between the centre and the region both through the presidential envoy for the North Western District and through ministerial and departmental channels.

One more goal is to analyse the effectiveness of the special economic zone in the Kaliningrad Region. Its economic effect has actually been only short-lived and able to produce only stopgap measures. It did almost nothing to address the task of establishing a new economy. We, however, need returns on the strategic scale, of which you and we are well aware.

The economic future of Kaliningrad depends to a great extent on the region’s energy supplies. The state of the energy industry bears directly on industry and transport. Therefore, special consideration should be given to these questions.

As you see, I have given a general outline. Actually, the problems are more prolific. So let us get down to the brass tacks and see what we need to do.