Russia's Baltic Foothold Looks West for Investors

HISTORY is taking an ironic twist here as authorities strive to revive the collapsed economy.

This Baltic Sea city's destiny first took a sharp turn April 9, 1945, when the Red Army "liberated" it following a fierce fight against Nazi troops, a battle that destroyed about 90 percent of the center. Under the Potsdam Treaty on postwar Europe, the Soviet Union annexed the city and surrounding territory, formerly known as East Prussia - and the destruction continued.

To facilitate Sovietization, the new authorities obliterated centuries of Germanic influence. In 1946, the city changed names from Konigsberg to Kaliningrad, honoring the former Soviet chief of state Mikhail Kalinin. Then, between 1947-48 virtually all German civilians - more than 100,000 - were deported to what became East Germany.

But now regional officials are trying to restore what little remains of the area's Germanic heritage, hoping to make it more attractive for Western investment. Some landmarks that have lain in ruins for years - such as a 13th Century cathedral where the philosopher Immanuel Kant is buried - are undergoing restoration. Authorities here profess loyalty to Russia, but they are focusing on the West, especially Germany, to power the local recovery.

For its part, Moscow is not eager to help Kaliningrad lay the groundwork for semi-integration with the West. Although Moscow declared Kaliningrad a Free Economic Zone, it has done little else to enhance the region's attractiveness to investors. Such action, some Moscow officials say, could contribute to the breakup of the Russian Federation.

Officials here argue that Kaliningrad's geographical position makes it a natural bridge for trade with the West. The territory is completely cut off from Russia proper, bordered by Lithuania, Poland, and the Baltic Sea.

"We'd like to reintroduce this city into the ring of old Hanseatic League cities," says Vladimir Toropov, deputy chief of the Kaliningrad Region Administration, referring to the economic alliance of Baltic Sea centers that thrived between the 13th and 15th centuries. But integration efforts have run into roadblocks. Currently, Kaliningrad is wrangling with Moscow over a proposed law that would grant the region special status. Kaliningrad officials envision the draft law - now being discussed in parliamen tary committees - as giving the region economic autonomy, while preserving political ties with Moscow.

But with Moscow struggling to contain several restless autonomous republics - nominal ethnic homelands that are agitating for greater sovereignty - many in Parliament are unreceptive to Kaliningrad's bid to gain increased decisionmaking powers.

The granting of special rights to Kaliningrad could spark other Russian regions to seek similar powers, further weakening the ties that keep Russia together. In addition, Russian nationalists worry that special status could invite attempts by Germany, Lithuania, and Poland to claim Kaliningrad's territory.

"Given its enclave status we certainly recognize the need for special methods of administration ... but their conception of the law will have to be reworked," says Nikolai Kartsev, an official with the Parliament's Committee on Inter-Republican Relations, Regional Policy, and Cooperation.

"We're working with a very delicate problem," Mr. Kartsev continues. "This law could create a precedent for the individualization of legislation."

Rather than granting autonomy, Kartsev says, Moscow could also develop Kaliningrad's economic potential by increasing federal allocations to the region.

Kaliningrad officials welcome federal contributions, but add that the greater decisionmaking powers are nevertheless required.

"We must decide a lot of questions with our neighbors across the border [Poland and Lithuania]. It would be better ... for these questions to be solved here, on the spot," says Leonid Ko-kotkun, deputy chairman of the Kaliningrad Regional Legislature.

One key to passage of the law rests in Kaliningrad's ability to convince Moscow that the region will not use the legislation to pursue a separate way out of Russia's economic crisis.

"Our goal isn't just to survive, but to help Russia survive," says Oleg Mikhailov, deputy chairman of Kaliningrad's Free Economic Zone Development Committee. "But for now [authorities in Moscow] don't trust us completely."

Recent developments have helped boost trust. For example, deputy administration chief Toropov praised the Russian Foreign Ministry for closer coordination with Kaliningrad in dealings with the Baltic states of Lithuania, Latvia, and Estonia. Despite such improvements, the relationship faces a test in the coming weeks, as the effort to promulgate a new constitution intensifies.

Toropov and others say the devolution of power from Moscow to the regions, envisioned in the Federation Treaty, must be part of the new constitution. Otherwise, some areas would be forced to pursue separatist policies.

"The erosion of central power isn't just a possibility, but an absolute necessity," he says. "And the Federation Treaty is the most important document for preserving the stability and integrity of Russia."