The Economy in Kaliningrad Is So Bad That One Mayor Put His Town Hall Up for Sale

Kaliningrad, a Russian enclave nestled between the Baltic States and Poland, used to enjoy economic growth that outpaced the rest of Russia — close ties with its EU neighbors were good for business. But between Russia’s recession and Western financial sanctions, Kaliningrad has been on the receiving end of an economic downturn that leaves many in the region struggling.

One Kaliningrad mayor, however, has found a creative way to help his town weather the fiscal storm. Rather than slash budgets or raise taxes, Aleksey Zalivatskiy, the mayor of the small coastal city of Yantarny, put the town hall up for sale.

“I cannot and don’t want to cut back on social services,” the mayor wrote in a Facebook post announcing the sale. He is planning on auctioning off the town hall to help bankroll ailing public services. “No joke. It’s a beautiful building in the city center,” Zalivatskiy wrote. “We are inviting serious investors.”

With its unique geography surrounded by EU members, many used to hope Kaliningrad could become a staging ground for closer EU-Russia cooperation. Dmitri Trenin, the director of the Carnegie Endowment for International Peace’s Moscow Center, called Kaliningrad a “natural laboratory for EU-Russia relations” in 2002. But with West-Russia tensions at rock bottom after the annexation of Crimea in Ukraine, this enthusiasm has all but evaporated — as have the enclave’s special ties with the West.

In April, the enclave’s decade-long “special economic zone” (SEZ) privileges — which allowed duty-free trade with EU neighbors — expired amid Western sanctions on Russia. Since then, its economy has ground to a halt.

The end of the SEZ was a disaster foretold, expected to negatively impact “at least 785 local companies that currently employ 24 percent of the local workforce” in Kaliningrad, according to analysis by Sergey Sukhankin for the European Council on Foreign Relations the month before it lapsed.

Yantarny is just one of the towns in Kaliningrad suffering the impact of the SEZ’s expiration and continued Western sanctions. Whether it is a publicity stunt or not, Zalivatskiy’s move has captured the attention of popular Russian news sites.

But for Western leaders, Kaliningrad is catching their attention for a host of other reasons. U.S. and European officials are increasingly concerned that the Kremlin is turning Kaliningrad into a militarized outpost to ratchet up tensions with NATO. In October, Russia deployed nuclear-capable Iskander missiles to the enclave. NATO Secretary-General Jens Stoltenberg criticized the move as an example of Russia’s “assertive military posturing.”

Photo credit: ALEXANDER NEMENOV/AFP/Getty Images