By Kieran Cooke

in Kaliningrad



The village of Yantarny, on the shores of the Baltic in the Russian "oblast", or territory, of Kaliningrad has a prosperous look about it.

Quaint wooden houses are newly painted. Polished four-wheel-drive jeeps are parked along the road.

Residents of Yartarny have grown wealthy on what is one of Kaliningrad's main industries - the mining of amber, the soft stone used in the jewellery business.

More than 80% of amber production now 'disappears'

Kaliningrad is believed to have more than 90% of the world's total amber deposits.

But Yantarny residents are the exception in a territory caught between the political world of Russia and the new European world which will soon surround it.

"They are the lucky ones," says Olga Danilova, a teacher and guide.

"Earning a living is a great struggle for most people - and most of us face a very uncertain future."

Limbo state

Poland and Lithuania, Kaliningrad's neighbours, are due to join the European Union next year.

That will mean the one million people of Kaliningrad - the name refers to both the territory and its capital city - will find themselves cut off from the rest of Russia, surrounded by EU states.

"Now we don't need visas to go to Poland or Lithuania but when they join the EU, unless we fly to Russia, we're going to need travel documents to visit our own country," says Ms Danilova.

"It could mean yet more economic hardship."

'Disappearing' production

Up till the early 1990s agriculture was Kaliningrad's main industry.

Dairy cattle grazed its lush, green fields, supplying milk and butter products to Moscow and St Petersburg.

When the Soviet Union was dissolved, Kaliningrad's farmers suddenly found they no longer had a captive market and more than 70% of the territory's dairy herd had to be destroyed.

"The Monster" - a remnant of 60s modernisation

In the post second world war years, the whole of Kaliningrad was designated a special military zone, home to up to a quarter of a million troops and headquarters of the old Soviet Baltic fleet.

The military presence generated considerable local income and industry. Now only about 20,000 military personnel remain in Kaliningrad: abandoned, rusting military equipment is everywhere.

Average per capita income is less than $100 per month: with rents averaging $20 to $30 and a scarcity of jobs, for most it is a struggle to survive. Smuggling - of everything from military hardware to cars, from cigarettes to alcohol - is a major past time.

"It's calculated that since the break up of the Soviet Union about 80% of our annual amber production has disappeared" says a local economist.

"It's been stolen and smuggled across the border to be processed in Poland or in the Baltic states.

"The industry was privatised 10 years ago. There was no proper management, no controls - it was a disaster. Now it's been renationalised."

A new start

Other businesses have started up. A local plant assembles the latest series BMW's for the Russian market. There have been investments in fur farming and furniture manufacturing facilities.

Amber-infused vodka: one of Kaliningrad's export hopes

Kaliningrad has oil deposits. Surrounding countries are concerned about plans to start production offshore, in the Baltic.

Efforts are being made to export the local vodka - flavoured with amber acid and described by its manufacturers as "a strong biological stimulant".

At one stage it was proposed that Kaliningrad should become one big, free trade zone - the so-called Hong Kong of the Baltic.

The project floundered due to excessive bureaucracy and an unwillingness by Moscow or outsiders to commit funds.

Time-warp

We are not the same as the other Baltic states....We will always be part of Russia

Olga Danilova

Much of Kaliningrad seems trapped in a time warp: a giant statue of Lenin looks down on the city's main square.

Dull, Stalinist style apartment blocks line its streets. A concrete edifice looking like a giant robot's head dominates the city skyline. Started in the 1960s by Soviet planners the building - nicknamed "The Monster" by locals - was never finished or used.

Though Kaliningrad's population faces geographical isolation from the rest of Russia, few seem interested in any break with Moscow.

"We are not the same as the other Baltic states," says Ms Danilova. "They have their own languages, their own cultures. We will always be a part of Russia."

The big problem for Kaliningrad is that it is becoming more separated from the economy and political life of the rest of Russia - and yet it is not part of the new European world which will soon surround it.

"We have to find a new role for ourselves," says Ms Danilova. "Above all we need investments and new laws - only then can we make progress and improve our living standards."