LENINGRAD OBLAST

Basic information

Text by: Stanislav Tkachenko (et al.)
St. Petersburg State University, Faculty of International Relations,
October 2001

Leningrad region was established as a territorial unit of the USSR on August 1, 1927. Currently territory of the region is 83 900 square kilometers and the population is 1,676 million with a rather high for the Russian Federation share of urban population - 66,1%. The territory of the region is divided into 17 districts with 29 cities and towns and about 240 village administrations.

The Leningrad region (Governor Valery Serdyukov) is among the few regions of Russian Federation, which have a common border with a European Union member-state - Finland. The region has a border with an EU applicant member (Estonia) and four other Russian regions (Novgorod, Pskov and Vologda regions, and the Karelian Republic).

The Charter of Leningrad region was approved by the Legislative Assembly of the region on October 27^th, 1994 and modernized several times after that (the latest version is of June 27^th, 2001). The Chairman of the Legislative Assembly is Vitaly Klimov. One of the reasons for changes to the Charter is to achieve correspondence between federal and regional legislation. The control over implementation of federal legislation in the Leningrad region is the responsibility of the Chief Federal Inspector in the region. Up to September 2001 Andrey Stepanov was in this position before he was appointed as the Representative of the President of Russia in Kaliningrad region.

Nowadays the Government of Leningrad region consists of 22 committees as well as several agencies and chambers. The most important committees are: the Committee of Foreign Economic and International Relations; Committee of Information and Telecommunication; Committee of Energy Complex; Committee of Finances; Committee of Economy and Investments; Industrial Committee; Construction and Transport Committee; Committee of Health Protection; Committee of General and Professional Education; Committee of Culture; Regional State Property Committee; Agricultural Committee; Legal Committee; Anti-Monopoly Agency of Leningrad region and several other institutions inside regional government.

The Leningrad region is rather typical for modern Russia in terms of the characteristics of its leadership. The personal style of Governor Valery Serdyukov can be described as authoritarian. Even in his interviews he openly explain to journalists how he forces his deputies and heads of municipal formations to follow his policy (see, for example, interview with Valery Serdyukov in Expert-Severo-Zapad Weekly, October 29^th, 2001, pp. 34-36, www.expertnw.ru). As an example we may mention that the Ombudsman of Leningrad region, Alexander Pisarevsky, and his apparatus were included in the structure of the regional government as a unit under the personal control of Governor Valery Serdyukov despite of the fact that in many other Russian regions ombudsmen are totally independent from regional authorities.

There are 29 districts in Leningrad region: Boksitogorsk district, Volosovo district, Volkhov district, Town of Volkhov, Vsevolozhsk district, Vyborg district, Gatchina district, Town of Gatchina, Town of Ivangorod, Kingisepp district, Kirishi district, Kirovsk district, Koltushi volost, Town of Kommunar, Settlement of Kuznechnoye, Lodeynoye Pole district, Lomonosovsky district, Luga district, Town of Pikalyovo, Podporozhje district, Priozersk district, Town of Svetogorsk, Sertolovo, Slantsy district, Town of Sosnovy Bor, Tikhvin district, Tosno district, and the Town of Schlisselburg.

In September 1996 the recently elected Governor of Saint-Petersburg, Vladimir Yakovlev, and then-incumbent Governor of Leningrad region, Alexander Belyakov, who was trying to be re-elected a second time to his position, initialed the Treaty on merger by stages of Saint-Petersburg and Leningrad region". However, the treaty put no obligation on each of two sides and after Governor Belyakov lost his position to Mr. Vadim Gustov, the idea was forgotten for several years. Vadim Gustov, who was the Governor of Leningrad region for a rather short period of time before moving in September 1998 to Moscow to become First Deputy of Prime-Minister, supported the idea in general terms but avoided any concrete action to implement it. The current Governor Valery Serdyukov is an open opponent of unification. That's why in the autumn and early winter of 2001, as well as 2002-2003, will be a period of active political struggle between the leaders of Saint-Petersburg and the Leningrad region over the possibility, terms and time-table of unification.

The region, due to the active policy of its Administration is among national leaders in attracting foreign direct investments. Such well-known companies as "Ford Motors", "Philip Morris", "Kraft" moved into the region with their production oriented on the growing Russian internal market as well as on exports to European countries and member states of the Commonwealth of Independent States. Nowadays there are active consultations between the Government of Leningrad region and German company Volkswagen about the construction in the region of factory producing cars. Approximate amount of direct investments into the project will be about DM1 billion.

Due to a good location on the borders of the Russian Federation and a developed transportation system, the region has a quickly growing economy. The industrial growth in the region in 2000 was fantastic - about 127%. At the first half of 2001 the industrial growth was lower (114,7%) but still among the highest in Russian Federation. There is clear competition between Saint-Petersburg and Leningrad region to attract Russian and foreign capital into their economies, and during the previous two years Leningrad region was very successful in inviting leading companies from all the major sectors of economy (oil-refinery, aluminium, sea-ports construction in Ust-Luga and Primorsk, huge transport projects).

Due to significant industrial growth the region has in 2000-2001 for the first time in post-Soviet history a non-deficit budget. Functions of control of expenses from the regional budget in responsibility of Chamber of Control and Audit of the Leningrad region (the Head - Vladimir Semenov).

The structure of the government of Leningrad region is the standard for any Russian region. There are 9 members of the Government of Leningrad region. It has the Governor (Valery Serdyukov), First Vice-Governor (Vladimir Kirillov) and seven Vice-Governors, responsible for all spheres of economic, social and cultural life as well as for international cooperation.

The leading sectors of industry in Leningrad region are: production of electricity, oil-refinery, machine-building, pulp and paper industry, food and textile industries, chemical industry). In a few years the region will play very significant role in transit of Russian energy and raw materials to foreign markets as well as in import to Russia.

Agriculture is a very important sector of the regional economy. According to estimations from the Russian government, the region's agriculture is among the most productive in Russian Federation, especially in the sector of diary products.

The budget of Leningrad region is currently about RUR 6 billion. Industry provides 65% of the regional budget, the service sector - 25% and taxes - another 10%. In 1999-2002 the regional budget has become four times bigger (from RUR 2 billion in 1999 to RUR 8 billion in 2002 according to the, approved by the Legislative assembly, draft of the budget). Further important evidence of the growth of the regional economy is related to dynamics of Gross Regional Product and industrial production:

Table 1: Dynamic of economic development of Leningrad region (forecasts), in Russian rubles

The dynamic growth in the Leningrad region is really very impressive and may be explained by combination of objective reasons (proximity to Saint-Petersburg and to European Union, location on main transit routes between Russia and the most important foreign markets for Russian economy in Western Europe and Northern America), and the management skills of the regional leadership since 1998, when Governor Vadim Gustov was replaced by his deputy Valery Serdyukov.

Leningrad region has signed agreements on cooperation with many regions in the CIS and European countries, and the role of foreign economic relations is consistently growing. A very important role in the promotion of economic interests in the region is played by the Committee on Foreign Economic and International Relations (Head - Mr. Sergey Naryshkin). The most important economic partners of Leningrad region are the USA, Germany and Finland.

The volume of commodity circulation between Leningrad region and Finland was about $200 million in 2000. There are 219 joint ventures with Russian and Finnish capital and there are 69 enterprises with purely Finnish capital in the region. The government of Leningrad region is planning now to invite Finnish investors to take part in the financing of pipe-line construction from the Shtockman oil and gas fields in Barents Sea via Karelia to the Baltic Sea ports in Leningrad region. Another plan includes the development of ecological tourism and the tourist infrastructure on Russian islands in the Baltic Sea using Finnish know-how and investments. Leningrad region is also promoting projects of the construction of terminals for transportation of wood via the Russian-Finnish border and the construction of an International Industrial complex in Svetogorsk on the border with Finland. Finally, exports of Russian electricity to the lucrative Finnish market is possible only via the territory of Leningrad region.

Industrial production is spread across the territory of Leningrad region very irregularly. Traditionally Leningrad region since Soviet times specialized economically on the agricultural sector and smaller industrial production due to a lack of any significant natural resources and domination of sea ports in three Baltic Soviet republics in transit of Soviet export-import goods. That's why besides of huge investment projects, which are now under implementation or negotiations, it is the development of small and medium enterprises, which may assist in the rapid development of the regional economy, especially in districts, located far away from Saint-Petersburg, the Russian-Finnish border and the Baltic Sea coast. Currently the highest density of industrial enterprises, both large and SMEs is in municipal formations, located around Saint-Petersburg (in Vsevolozhsk district and in Schlisselburg), in the region on Russian-Estonian border (Ivangorod) and on the Russian-Finnish border (Vyborg). The concentration of SMEs in Leningrad region may be demonstrated by the fact that 40% of all SMEs in the Leningrad region is located in just two of 29 regions: Vsevolozhsk region and Vyborg region. The smallest number of SMEs are in following regions and cities: Kommunar, Pikalyovo, Boksitogorsk, Volosovo, Volkhov and Slantsy districts, here there are less then 2 small/medium enterprises per 1000 inhabitants.

For several years the theme of unification of Saint-Petersburg and Leningrad region has been discussed in political circle as well as in media. In summer 2001 the theme again became very popular. The reason being the Governor of Saint-Petersburg, Vladimir Yakovlev, lost all chances to be elected to governors office for the third time in succession, a third term is strictly forbidden under Russian legislation. His only opportunity to keep his position is to be elected as governor of a new unified Saint-Petersburg/Leningrad region. In this scenario he would be able to serve two terms as governor in Smonly, the residence of Saint-Petersburg government.

Before the financial-economic crisis of August 1998 it was Saint-Petersburg that played the leading role in bilateral relations, defining terms of economic cooperation and conditions for the city's companies to invest in the Leningrad region and obtaining concessions from its government and legislators. After the crisis the role of Leningrad region became much more significant due to the growing independence of the regional economy from Saint-Petersburg via a reorientation on partners in other Russian regions and foreign investors. Leningrad region is now one of the most rapidly growing Russian regions. The dynamics of per capita incomes in Leningrad region is now better than Saint-Petersburg. For example, the growth of real wages in Saint-Petersburg in 2000 was 118%, compared to 121% in Leningrad region in the same period. Some observers are now thinking about the possibility of the situation, where "wealthy Saint-Petersburg" and "poor Leningrad region" swap roles in the foreseeable future.

In the new situation Leningrad region and Saint-Petersburg are competitors in many sectors of the economy. First of all there is bitter competition over the status of leading transit center in the Russian North-Western region. Leningrad region is leading in this sphere due to the rapid construction of oil terminals in the Port of Primorsk, the Baltic Pipe-line System, and the Port of Ust-Luga. The sea port of Saint-Petersburg, once the only reliable transit port in Russia's North-West for trade with European countries and USA, and an important source of incomes for the Saint-Petersburg budget, is now moving into the shadow of new and modern ports in the Leningrad region. The Government of Russia is actively supporting all three ports in construction, mostly via the creation of favorable conditions for Russian private investors - leading oil, chemical and metallurgical companies like Surgutneftegaz, Lukoil, Transneft, Severstal and many others. At the moment the most fierce competition between the city and region is for control of ferry line Saint-Petersburg (or Ust-Luga in Leningrad region) - Baltiysk (Kaliningrad region) - Kiel (Germany). The Security Council of Russia supervises the project due to its importance for effective connection between "Big Russia" and the Russian enclave of Kaliningrad. Saint-Petersburg even is going to construct totally new port facilities in the city's suburb of Bronka in the south-west of the city, but Leningrad region is pushing forward the idea of using facilities in the Ust-Luga Sea port which will be built in the very near future. In general the construction of the port in Ust-Luga is one of the most important priorities for the Leningrad region's government. The construction is scheduled to finish in 2004 and it will cost about $30 million of the regional budget. As a result, Ust-Luga will be the only Russian sea-port for mineral fertilizers and become a competitor to the Latvian port Ventspils, whose specialization in the export of fertilizers was established in times of Soviet Union.

The competition over foreign investors is another sphere of rivalry between the neighboring regions. Leningrad region is receiving much more foreign direct investments per capita compared to Saint-Petersburg due to a favorable investment climate created by the Legislative Assembly of the region. A new sector of competition is related to an ambitious project of cthe onstruction of the Circular Highway (KAD) around Saint-Petersburg for transit traffic outside of streets and bridges of the historical center of Saint-Petersburg. It is a very costly project itself, but future income from developing infrastructure around the highway pushes both the city and region into severe competition, where legislators, federal ministries and even the Presidential Administration are involved.

Another growing sector of the Leningrad region's economy is non-ferrous metallurgy and especially the production of aluminum. There are at least three projects now under consideration for the construction in the region of an aluminum mill. One of the projects is based on idea that a combination of huge resources of cheap electricity from the Leningrad Nuclear-Power Station, alumina from Boksitogorsk and Pikalyovo in Leningrad region and the Sea Port of Ust-Luga for export of aluminum with mills in towns near-by Saint-Petersburg such as Sosnovy Bor or Vsevolozhsk. The project for a Sosnovy Bor mill is designed to produce about 150 thousand metric tons of aluminum, and the Vsevolozhsk Mill may produce the same 150 thousand metric tons. The production of aluminum is one of the most profitable branches of the Russian economy, but also one of the most criminal too as we know from experience of the Krasnoyarsk, Bratsk and Irkutsk Aluminum Mills. In mid-1990s there was, as one Russian journalists wrote, even the Great Aluminum War where dozens of businessmen were killed. The prospect of this happening in or around Saint-Petersburg has push many people and NGOs to start campaign against construction of the aluminum mills. Yet it seems likely that at least one of the projects will be carried out.

In a rating of comparative solvency of 89 Russian regions, which was created by the Rating Center AK&M in October 2001, Leningrad region is in the twelfth position now - the best result for the region since mid-1990s. Only the two Russian capitals (Moscow and Saint-Petersburg), regions with oil resources in Northern part of Russia and Tatarstan as well as regions, specializing on metallurgy (Lipetsk and Vologda) are ahead of Leningrad region. The rating list reflected qualitative changes in the regional economy - having few mineral resources and no specialization on any specific industry, the region was able to develop in the late-1990s a good investment climate and attract national and foreign investments into many branches of industry and sectors of services. The complex character of the Leningrad region economy's development (industry, agriculture, services, transit) is the main characteristic of new economy of the region.

The most attractive sectors for Russian and foreign investors of the Leningrad region's economy are: mechanical engineering, assembly of motor cars, non-ferrous metallurgy, the wood and pulp&paper industry, and transport. The least developed sector of the regional economy is telecommunication. There is no single project in the field, which is rather surprising because of Saint-Petersburg telecom companies are Russian national leaders and the companies - Telecominvest and Delta Telecom are heavily investing into different Russian regions from Kaliningrad to Russian Far East.

Leading Russian companies are moving into the region. In September 2001 the largest Russian company RAO Gazprom signed an agreement with the Administration of Leningrad region on the construction and supply of natural gas facilities into three of the most backward districts of the region: Lodeynoye Pole district, Podporozhye district and Luga District. The project has to be implemented in 2003, and after that the whole territory of Leningrad region will have the opportunity to use natural gas for heating and use in houses. The Government of Leningrad region will finance municipal formations for implementation of the project directly from the regional budget.

Foreign capital is also moving into the region due to favorable legislation for foreign investments as well as because of the proximity of Leningrad region to the attractive market of Saint-Petersburg. According to the estimates of experts, inflow of foreign investments into economy of Leningrad region in 2001 will be about $400 million - a growth of about 15% compared to 2000. Among the biggest recent projects with participation of foreign capital are: the construction of a factory producing filters for cigarettes in Gatchina, transit and trans-shipment facilities for alumina in Ust-Luga and a $1 billion project for the installation of "Hidrocracking" for deep treatment of oil in Kirishi oil refinery.

The Government of Leningrad region is the founder and owner of the leading regional newspaper Vesti (www.vesty.spb.ru) and TV company LOT, which has several hours every day on the leading regional TV channel "Petersburg" - Channel 5. The regional authorities as well as some municipalities have their sites in on the internet (the most important is www.lenobl.ru, which has both Russian and English language versions). There are also several sites of municipal formations and cities of Leningrad region on the Internet, but usually the sites have little information and are very poorly designed. We may recommend just two of them: the site of municipal formation "Vyborg district" with rather sizeable english-language page http://www.head.vyborg.ru/en/index.html; and the web-site of the municipal institutions of Sosnovy Bor: http://www.sbor.ru/

Rather recently one more web-site, with information about Leningrad region, was opened. Owners of the site are in opposition to governor, government and even the Legislative Assembly of the region. The site is based on opposition newspaper "Novosti Leningradskoy oblasti" ("News of Leningrad region"). Address of the web-site is: http://www.lenoblnews.ru/