Druzhinin Alexandr Georgievich — Doctor of Geography, Professor, Director of the Northern-Caucasian Research Institute of Economic and Social Problems of the South Federal University.
Lachininskii Stanislav Sergeevich — PhD in Geography, Research Fellow at the Laboratory of Comprehensive Studies of the Spatial Development of the regions, Institute of Problems of Regional Economics of the RAS; Assistant Professor of the Department of Economic and Social Geography, Saint-Petersburg State University.
This article was prepared based on the materials of the expedition studies in the framework of research grants of the Russian Scientific Foundation (#15- 18-10000) and the Russian Humanitarian Scientific Foundation (#15-02- 00002).
The aim of the study was to identify the role of the coastal factor and the location factor in the transformation of the socio-economic system of Kingisepp District.
The scientific and practical significance of the proposed research concerns synthesis of analytical, statistical, expert estimates and projections, as well as consideration of the position of the local authorities, views of major economic players and port operators.
The study aims to contribute to the regional economy and social geography, united by a common geospatial paradigm. Russian scientific literature provides little research performed on the level of municipal districts, which greatly decreases our understanding of the socio-economic processes in the field. Kingisepp district of Leningrad Oblast is a unique area that combines several important spatial characteristics — «cross-border-ness», «seaside-ness», and «periphery-ness». The seaside part of the region (which has 114 km of the sea coastline) has gained a powerful impetus to its formation due to implementation of the project of the Ust-Luga sea port. This sea port continues to increase its influence not only on the surrounding areas, but also on the whole historical main area of economic and residential development of the municipality (along the axis of «Ivangorod — Kingisepp»). This became possible due to improvement of road and transport infrastructure, outlooks for development of industrial zones, housing development, and due to an increase in labour “push-pull” migration. The article describes the most important aspects of the transformation of the socio-economic system in the context of marine economic activities that correspond to the port development.
“The shift to the sea” of the economy, population and infrastructure is a fundamental, universally manifested trend of the territorial organization of the modern society. Marine economic activities are based on the powerful economic potential of the world’s oceans (according to the most conservative estimates, the value of their resources totals 24 trillion USD ), and correspond to globalization (it is symptomatic that 90% of international trade is carried out through seaports ). In this regard, in the scientific literature there have been cultivated for decades notions of the economic and social specificity of coastal regions, of the “coastal zones” as specific socio-geographical phenomena; attempts have been made to identify and delimitate them. At the same time, formal geospatial criteria for a “coastal zone” (a direct “access” of a territorial socio-economic taxon, merged by this coastal zone, to the coast, as well as a small, usually in the range of 50 to 200 km distance from the coastline [3-9]), as we believe, should always be complemented by the actual impact of the “coastal factor” on the territorial socio-economic dynamics, and by recognition of the determination of the coastal zone (including its spatial scope and contours) specifically by its marine economic activities (including development of modern port, logistics and industrial complexes [10, p.55]).
A striking example of the renovation of the coastal zone, its “compressing” and “expansion” (as well as the overall “coastal factor” in the social and economic development), is Kingisepp District of Leningrad Oblast. Here, a major project of the Ust-Luga sea port has been successfully implemented for already more than two decades. With the growth of the port and industrial activity and developing of the necessary infrastructure, it provides an increasing impact on theeconomic and residential architectonics of the territory.
The port of Ust-Luga as the “pole” of the socio-economic activity in water and on land
Construction of the sea port of Ust-Luga is carried out in accordance with the decree of the Government of the Russian Federation dated April 28, 1993 #728-r with the aim to create powerful, high-performance complexes for handling bulk to large vessels with the carrying capacity of over 30 thousand tonnes. The port was kind of an “answer” of Russia to the growing geopolitical and geo-economic risks from transit countries (first of all, from the Baltic States). At the same time its construction was a logical step in the development of the north-west (Baltic) transport communication corridor of Russia and in the reconstruction (expansion on a new site) of the Saint-Petersburg sea transport hub.
Unlike the old sea ports – Saint-Petersburg, Novorossiysk, Rotterdam, Antwerp, Hamburg, Le Havre and others, Ust-Luga was originally designed as «greenfield». This means that it was designed as a new project from scratch in a new place, which determines not only its high-tech capabilities, but also opportunities for further expansion of transport and logistics activities and, which is even more important (also due to the potential impact on the surrounding areas), opportunities for the development of the port industry. This project is a good example of the successful practical implementation of the Russian geo-economic strategy by the State and its business in the very complicated geo-economic, economic, financial and institutional conditions. German researcher Hans Kundnani, when discussing such behavior of states (in his studies – Germany), interprets it as a “geoeconomically active state using its geoeconomic power” .
Turnover growth dynamics, 2003-2014 (tonnes)
Compiled based on 
Currently, the port of Ust-Luga (with a turnover of 75.7 million tonnes in 2014 – Fig. 1) is the largest port not only in the region (to put this in perspective, the port of Saint Petersburg has a turnover of about 58 million tonnes, oil loading port Primorsk – up to 75 million tonnes), but also in the entire Baltic Sea, being second in the whole country only to the sea port of Novorossiysk. Developing on a single site, the port of Ust-Luga is in fact an established transportation and logistics cluster, uniting 15 independent terminals:
- “Rosterminalugol” JSC (employing 308 people; overload of Kuzbass coal for export with the design capacity of 4 million tonnes of coal per year; by August 2015 it has handled almost 10 million tonnes);
- “Universal Handling Facility” LLC (design capacity – 3 million tonnes; the terminal specializes in receiving, storage and shipment for export (import) of general and bulk cargo, including – cast iron ingots, coal, nonferrous metals, bulk goods);
- “European sulfur terminal” JSC (design capacity – 9 million tonnes per year; sulfur comes by rail from Orenburg and Astrakhan);
- “Baltic fertilizer terminal” LLC(Transshipment of general cargo and fertilizers with the capacity of over 5 million tonnes);
- “Ust-Luga Oil” JSC (employing 600 people; the design capacity – 30 million tonnes of oil products per year, of which 20 million tonnes – dark oil products and 10 million tonnes – light petroleum products; the tank farm provides storage for 960000 m3 of petroleum products; the terminal performs transshipment of oil products from companies of the following cities and towns: Kirishi, Yaroslavl, Surgut, Ryazan, Nizhnevartovsk, Orenburg, Saratov, Samara, Syzran, Achinsk, Kazan and Pavlodar);
- “Spetsmornefteport” LLC (LLC “Transneft – Port of Ust-Luga” is focused on receiving of oil from the main oil pipeline, storage and shipping of oil into tankers in the interest of oil companies of the Russian Federation and is aimed at ensuring a continuous process of transfer of oil for export; the tank farm of Ust-Luga is an endpoint of the “Baltic Pipeline System – 2″ (BPS-2));
- “Neva Pipeline Company” LLC (provides handling of up to 30 million tonnes of Russian oil for export);
8. “Commercial sea port Ust-Luga” JSC (Multipurpose Transshipment Complex MTC Yug-2 is designed to handle a wide range of goods: new imported cars, large rolling machinery, containers, project and general cargos, including military equipment for export; shipment of cars from the terminal is carried out by car and rail);
9. North-Western Basin Branch of the Federal State Unitary Enterprise “Rosmorport” (servicing terminal for the port activity);
- “Ust-Luga Container Terminal” JSC (the first deep-water container terminal in north-west Russia; with its full development it will become the largest and most technologically advanced Russian terminal with a depth of up to 16 m at berth and a carrying capacity of 2.6 million TEU per year; currently the volume of transshipment totals 440 thousand TEU);
- “Sibur-Portenergo” LLC (subsidiary of “SIBUR Holding” JSC, managing a complex for transshipment of up to 1.5 million tonnes of liquefied petroleum gas (LPG) per year and up to 2.5 million tonnes of light oil products per year in the commercial sea port of Ust-Luga);
- “NOVATEK Ust-Luga” LLC (complex for fractionation and transshipment of stable gas condensate; enables processing of stable gas condensate in the light and heavy naphtha, kerosene, diesel fractions and fuel oil, and shipping of finished products for export by sea; capacity of the complex is 6 million tonnes of raw materials per year);
13. Forest Terminal “Factor” JSC (has a timber transshipment capacity of about 290 thousand m3/tonnes with the prospect of handling pallets up to 400 thousand tonnes per year);
- “Terminal New Haven” LLC (the terminal is designed to receive Ro-Ro and general cargos; the terminal capacity allows storage of up to 10,000 cars at the same time with the ability of loading up to 240 car haulers per day);
15. “SmartBalk Terminal” LLC (a joint venture of “FosAgro” JSC and “Ultramar” LLC, stevedoring and terminal service company for transshipment of mineral fertilizers in the port of Ust-Luga. The freight turnover is 3 million tonnes of phosphate fertilizers per year).
Additionally, the “Baltic ferry” project has been launched in Ust-Luga. This is a railway-car ferry line Ust-Luga – Baltiysk – Sassnitz (Germany). It is important to emphasize that this ferry crossing, while providing stable sea links with the Kaliningrad Region, also becomes the basis for the development of the cross-border transport and logistics cluster on the shores of the Baltic Sea, which is very important for Russia. In particular, at a meeting of the Governor of the Leningrad Region A. Drozdenko with the Head of Mecklenburg-Western Pomerania E. Sellering in June 2015 it was decided to set up a logistics center in the port of Sassnitz-Mukran (Germany).
Currently, there are three vessels operating on the ferry line Ust-Luga – Baltiysk – Ust-Luga. They are owned by subsidiaries of the Russian Railways and make 7-8 voyages per month. Over the entire period of the functioning of the ferry line Ust-Luga – Sassnitz there have been transported about 254 thousand tonnes of cargo, including 861 units of vehicles and 4171 carriages. According to experts , in the next 15 years many countries, including France, Denmark, the Netherlands, Belgium and Austria, will become interested in this ferry crossing, as already now there is reciprocal cargo traffic with Russia with the volume of about 20 million tonnes.
With the growth of its transport and logistics potential, the port of Ust-Luga is becoming an increasingly attractive platform for the implementation of major industrial projects. First of all, this involves localization of the gas- and petrochemical cluster in the port area with further intensification of specialization and cooperation and with the growth of the added value of products. It is significant that this is not for the first time that petrochemical and gas chemical industry becomes the driver of a port and industrial complex. For example, Houston (USA) is one of the largest manufacturing centers in the world for petrochemical industry. Houston has more than 3,700 organizations working in petrochemistry, as well as 9 refineries, processing 2.3 million barrels. In total, Houston has 719 enterprises producing chemicals and plastics .
The decision of “Gazprom” JSC to build the “Baltic LNG plant” is strategically important for the creation of the gas and petrochemical cluster. The project has been preliminarily approved in the following format: two lines of 5 million tonnes of LNG per year each with a possibility to build a third one. The in-service date of both lines is the fourth quarter of 2020. The volume of investments was estimated at 10 billion USD. Gazprom’s partners can become the Anglo-Dutch «Shell» or Japanese «Mitsui», «Mitsubishi», «JGC Corporation», which possess the necessary licenses and gas liquefaction technologies. All of them are already involved in Russian LNG projects. A strategic partner will get a share of up to 49%. The plant will be located in Ust-Luga, which will require a gas pipeline of 360 km from Volkhov with the capacity of 25 billion m3. It is expected that the construction phase will provide about 4,000 job vacancies .
As part of the development of the industrial zone “Ust-Luga”, there has started development of the project for production of ammonia and carbamide – “Baltic carbamide plant” LLC (near the village of Vistino) of the group of companies “East” with the capacity of more than 1 million tonnes of carbamide. The estimated volume of investments exceeds 1.5 billion USD. The construction of the plant will create 780 jobs in the area. To implement this project, the company rents an area of 160 hectares in the eastern part of the industrial zone “Ust-Luga”. The future plant of the “East” group for production of granulated carbamide will be located here. Thesiteareawillbeabout 55 hectares. The project also involves creation of a sea terminal with the length of the quay wall of 300 meters and a depth of 16 m (the transport corridor from the plant is 8 km). If necessary, it will also involve construction of its own branch of a gas offtake from the existing gas pipeline “Kohtla-Järve – Leningrad”, the reconstruction of which is incorporated in the plans of “Gazprom”. The terminal complex and a carbamide plant will be connected by a corridor of communications . An ammonia plant for 700 thousand tonnes,ownedby”EvroChim” JSC,should become an important part of the port and industrial complex.
The already built and planned port terminals, as well as production capacities near the port designed for construction are a strong “pole” of the localized marine economic activity. Thus, they foster renovation of the coastal zone, expanding the impact of the “coastal factor” virtually over the entire territory of Kingisepp District, which becomes, in this regard, not only formally, but also actually (structurally, due to the configuration of centers and flows) a coastal area.
The main local socio-economic effects of the “compressing” and “expansion” of the coastal zone
The variety of regions and territories determines various models of social and economic development. Situation factors significantly adjust such development and expand the “corridor” of opportunities. At the same time, the economic, geographical and geo-economic situation is no longer a “destiny”: it can and must be adjusted (for more details please refer to ). The near-border and seaside location can change most successfully, primarily due to the development of cross-border infrastructure (including international automobile border-crossing points, warehouse and logistics infrastructure, commercial areas), as well as port and industrial facilities.
As O.A. Kuznetsova rightly notices, “an economic and geographic position can be assessed as favorable in case of vicinity to major economic centers and large sales markets; in case of a seaside location (maritime transport remains the cheapest, therefore sea ports are actively developing due to the port activity itself as well as due to production facilities associated with imported components and/or delivery of products for export); in case of a near-border location in proximity to economically developed countries (which become sources of investments) [18, p. 128]. It is also worth referring to the opinion of S.S. Artobolevsky, who notes that in modern Russia “one can distinguish three types of areas of growth, formed under the influence of globalization, agglomeration and resource factors: the largest urban agglomerations; export and resource regions; port near-border regions on the main routes of foreign trade “(, p. 82). Indeed, the territory under investigation falls under the strong influence of Saint-Petersburg; the western part of the area, along with the district center, is part of the Greater Saint-Petersburg (with a population of about 6.5 million people). In addition, the near-border position provides promising opportunities for the development of global economic cooperation. However, under the current circumstances of the sanctions confrontation, many near-border and bilateral projects with Estonia and the EU in general have been frozen. In this situation, the use of the potential of the seaside position, in the first place for its port and economic and port and industrial activities, is undoubtedly a dominant factor in the development of Kingisepp District.
With the focus on Kingisepp District, it should be emphasized that the development of the port of Ust-Luga was accompanied by multidimensional impact on the entire local social and economic system. Just during the period of 2012-2014, the volume of goods and services, produced on the territory of the district, almost tripled. The unemployment rate is steadily declining and now is less than 1%. The average salary in the district in 2014 was 39,500 RUR – this holds the fourth place among the municipalities of the Leningrad Region . To put this into perspective, the average monthly wage in the district in 2010 increased by 19% and nominally amounted to 27,701 RUR in 2011 . At the same time, in 2014,the average monthly wageof employees in largeand medium-sizeprocessing industries on the territory of the districtcompared to 2013increased by10.0%, reaching 40,979 RUR. In largeand medium-sizeenterprises ofall forms of ownership the wage growthwas 8.4%; the average monthly wagefor2014 is 40,564 RUR. Wagesabove averagein Kingisepp District are found in organizationsinvolved in construction(139.7% compared to the average level forthe district) and in transport and communications services(157.7%) [20-21].
The most striking positive social and economic situation in the district is reflected by its considerable migration attractiveness (Table 1).
Population migration in Kingisepp District and in certain areas of Leningrad Oblast (2011-2014) *
|District||District population in 2011 (thousand people)||Indicator (people)||2011||2012||2013||2014|
*Compiled based on 
Kingisepp District is a part of the so-called “belt” of four districts, located to the south of Saint-Petersburg (Fig. 2), which is characterized not only by a significant migration increase, but also by large-scale modernization of the basic infrastructure [20-22].
Compiled based on 
Structure of the migration balance in Leningrad Oblast in 2013
General migration balance
Migration structure of Kingisepp District:
Therefore, influence of the port is most significantly reflected in social indicators of the development of the territory: unemployment rate, wages (especially in construction and transport), positive migration balance. However, it should be noted that the port turnover, which has substantially increased in recent years, still poorly corresponds with the general demographic and economic characteristics of Kingisepp District, which is quite noticeable when compared to some foreign “near-port” territories (Table 2).
Social and economic potential of Kingisepp district compared to some similar territories*
|Territory||Population, people, 2015||Area, km2||Population density, person per km2||GDP per person (euro)||GRP, mln euro, 2012||Main port|
|Kingisepp District (Russian Federation)||79647||2907||27,20||7423||810||Ust-Luga(78 mln tonnes)|
|Kymenlaakso (Finland)||180900||5148||35,24||32095||5806||Kotka-Hamina (13,41 mln tonnes)|
|Ostvorpommern (Germany)||105036||1899||55,00||16975||1783||Rostock(21,1 mln tonnes)|
|Klaipeda District (Lithuania)||333000||5209||63,93||12613||4200||Klaipeda(35,2 mln tonnes)|
|Kurzeme (Latvia)||301621||13596||22,20||6153||1856||Ventspils(30,4 mln tonnes)|
* compiled by the authors based on [12, 23]
The “coastal factor”, implemented due to the development of the port, also impacted the basic center-peripheral architecture of the territory. The emergence of a new “point” of the social and economic growth in the ex-periphery of the municipality (degradation of fisheries, as well as border and environmental constraints, complemented by a lack of transport and other infrastructure, which was overcome only due to the construction of the port, secured such a status for coastal areas) determined the socioeconomic bipolarity of the area. Meanwhile, its traditional center (Kingisepp) became increasingly involved in ensuring implementation of the transport and logistics Ust-Luga project, acquiring features of a “coastal” settlement.
It is indicative that at an early stage of the development of the transport and logistics project it was believed that it is the seaside village of Ust-Luga that in the long run will become the economic center of the area and will draw investment and human resources from Kingisepp. Such a vision was partly caused by the partial degradation of the town-forming basis of the district center (its largest enterprise “Phosphorit” was downsized), which occurred in 2003-2008.
However, as Kingisepp was integrating into an expanding coastal zone, it managed to keep its position. The fact is that the port of Ust-Luga currently employs 3500 – 4000 people; at the same time, there are no more than 3000 people living in the nearest village of the same name (according to the situation in 2015). The vast majority of those employed in the port, in the end, is settled primarily in the district center, where there has been extensive residential construction in the recent years (Residential Complex “Karat”, Residential Complex “Yamburg-City”, Residential Complex “Yamburg”, Residential Complex “Prestige”, residence on Krikkovskoe shosse, microdistrict #6). It is also symptomatic that the district, by the volume of retail space, exceeds the standards already by 4 times. It is exactly Kingisepp where large national retailers come to open their stores.
The settlement of Ust-Luga (located only 12 km away from the port terminals) has also a town-planning perspective. Despite a persisting lack of infrastructure (problems with water supply, gas supply, sewage systems, lack of modern socio-cultural and shopping facilities, etc.), construction of modern residential areas is under way. Such residential areas are designed primarily for port workers.
Implementation of the largest transport and logistics project and an adopted strategy for the development of the port industry have more clearly highlighted the general shortage of land resources (typical of the area with its large surface of wetlands), as well as a conflict of interest among various alternative directions of land use (industrial, transport and storage, residential, agricultural, recreational, and environmental).
Construction of the port of Ust-Luga caused significant imbalances on the local labor market, highlighted a lack of the necessary human capacity (including specialists specifically for work in the port – dock workers, repairmen, installers, riggers, etc.). Currently, Kingisepp District has about 1500 job vacancies (about 10% of those active in the economic activity). Misalignment in the labor market also affects the level of the average salary in the region, which (in certain specialties) can reach 60,000 RUR. At the same time, the level of wages in the port is significantly higher than the average wage in the area (on average, it is higher by 20-100%, depending on the nature of labor and qualification). The current situation led to the opening of a Kingisepp branch of the State Enterprise “Training center of Leningrad Oblast”, aimed at preparation of dock workers, sling operators, crane operators, engine drivers, technicians, boiler facility operators and of other technical professions.
Prospects of transport and logistics and port and industrial activity in Kingisepp District in the new geoeconomic reality
At present, our country is fully experiencing the effects of the destabilization of the geopolitical situation in Eurasia, the consequences of illegal sanctions adopted by the political leadership of the United States, the European Union and several other countries, as well as sharp decline in world prices for major export commodities from Russia – oil and natural gas, which resulted in a nearly twofold decrease in the national currency rate. The geopolitical and geoeconomic context leads to implementation of programs of forced import substitution and enhancement of domestic production in the Russian Federation. This might suggest recalling an interview of London School of Economics Professor Carlota Perez about Russia: “The key issue of the current agenda is what to produce? We have three options: industries of the current technological structure, for example, information and communication technologies; industries of the future technological wave (bio-, nano-, “green” technologies); and finally, industries of former technological structures – from services to agriculture. Which one to choose? The correct answer is that you have to select all of these three options at once. Youshoulddoeverything!” (Cited from ).
In the 2000s, signs of new industrialization were seen in the Saint-Petersburg coastal region, including Saint-Petersburg and the western part of Leningrad Oblast. Up until 2013-2014, it was carried out mainly by foreign companies, which were bringing their production in the region. This production was focused on the growing domestic demand. However, due to the significant reduction in effective demand and a high dollar exchange rate, enterprises of the northwest (primarily, those that are the “closest” to the major ports) gained an additional competitive advantage in foreign markets, their products became relatively cheaper. It is no coincidence that some car manufacturers, such as, for example, “Hyundai Manufacturing RUS”, begin to look closely at external markets. In particular, they launched production of “Hyundai Solaris” cars for Egypt and Lebanon, which soon will be exported. By the end of 2015, more than four thousand customized “Hyundai Solaris” cars are planned to be shipped to Egypt and Lebanon . Chances are high that the port of Ust-Luga will handle these shipments.
Many other manufacturers of Saint-Petersburg and Leningrad Oblast are also expanding their export potential.
In 2014, export earnings of the company “Nokian Tyres” LLC, which holds the 13th place among the leading exporters of the Northwestern Federal District, amounted to 690 million USD, which showed an increase of 13% in comparison to 2013. In 2014, “Hyundai Manufacturing RUS” LLC for the first time achieved its export earnings of 650 million USD, and “Atomproekt” JSC (“Rosatom” SC) increased its indicators up to 470 million USD . In 2015, the “Siemens Gas Turbine Technologies” company (SGTT) launched its production in the settlement of Gorelovo. The company immediately announced its export orientation and a desire to ship their products through Ust-Luga.
The military-industrial export of Russia is growing. In 2014, it amounted to 15 billion USD, which showed an increase by 45% compared to 2010. The total order portfolio for the end of 2014 was 49 billion USD . The share of the military exports in the total exports of the Russian Federation in 2014 was 3% (in 2010 – 2.6%). The port of Ust-Luga also has a priority position for its support.
It should be noted that the prospects for expanding industrial exports of Russia in general and of the Saint-Petersburg coastal zone in particular depend on bringing industrial production “closer” to the already established port infrastructure. The latter, at the same time, will become significantly more attractive not only for Russian investors, but also for foreign ones. The appearance of the first foreign state fund of the United Arab Emirates «Mubadala Development»  in the port of Ust-Luga could mark a new stage in the development of the whole port and logistics complex. This could create an example for other companies and funds of the Middle East and South Eastern Asia, that are able to invest in projects on the territory of the Saint-Petersburg coastal zone.
Other perspectives are associated with the positioning of Kingisepp District in the global production, information and communication links. First of all, this concerns the Trans-Eurasian Corridor “One Belt, One Road” (“New Silk Road”), which aims to connect China and Europe – inter alia, via Russia. The route of the northern railway corridor goes from Western China to Europe via Kazakhstan and Russia to the Baltic Sea; from there its western branch will go via Belarus and via Poland to Germany and the Netherlands. It is evident that the Russian ports on the Gulf of Finland will be connected to this global artery. Under these circumstances, the role of the coastal zone in the territorial socio-economic development will increase both at the microlevel (separate urban settlements, administrative districts) and at the mesolevel. The range of various effects of marine economic activity will expand even further.
About the authors:
A.G. Druzhinin – Doctor of Geography, Professor, Director of the Northern-Caucasian Research Institute of Economic and Social Problems of the South Federal University.
S.S. Lachininskii – PhD in Geography, Research Fellow at the Laboratory of Comprehensive Studies of the Spatial Development of the regions, Institute of Problems of Regional Economics of the RAS; Assistant Professor of the Department of Economic and Social Geography, Saint-Petersburg State University.
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According to our calculations, in accordance with the O. Merck Index (1 TEU, which equals 28200 kg in the metric system, generates 2538 USD of the added value in services), therefore the Ust-Luga Container Terminal should generate about 1.12 billion USD in the port per year.