The thesis focuses on the question of regional economic development of the part of Russia with unique location within EU territory – the region of Kaliningrad. The small territory has a relatively short but eventful history as a Russian exclave. The region has been facing numerous challenges in its development owing to the region’s detachment from the mainland. In addition to this, the location between two major players on European arena – the EU and the RF – defined particular political significance of the region. Complexity of Russia– EU relationship is reflected in their ways of perception and treatment of the region. The objectives of the work are to understand specifics of development of small territories surrounded by other states and to define challenges the territories have to tackle; to apply theoretical findings for analyzing a specific case of the detached part of Russia and to identify future prospects for the Kaliningrad region. The main findings of the work include several future prospects for the Russian region of Kaliningrad in the view of its specific geopolitical position which implies intricate combination of such factors as EU–Russia relationship, WTO expansion, energy prices and globalization among others.