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The work focuses on the question of the regional economic development of the part of Russia with unique location within the EU territory the region of Kaliningrad. The region has a relatively short but eventful history as a Russian exclave. A small territory has been facing numerous challenges in its development owing to the region s detachment from the mainland. In addition to this, the position between two major players on European arena the EU and Russia defined a particular political significance of the small 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 particular case of the detached part of Russian territory Kaliningrad and to identify future prospects for the region. The main findings comprise several future prospects for the Russian region of Kaliningrad in the view of its specificgeopolitical position which implies intricate combination of such factors as EU Russia relationship, WTO expansion, energy prices and globalization.