Fur around small city (5)
I believe the answer is:
minsk
'city' is the definition.
(capital of Belarus)
'fur around small' is the wordplay.
'fur' becomes 'mink' (mink is a kind of fur).
'around' means one lot of letters goes inside another.
'small' becomes 's' (abbreviation - e.g. clothes size).
'mink' enclosing 's' is 'MINSK'.
(Other definitions for minsk that I've seen before include "E European capital" , "capital city" , "City of Belarus" , "Russian city" , "Capital of Belarus" .)