Johnson's Russia List
19 May 2003
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A CDI Project

transcript of Putin's State of the Nation address
BBC Monitoring
May 16, 2003
Putin tells the nation Russia can be rich and strong again
Source: RTR Russia TV, Moscow, in Russian 0800 GMT 16 May 03

In his state of the nation address to members of both houses
of the Russian parliament on 16 May, Russian President
Vladimir Putin paid particular attention to the state of the
economy, Russia's international standing and efforts to bring
peace to Chechnya. He said that despite certain advances, the
economic fundamentals were still "very weak", and the country
was bedevilled by slowing growth, uncompetitive industries,
over-reliance on temporarily favourable foreign markets,
administrative inefficiency and a declining population. Putin
described the country's economic achievements as "very, very
modest", and set a 10-year target of doubling GDP. Problems
with the economy, he said, were hindering what ought to be
the "key purpose": making Russia a rich and powerful country
again. Economically-developed countries were "squeezing
Russia out of promising world markets", he complained.
Terrorism, he said, "threatens the peace and security of our
citizens", but instead of fighting terrorism strong
countries' national armies were sometimes used for "expanding
the areas of strategic influence of individual states". Putin
said the Russian army must be strong, professional and well-
equipped to defend the country and must act with others to
counter common threats. The president praised Chechens who
voted in a recent referendum in favour of remaining
an "inseparable part" of the Russian Federation. Despite the
difficulties that still lay ahead, he pledged, people in
Chechnya would be given the chance to lead "normal, human
lives". He expressed support for the UN as the world's most
important decision-making mechanism and called for closer
ties with the CIS and Europe. Turning to domestic politics,
he described forthcoming Duma elections as a new stage in the
development of the country's multiparty system and looked
forward to a "professional and efficient government relying
on the parliamentary majority" being formed after the
elections. The following is the text of the address, as
broadcast live on the Russia TV channel. The subheadings have
been added editorially:

Good day, respected colleagues, respected deputies of the
State Duma, respected members of the Federation Council,
citizens of Russia.

Today, in keeping with the constitution, I will be presenting
you with a report on the situation in the country and, first
of all, will be summing up certain results. The results of
the past year have been, to a great extent, a continuation of
what was started three years ago. During this three-year
period, we not only dealt thoroughly with a backlog of
problems - and one had to deal with them every day, life
itself made us do this - we also achieved some positive

Quest for power and influence

Now we have to take the next step and all our decisions and
actions must be dedicated to ensuring that, in the
foreseeable future, Russia will firmly take its place among
the truly strong, economically advanced and influential
states of the world. This is a qualitatively new task, a
qualitatively new step for the country. A step which we were
unable to take earlier because of a number, a multitude of
pressing problems. We have this opportunity and we must take

Russia should be and will be a country with a developed civil
society and stable democracy. Russia will guarantee full
human rights, civil liberties and political freedom. Russia
should be and will be a country with a competitive market
economy, a country where property rights are reliably
protected and where economic freedom makes it possible for
people to work honestly and to earn without fear or
restriction. Russia will be a strong country with modern,
well-equipped and mobile armed forces, with an army ready to
defend Russia and its allies and the national interests of
the country and of its citizens. All this will and should
create worthy living conditions for people and will make it
possible to be an equal in the society of the most developed
states. And people can not only be proud of such a country -
they will multiply its wealth, will remember and respect our
great history. This is our strategic goal. applause

Strong state

In order to achieve this, however, we need consolidation, the
mobilization of our intellectual capabilities and united
efforts on the part of the authorities and civil society and
of all the people in the country. We must strive for
consolidation in order to resolve the most important
nation-wide problems on the basis of clear and intelligible

Why do I consider this to be vitally important? The whole of
our historical experience bears witness to the fact that a
country like Russia can live and develop within its existing
boundaries only if it is a powerful state. Russia has always
and inevitably been faced with the threat of disintegration
in all periods when the country has been weakening,
politically or economically. Yes, certain achievements in
recent years have made it possible to speak of stabilization.
Some have even had the feeling that all our problems have
been resolved, that Russia's future is totally predictable, a
success story, and that it is just a matter of whether our
economy should grow at 4 per cent or 6 per cent, and how much
to spend. I want to tell you that this is not so.

Russia squeezed on global markets

We are faced with serious threats. Our economic foundation,
although it has become considerably sounder, is nevertheless
unreliable and very weak. The political system is not
sufficiently developed. The state apparatus is ineffective.
The majority of industries are not competitive. And meanwhile
the population is continuing to decline in number and poverty
is receding extremely slowly. The international situation
continues to be complex and competition in the world economy
is not diminishing. Around us are countries with highly
developed economies. It has to be said plainly that they are
squeezing Russia out of promising world markets wherever they
can. And their evident economic advantages give grounds for
the growth of geopolitical ambitions.

Nuclear, terrorist threats

Nuclear weapons continue to spread across the planet.
Terrorism threatens the peace and security of our citizens.
Strong, well-armed national armies are sometimes used not to
fight this evil but to expand the areas of strategic
influence of individual states. Can Russia seriously
withstand these threats if our society is split into small
groups, if we care only about narrow small-group interests,
if consumption-centred approaches are not diminishing but
growing, if bureaucrats are benevolently nourishing these
attitudes by failing to maintain national wealth, by not
increasing it but often by wasting it? I am convinced that,
without at least consolidation around the basic national
values and goals, it will be impossible to withstand these

Past sacrifices

I would like to remind you that, throughout our entire
history, Russia and all our citizens have accomplished and
are continuing to accomplish a truly historic and heroic
feat, an exploit for the sake of the country's integrity, for
the sake of peace in the country, for the sake of a stable

To maintain statehood in a vast country, to preserve a unique
community of peoples while ensuring the country has a strong
position in the world is not just a tremendous amount of
work. It is also about great sacrifices, the deprivations
people had to suffer - this is what Russia's thousand-year
journey has been like. This is the way it reproduces itself
as a strong country and we have no right to forget this. We
must bear this in mind when assessing our current dangers and
our main objectives.

Successful reforms

The results that we have achieved together, jointly, in the
past three years, show that we are capable of reaching our
goals and solving these problems. Indeed, we have tackled
many problems, including those which very recently seemed
simply impossible to resolve.

At last, we have restored the country's unity de jure and de
facto. We have strengthened state authority and brought
together the federal and regional authorities. Owing to the
restoration of a common legal space we were able to deal very
closely with the delimitation of powers and regional remits.
Much needs to be done there but in any case we have begun to
deal with the problem directly. We have embarked on the
construction of effective and properly financed local
authorities - I am speaking very precisely, as you can see -
we have only embarked upon this work.

In adopting section three of the civil code, Russia has
completed a very important stage in the codification of its
legislation. A new labour code has been adopted. The updated
legislation and a systematic dialogue with trade unions and
entrepreneurs have begun to form a civilized labour market.
We have moved on considerably in the creation of truly
independent courts and have adopted new codes of criminal
procedure, civil procedure and arbitration procedure,
ensuring additional guarantees for human rights. We have
improved the electoral system. Conditions have been created
in the country for a fully-fledged civil society, including
conditions for the emergence of strong political parties in

We have made substantial progress along the path of tax
reform and have started military reform. As a result of
difficult work, we have managed to get the reform of land
relations out of the doldrums. May I remind you that this
issue has continued to be a serious economic barrier on the
road to democracy and the market for whole decades.

We have taken the first steps in reforming the pension
system, the infrastructure monopolies and municipal housing.
Together we have overcome an absolutely unacceptable
situation where individual Russian territories were, in
effect, beyond the bounds of federal jurisdiction and the
supremacy of the Russian constitution and federal laws, and
also of the obligation to pay taxes into the state treasury.
Today these have become the everyday norm for all regions of
the Russian Federation.

Chechnya referendum

Here I would like to make one important digression on a
subject that is very sensitive for all of us. In my last
address I spoke of the need to return the Chechen Republic to
the country's political and legal space. Free elections and
the establishment of effective institutions of republican
power were also mentioned. Let me be blunt: Not many believed
in this at that time. However, a year has passed and reality
has confirmed that together we can accomplish a very great
deal. I would like to thank yet again all those who lent
support to this policy pursued by the country's leadership,
those who took an active part in this policy and, of course,
all those who took an active part in preparing the
constitutional referendum in Chechnya itself.

Today I especially thank the Chechen people, for their
courage, for the fact that they did not allow themselves to
be intimidated and do not allow themselves to be intimidated
now, for their wisdom, ever-present in ordinary people who
instinctively know what's right and wrong. People in Chechnya
had a heartfelt awareness of their responsibility and human
interest. Finally, the referendum there showed that the
Chechen people legitimately regard themselves as an
inseparable part of a unified Russian multinational people.

Yes, we all had to pay a high price for the restoration of
Russia's territorial integrity. We bow our heads to the
memory of those servicemen and Chechen civilians who lost
their lives, of all those who paid with their lives so as not
to allow the country to be torn to pieces, who fulfilled
their duty to the end.

The referendum on the constitution, which was held in the
republic, drew a line under the era of anarchy, under the
years when power in Chechnya was usurped by bandits, when the
residents of the republic lived literally in the Middle Ages,
deprived of basic human rights, when public executions were
regularly and blatantly carried out on the streets of
Chechnya's towns and villages, when thousands of people ended
up as human merchandise in the hands of slave traders, when
schools, institutes and hospitals were not working. All this
has ended.

Much still to do in Chechnya

But in order for life in the republic to finally reach
normality, a very great deal has yet to be done. It is
necessary - in keeping with democratic principles and the
constitution adopted at the referendum - to elect the
republic's president and parliament, to form local government
bodies, to draft and sign a treaty on dividing authority
between the federal centre and the republic. And, of course,
to restore Chechnya's economy. We will also have to hand over
to the Chechen police the organization of law-enforcement
work in the republic.

In addition to this, preparations for an amnesty are being
carried out together with you, esteemed colleagues, within
the framework of continuing the political settlement process.
The amnesty will create the conditions whereby those who for
various reason failed to take this step earlier but are ready
to do so now may become involved in civilian life. We will
have to do all this in complex conditions. It is obvious that
the remnants of the bandits will strive, through threats,
killings and acts of terrorism, to intimidate the residents
of the republic and frustrate the vigorous progress of the
political process. We can see that the terrorist acts being
perpetrated by the bandits are being aimed with increasing
frequency against the civilian population, against ordinary
people. We will, however, see this thing through to the end,
without fail. People in Chechnya will lead normal, human
lives applause .

Demographic decline

Esteemed assembly, three years ago we defined demographic
decline, Russia's economic weakness and the low efficiency of
the state as the most serious threats to this country. Have
we managed to move forward in resolving these problems? Yes
and no. There have been both successes and serious
miscalculations. Let us talk about this openly today.

The decline in Russia's population was singled out as one of
the most acute problems. This decrease was caused, first of
all, by falling birth rates and rising mortality rates. Over
the past several years, the death rate has continued to grow.
It grew by 10 per cent over three years. Life expectancy
rates also continued to decline, from 67 years in 1999 to 64
in 2002, which are sad figures.

Among the causes are: high illness rates, deaths in
accidents, poisonings and injuries. The spread of new
epidemics, the so-called new epidemics, including drug abuse
and AIDS, is exacerbating the situation. But, over the same
three years, birth rates grew by 18 per cent and infant
mortality dropped by 21 per cent. At the moment, this is an
absolute record low in our history.

I will remind you that recently, within the framework of the
State Council, we discussed a set of measures to accelerate
the transition to medical insurance. I believe that this will
make it possible to significantly strengthen the health
system's financial base and that, once organizational
questions have been fine-tuned in 16 regions of Russia in the
second half of the current year, medical insurance will be
provided for pensioners across the entire country. I very
much hope that this will be a serious support for our elderly

The nation-wide Russian census has shown that, according to
preliminary data, the country's permanent population is in
excess of 145m people. This is almost 2m people more than
routine statistics showed. At the same time, this is 2m down
on 1989. What do these figures show? First, they show that
the country's population is falling, albeit at a slower pace
that the routine statistics above showed. The population is

Second, although the birth rate has somewhat increased, it
was not the main source of our population growth. The main
source was legal immigration into the country. About 7m
people have moved into our country in the last decade, mainly
from the Commonwealth of Independent States, of course. This
is a very telling result which shows that, despite all our
difficulties, for millions of people Russia remains an
attractive country in which to live and work.

Global economic integration

The growing globalization of the economy and the entire
social life of the modern world were also cited as serious
problems three years ago. Today not a single country,
whatever its size or wealth, can develop successfully in
isolation from the rest of the world. On the contrary, only
those states which deliberately, intelligently and
dynamically integrate into the world economy become

In the last three years, we have made a number of serious
steps towards international integration. First, Russia was
last June invited to become a fully-fledged member of the
club of the world's most developed states. Together with our
partners, we are working to ensure our national interests and
resolve the common problems facing contemporary civilization.
Global partnership in the non-proliferation of weapons of mass
destruction is an important example of this. Scrapping these
weapons will help us improve the ecological situation in
certain Russian regions.

I'd like to point out, too, that Russia's credit rating is
now the highest in the entire history of new Russia. A number
of Russian companies have joined the ranks of major European
and international companies. For the first time in the last
90 years some of them have begun seriously breaking into
world markets, become prominent in international economic
relations and have turned into no-nonsense competitors for
foreign companies. I have to say that we have also advanced
significantly towards accession to the World Trade

Economic successes

And finally, Russia's economic weakness was identified as a
strategic and fundamental challenge for the country back
then, three years ago. What has changed since then? On the
one hand, changes for the better have been observed over that
period. Economic growth has continued. Over the three years,
gross domestic product has risen by 20 per cent. Capital
investment has increased by over 30 per cent. The physical
volume of goods exported has grown by a quarter, including
export of machinery, equipment and means of transport by over
70 per cent - not a bad result.

For the first time in half a century, Russia has gone from
being a grain importer to a grain exporter. Since 1999, the
sale of our food products abroad has trebled. Exports of oil,
oil products and gas have increased by 18 per cent. Today
Russia is the largest exporter of fuel and energy resources
in the world. Information technology has been developing
rapidly - the so-called new economy is growing. Its output
has grown by between 20 and 30 per cent a year. The level of
telephone penetration in the country has grown significantly.
The number of users of mobile telephones has doubled annually
and has reached nearly 18m. According to estimates, today
about 10m people in Russia use the Internet.

These figures show that balanced growth in the domestic
economy, based both on traditional industries and modern
technologies, is possible. The country's increased economic
potential has made it possible to improve the lives of tens
of millions of people. It is thanks to economic growth that
nearly 4m people have left the ranks of the unemployed during
these years. The opportunity to work and earn real money
reduced the scale of strike action, from nearly 900,000 days
in 1997 to less than 5,000 in 2002. Please note, this was
amid not falling but increasing trade union activity. The
real incomes of the population have increased by 32 per cent.
Only three years ago, the average pension amounted to just 70
per cent of the pensioner's subsistence minimum. Last year,
the two figures were already equal. Finally, per capita
consumption has gone up nearly one-third in three years. Last
year, this indicator exceeded not just the level of three
years ago, not just the level of the crisis year of 1998 or
even the pre-crisis year of 1997: in 2002, it reached a
record high in the entire history of our country.

Of course, this listing of bare figures may seem hard to
understand - but not for you, I believe. What lies behind
these figures are substantial funds that have really become
available to millions of our citizens. These funds
contributed to a rise in people's wellbeing, they preserved
their health and helped solve difficult social problems in
the country.


And yet, despite all that I have said, I have to state that
our economic achievements so far have been very, very modest.
First, a quarter of Russia's citizens still have incomes
lower than the subsistence minimum. A quarter of the
country's population! Second, economic growth in this country
remains extremely unstable. Thus, whereas in 2000 industrial
production grew throughout the whole year, in 2002 it grew
only for six months. As a result, unemployment began to grow
by the year's end. Third, economic growth is slowing down. In
2000, the economy grew by 10 per cent. Last year, it grew by
only slightly more than 4 per cent. And a slowdown in growth
inevitably leads to a slowdown in social development and
makes it impossible to solve many other problems facing the

We also have to acknowledge that we owe economic growth in
Russia, above all, to the favourable conditions in the world
economy in recent years. Thanks to an unprecedented
improvement in the foreign trade conditions for our economy,
Russia has obtained substantial economic advantages and much
extra income. Some of this income was directed at raising the
our citizens' standards of living. Some was invested in the
Russian economy. Yet more was used to pay the state's
external debt, a debt we have succeeded in cutting by a
quarter. Finally, it is to a large extent thanks to this
revenue that we have beefed up our reserves, the combined
reserves of the Finance Ministry and Central Bank and the
Central Bank's own reserves, the gold and currency reserves.
Moreover, these currently stand at the record level of 61Bn
dollars. Incidentally they amounted to only 11Bn three years

I think it is understandable that, without these resources,
by which I mean without the propitious foreign policy
circumstances, successes in social and economic development
would have been much more modest. One would do well to bear
in mind that such a propitious situation cannot and will not
last forever. In this connection I would like to draw your
attention to one more problem: the total annual volume of the
state's welfare obligations amounts currently to R6,500Bn. In
practical terms, it is more than double Russia's consolidated

Hollow promises

Both the executive and the legislative branches of power
have, in the space of many years, promised much to people
that the Russian economy is simply unable to deliver. As if
this were not enough, promises which cannot be kept keep
piling up, under the cover of populist slogans, deceiving the
citizens of the country. Unfortunately some politicians are
striving to exacerbate this situation right now.

In addition to expectations that are raised in vain, a
lowering of the quality of existing economic policy is a
serious consequence of this increase in hollow promises. It
also engenders distortions and conflicts in intra-budget
relations. It is difficult for one to expect things to be
otherwise in conditions in which the state's expenditure
grows faster than the growth in the real economy.

Esteemed members of both chambers of the Federal Assembly and
esteemed heads of regions, I think it is long since time we
all put an end to this policy. The authorities cannot, should
not and have no right to deceive the citizens of their own
country. If we promise people something, we simply must do
it. It's better not to promise if you don't do it.

And finally, the regulated state tariffs for the products and
services of the infrastructure monopolies are increasing at a
higher rate than the growth of prices in the free sector of
the Russian economy. As a result, the excess distribution of
economic resources in favour of the monopoly sector is
increasing and its share of the Russian economy is growing.
Meanwhile, this monopoly sector is not showing great
efficiency. Thus the monopolists are suffocating the
competitive sector of our economy. The government should keep
a stricter watch on this.

Continuing such a policy is evidently the road to stagnation.
The upshot of what I have said is clear: while the positive
tendencies and indicators that I have mentioned, the
favourable external markets and a stable political situation,
exist, they have simply not been used, or not fully at least,
to attain our strategic goals.

Economic revival

Esteemed deputies, esteemed members of the Federal Assembly:
the three years that have passed have also demonstrated what
we really can achieve when we work together with a common
purpose. We have shown that Russia is a country that is by no
means doomed to crises and to freezing, that the Russian
people are talented, with initiative and enterprise, that
they know how to work and deserve a better life, and that
they are capable of achieving this - as long, of course, as
nobody gets in their way. Far from getting in the way, it
would be better if we were to help. I think that returning
Russia to the ranks of the rich, developed, powerful and
respected states of the world should become our key purpose.

But Russia will only return to this when it becomes powerful
in economic terms, when it is not dependent on handouts from
international financial organizations or on unpredictable
changes in external markets. Such a thing is only possible in
conditions of steady and rapid growth, growth based on the
utilization of all factors, internal and external,
traditional and modern, domestic and foreign. And finally,
rapid and steady growth is only possible when competitive
products are being made. Everything we make must be
competitive - goods and services, technology and ideas,
business and the state itself, private companies and state
institutions, entrepreneurs and civil servants, students and
professors, science and culture. Meanwhile, economic growth
is sometimes opposed to reforms. One can hear people saying
that it is dangerous to stimulate economic growth and that it
is more important to continue structural readjustment and

I want to express my opinion on this. Such opposition is, at
least, dubious. Reforms for the sake of reforms are not
needed. Permanent revolution is not needed. It is obvious
that private initiative, by both Russian and foreign
businesses working in Russian territory, is the engine of
economic growth. It is also obvious that Russian business
itself has to become modern, inventive, flexible and mobile.
It has to solidly continue the tradition of Russian
entrepreneurship. A little bit more patriotism will do it no
harm either.

I will repeat once again: the success of this country greatly
depends on the Russian entrepreneur's success. And the policy
of economic growth cannot be opposed to social policy. I
would like to stress that we need economic growth, first of
all, to improve the citizens' wellbeing. The solution of an
entire set of urgent problems directly hinges on it. These
are quality of food, good and comfortable housing, a stable
supply of electricity and hot water, good education and a
modern health system, protection from accidents and natural
disasters and, finally, longer life expectancy.

We stated that stiff competition is a norm in the modern
world. That is why our ability to compete and our readiness
to fight for resources and influence directly define the
situation inside the country and Russia's international
importance. This approach to our development prospects has
been welcomed and adopted in Russian society.

Practically all the influential political forces and our
citizens have agreed that the country's high level of
competitiveness has to be a most important aim. Now we have
to ensure that this aim is taken into consideration by the
state authorities and by local self-government bodies in
their practical work.

Administrative reform

Meanwhile, Russian bureaucracy has proven ill-prepared for
working out and implementing the decisions appropriate to the
country's present-day needs. At the same time, it has learnt
to accumulate administrative clout, as it were, using its
position. I talked about this last year. We also spoke about
the problem of administrative inefficiency in our state three
years ago and pointed out that the weakness of the state
brings economic and other reforms to nought.

The powers of our bureaucracy are still vast. But the number
of powers it possesses do not match the quality of
government. I have to stress that the source of this is
nothing other than the superfluous functions of state
government bodies. And yet, despite the huge numbers of
functionaries, the country has a severe dearth of personnel
at every level and in all government structures. There is a
dearth of modern managers, of efficient people.

The above constitutes the background against which
administrative reform, which the country badly needs, has to
be carried out. As you know, the government has compiled an
inventory of the functions of ministries and departments.
They came to 5,000. In the course of this work, however, it
transpired that nearly every department believes that its own
functions should be expanded rather than limited at the
expense of other, neighbouring departments in particular.
Even when we understand the complexity of this task, however,
and all the difficulties that have already appeared,
administrative reform is still taking too long. It looks as
though the government needs help. Evidently, an extra
political impetus is required. It will certainly come.

I believe that, rather than trying to persuade bureaucracy to
curb its appetites, it should be curbed by directives.
Radical cuts must be made in the functions of state bodies.
They certainly need to be well thought out but it looks as
though there is no other way for us to solve this problem.

This should be done on the basis of the inventory which a
government commission is finalizing now. This should be done
together with a package of solutions regarding the
delimitation of powers between the levels of power and by
ensuring their financial sustainability. At the same time, a
mechanism which works effectively needs to be created to
resolve disputes between individuals and the state by
improving administrative procedures and judicial mechanisms.

Ten-year plan to double GDP

A few words now about top priority socio-economic tasks. One
often hears that the Russian economy needs no qualitative
leaps and bounds, that there is no need for major national
projects that produce serious, landmark increments, and that
it is quite enough to be consistent only in pursuing the
existing policy, even if it does not bring the high rates of
growth, to which we all look forward so much.

I would like to point out that this kind of attitude, this
kind of fear of making responsible choices - and we are not,
of course, talking of large-scale projects in the mould of
those from the era of stagnation changes tack - but I believe
that the problem of really finding the source of growth will
only arise when there is a need to tackle specific large-
scale tasks.

We have such a task. It is quite realistic, though extremely
difficult. In a decade, we have to at least double the
country's gross domestic product applause .

Doubling GDP is a systemic task and certainly a large-scale
one. It will require a profound analysis and adjustment of
existing approaches to economic policy. But the most
important thing we need to do here, the thing we shall need,
is once again consolidation of political forces, of society,
consolidation of all the authorities, of the best
intellectual resources, support from socio-political
structures, co-operation between parliament and the government
and a joint search for the best ways to achieve what is a
strategic, a most vitally important and an historic objective
for Russia.

I am convinced that Russia already has all the necessary
conditions in place for setting and meeting such an
objective. It is possible to really engage in the large-scale
construction of a modern and strong economy and, ultimately
in the formation of a state that would be competitive in
every sense of the word.

Currency convertibility

Full convertibility of the rouble, both at home and abroad,
both in current and capital transactions, is yet another big
task that we should resolve jointly. I will remind you that,
in the past, Russia had one of the strongest and most
respected currencies in the world. The prestige of the gold
rouble was equal to the prestige of the state itself. I am
convinced that the country needs a rouble which would be
freely converted on the international markets. It needs firm
and reliable ties with the international economic system.
Having become a fully-fledged member of the world's eight
most developed countries, Russia simply must resolve this
task. Attaining this goal will become a factor in Russia's
genuine integration into the world economy. For our country's
ordinary citizens this will mean, in practice, that when
going abroad all they will need to take with them will be
their passport and Russian roubles.

Tax reform

Straightforward fiscal accounting and the application of
legal norms, the equality of taxable entities and a sensible
level of taxation should remain the basic principles of tax
policy. Permit me a few words on this subject. Unfortunately,
tax reform has become an ongoing and uninterrupted process in
our country. Of course, the measures the government has
proposed to alleviate the tax burden represent steps in the
right direction. But the frequency with which amendments are
being introduced into tax law is clearly higher than can be
tolerated. Let's be straight about this: it shows the low
quality of the job done. It makes it difficult for everyone -
the state, businessmen and citizens - to plan for the future.

For the first time now the government has shifted its tax
policy from annual to medium-term planning. A programme for
tax changes for the next three years was approved recently.
This is a correct, important and necessary step, of course.
Now we have to move on and draw up a blueprint for a tax
system which will exist in Russia for many years to come.


I'd like to dwell on another topic which is important to a
huge number of people. This is the problem of citizenship.
Currently the lives of more than one million people who
arrived in our country following the Soviet Union's
disintegration and prior to the adoption of new legislation
on citizenship have found themselves in a very complex
situation. We discussed this topic quite recently with the
leaders of the Russian State Duma factions. These people, who
came to be with us, used to live and work in Russia, took
part in her political life and many of them served in the
Russian army but they have now turned out to be individuals
without citizenship in their own country. The laws adopted
last year were to have brought order to the flows of
migration, to make them transparent. The situation that has
come about does not facilitate the resolution of these tasks
but, rather, creates serious problems for a large number of

I regard it as our duty to set this situation to rights. I
agree with the faction leaders on this score. Let's ponder
this and make appropriate amendments applause . Of course, it
is not bans and barriers that we need. What we need is an
effective immigration policy which is advantageous for the
country and convenient for the people, especially for the
residents of the Commonwealth of Independent States, for
those who are close to us and with whom we have a good
understanding, the people who speak the same language with
us, for they are people who in their heart of hearts belong
to our common Russian culture.

Importance of UN

Esteemed colleagues: Russia aspires to and will continue to
maintain friendly, neighbourly relations with all the
countries of the world, to tackle shared problems and defend
common interests together with them. The foundation of our
foreign policy, the fundamental task of Russia's foreign
policy, is the implementation of our national interests. And
here, the basic principle continues to be the observance of
the norms of international law. The events of the past year
have once again demonstrated that guaranteeing national
interests requires in equal measure both effective diplomacy
and a reliable Russian defence potential. In today's world,
the relations between states are determined to a considerable
degree by the existence of serious, world-scale real and
potential threats. Among such threats we include
international terrorism, the proliferation of weapons of mass
destruction, regional and territorial conflicts, and the
drugs menace. In the event of an aggravated threat to the
world community as a whole or to an individual country, it
seems extremely important to have a decision-making mechanism
which has to be comprehensible, transparent and recognized by
everyone. It goes without saying that the United Nations and
its Security Council are the most important such mechanism.

Yes, it is not always easy for the Security Council to pass a
decision. Sometimes no decisions are passed. It happens
sometimes that the initiators of a resolution do not have
enough arguments to persuade other countries that their
initiative is right.

Of course, UN decisions are far from being favoured by
everyone every time. But the world community has no other
more universal mechanism. This mechanism should be looked
after and maintained.

Of course, it is necessary to modernize the work of
international organizations and to make it more effective.
Russia is open to discussing these questions. I think that
such approaches to international matters are civilized and

These approaches are not directed against anyone nor in
favour of anyone. It is our position, a position of
principle, and we will adhere to it in the future.

Antiterrorist coalition

Russia was one of the first countries to face a large-scale
threat of international terrorism. As we all know, not so
long ago it even threatened the territorial integrity of the
Russian Federation.

After the well-known and terrible tragedies resulting from
acts of terrorism, an antiterrorist coalition took shape in
the world. It took shape with our active participation in
co-operation with the USA, with other countries. In
Afghanistan, it showed its high efficiency in the fight
against the threat of terror.

Russia values the antiterrorist community that has taken
shape, it values it as a tool for co-ordinating international
efforts in the fight against this evil. Moreover, successful
co-operation in the framework of the coalition and on the
basis of international law may become a good example of
civilized states' consolidation in the fight against common

I would like to stress once again: Russia is interested in a
stable and predictable world order. It is the only way to
guarantee global and regional stability, to guarantee
political and economic progress in general. It will help
fight poverty in the world, which is one of the most
important tasks.

Regional co-operation

The strengthening of relations with the CIS countries remains
our indisputable priority in foreign policy. These countries
are our next-door neighbours, many centuries of historical,
cultural and economic ties bring us together.

The mutual dependence of our development is also evident. In
addition, there are tens of millions of ethnic Russians who
live there. I must say straight out that we regard the CIS
space as a sphere of our strategic interest. We also proceed
from the fact that the CIS states regard Russia as an area of
their national interests. Having said this, our country is
interested in stability and economic progress in the CIS. I
would like to stress that the unifying economic processes
taking place in the CIS are linked with the integration of
our countries into the world economy and help us to implement
this integration in a more dynamic way, on conditions which
are more favourable for all our partners.

We will consistently broaden co-operation within the framework
of the Eurasian Economic Community which is working more and
more efficiently. Developments in the world confirm that we
made a correct and timely decision to set up the Collective
Security Treaty organization.

There are several sources of real rather than imagined
threats in close proximity to us: terrorism, transnational
crime, the influx of drugs. Together with our partners in the
Collective Security Treaty organization, it is our duty to
ensure stability and security over vast reaches of the former
Soviet Union's territory.

Closer links with Europe

An important element of our foreign policy is broad
rapprochement with and real integration into Europe. Of
course, we are talking about a complex process which will
take a long time. But this is our historical choice and a
choice that has been made. It is being implemented gradually,
at the current stage by stepping up bilateral relations,
developing a strategic partnership with the European Union
and taking an active part in the work of the Council of

Together, acting in the interests of Russia's citizens, we
have found a political compromise regarding the transit
between Kaliningrad Region and the rest of the Russian
Federation. It is obvious that our interests and the
interests of greater Europe require new qualitative steps
towards each other. Members of the public, business and
cultural circles, scientific organizations of the European
countries and the Russian Federation are interested in this.
Our proposals regarding the future development of all-
European processes are known: they concern free travel for
the public and a common economic space. This is not an
immediate prospect. In order to achieve the aims stated
above, we shall have to travel along a difficult and quite a
long road. Yet the dynamics of pan-European processes enable
it to be said that these plans are perfectly realistic. A
great many of our partners in the European Union actively
support them.

Army reform

Moving on now to the modernization of our military
organization: in military reform, the key issues are
substantial rearmament, perfecting the principles on which
the armed forces are manned and improving their very

For the trouble-free and peaceful development of the country,
we need a strong, professional and well-armed army. This army
should be capable of defending Russia and its allies. It
should also co-operate efficiently with the armed forces of
other countries as part of the fight against common threats.

In accordance with the plans already approved, we shall
continue to form permanent-readiness units in the Ground
Forces, the Airborne Troops and the marines on a professional
basis. This work should be completed in the year 2007.
Furthermore, service in the Internal Troops and Border Troops
will also be based on professional principles.

In simple and plain terms - this is not the only consequence
but a very important one - this means that in trouble spots
and in local conflicts, should Russia, God forbid, be faced
with such challenges - only trained professional units should
take part. I would also like to note that the non-commissioned
officer corps of our armed forces will be transferred more
rapidly to a professional basis.

Starting from 2008, the length of conscription service should
be reduced to one year. For the first six months, new
recruits will study military professions at educational
units. After that, they will have a choice: either to serve
out the remaining six months at regular units or to move over
to contract-based professional service. Those who have served
three years on contract should gain a number of privileges,
including the guaranteed right to receive higher education to
be paid for by the state. Also, a decision has been taken, in
principle, to recruit citizens from the Commonwealth of
Independent States for professional service in the Russian
army. After serving for three years under contract they will
be entitled to a simplified procedure for obtaining Russian

A lot of the above will need to be enshrined in law. In
connection with this, I am counting on your support, the
support of the Federal Assembly. Over the next period of
time, we will have to increase significantly the provision of
modern weapons for our armed forces. As you know, a relevant
programme of rearmament has been developed and approved and
will be implemented without fail. The strengthening and
modernization of the nuclear deterrence forces will be an
important component of the armed forces' reform.

Also today, and I can tell you about this, work on creating
new types of Russian weapons, weapons of the next generation,
is at the stage of practical implementation. This includes
weapons which are classified by specialists as strategic
weapons. This weaponry will make it possible to ensure
Russia's and its allies' defence capability for a long period
of time applause .

I will say once again that the country needs a combat-ready
army, an army with a thinking corps of officers, highly
professional junior command personnel and soldiers who
sincerely want and are ready to serve their homeland.

Duma elections

Esteemed deputies, esteemed members of the Federation
Council, the prospects for Russia's development and for
solving many of our problems will be determined to a
considerable degree by the results of the main political
event of the year - the elections to the State Duma. I can't
pass over in silence this most important event in the life of
the country. It's an important stage in the development of
our democracy. In the last few years relations between the
legislature and the executive have improved. Confrontation
has been replaced by constructive co-operation based on a
meaningful exchange of views, balanced criticism and
collaboration. Solidarity shown by responsible politicians on
the issues of the struggle against international terrorism,
the preservation of the country's territorial integrity and
support for our efforts in the international arena constitute
a most important sign of the spiritual revival of our
society. I say this without any exaggeration and I am
sincerely grateful to these politicians, politicians,
moreover of the most wide-ranging political persuasions. I
would also like to thank representatives of all the
associations of deputies for their active joint work.

At the same time, some features of domestic political life
are worrying. Above all, mechanisms for funding political
parties still remain a closed book for the electorate. The
market of electoral and other political know-how is today to
a large extent a sector of the grey economy. I hope that
quite soon our joint work will ensure more transparency in
party life and provide people with more objective
information, and, as a result, a better chance of making the
right choice.

Lack of transparency in financial transactions on the
political scene is often also complemented by ideological
vagueness, and sometimes, let's be frank, a degree of
political insincerity. Let me explain what I mean. Sometimes
those deputies who enjoy the reputation of liberals and
proponents of progressive economic theories vote in practice
for bills that are ruinous for the state budget - fully aware
of what they are doing. And those who have no qualms about
describing businessmen as nothing but robbers and
bloodsuckers in public unashamedly engage in lobbying the
interests of major companies prolonged applause .

Parliamentary parties are part of the state political machine
and, at the same time, part of civil society. Let me add: its
most influential part, and consequently also its most
responsible part.

We are all interested in enhancing the party structures'
co-operation with the regions, the citizens and their public
organizations. It is obvious that an active dialogue with
people cannot and should not be restricted to pre-election
debates and election campaigns. Only a day-to-day link
between the state and society, which can and should be
provided by the major parties, can spare the authorities from
making serious political mistakes.

We often talk about the greatness of Russia but a great
Russia isn't just a great state. First and foremost, it is a
modern, developed society, one that won't come about of its
own accord. A fully-fledged and developed civil society will
only emerge in conditions where there is a drastic reduction
in the functions of the state apparatus, where mistrust
between various groups in society is surmounted and, most
importantly of all, it will only be possible if there is
national unity in assessing the strategic objectives the
country faces. The creation of conditions such as these,
without the active involvement of political parties, is

I consider the forthcoming elections to the State Duma to be
yet another stage in the development of our multi-party
system, a development in the direction of greater openness of
intent, more effective action and greater responsibility
towards the people of Russia. Strong and responsible power
based on the consolidation of society is required for the
preservation of the country. Without strong power, a
breakthrough into the future is not possible either.

Parliamentary majority could form government

I would like to stress once again that we are facing serious
problems and threats. One has to be intelligent and strong to
survive in the cut-throat competition of this world. And what
we have to do is not just survive. We have to have
substantial economic, intellectual, moral and military
advantages. Only in this way can we retain our position among
the major powers of the planet. And, therefore, as I have
already said today and will repeat, I believe that doubling
gross domestic product, overcoming poverty and modernizing
the armed forces are among our most important objectives.

I believe that society is capable of achieving these results
by 2010 brief applause . I believe that the foundations for
achieving these results are the consolidation of social
forces, the inviolability of the constitution of the Russian
Federation and the inviolability of citizens' guaranteed
rights and freedoms.

I call on all those who regard the tasks formulated above as
top-priority ones for the country to mobilize intellectually,
to draw up common approaches and to co-ordinate specific plans.

I have already said I support the general course towards
strengthening the role of parties in public life. I believe
it possible, taking account of the results of the forthcoming
election to the State Duma, to form a professional and
efficient government based on the parliamentary majority.

Concluding my address, I would like to say: Pooling our
efforts is possible if the main political forces possess the
necessary civic responsibility for joint work.

I am convinced that Russia will definitely rise to a height
worthy of its potential. Consolidation of all our
intellectual resources, resources of authority and moral
resources will enable Russia to attain the biggest goals,
great goals worthy of a great people.

Let us wish each other success. Thank you very much.