Putin’s State of the Nation Address

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

Today under the Constitution I submit to you the State of the Nation Address and above all I will sum up some of the results.

Last year’s results have largely become the continuation of what was started three years ago. Over this period of three years we have not only substantially cleared the logjams of problems—and life itself was forcing us to deal with them practically on a daily basis—but we have also accomplished some positive results.

Now we have to make the next step. And all our decisions, all our actions we must aim at securing Russia a place among strong, economically developed and influential countries in the very near future.

This is a qualitatively new task. A qualitatively new level for the country. A level that we could not reach before for a number of reasons, because of scores of other urgent problems. Now we have such an opportunity and we must use it.

Russia should be and will be a country with a developed civil society and sustainable democracy, where human rights, civil and political rights will be fully ensured.

Russia should and will be a country with a competitive market economy, a country where property rights are securely protected, and economic freedoms allow people to work honestly and earn without fear or limit.

Russia will be a strong country with modern, well-equipped and mobile armed forces, with an army that is ready to defend Russia and its allies, the national interests of the country and its citizens.

All this must create decent living conditions for people and enable Russia to be an equal member of the community of most developed countries.

People will not only be proud of such a country. They will multiply its wealth, they will remember and respect our great history.

This is our strategic goal.

But to achieve this what is necessary is consolidation, mobilization of intellectual forces, the combined efforts of the bodies of government, of the civil society, of all the people in the country.

On the basis of understandable and clear goals we have to achieve consolidation to resolve the main national problems that we face.

Why do I consider this to be vital?

Our entire historical experience attests that such a country as Russia can only live and develop within its existing borders if it is a strong power. At every period of the weakening of the country, political or economic, Russia has invariably and relentlessly been faced with the threat of disintegration.

Yes, some achievements of the past years have allowed us to talk about stabilization. Some people even developed a feeling that all our problems have been solved, that the future of Russia is quite predictable and successful and the only question is whether our economy should grow by 4 or 6 percent and how much we should spend. Let me tell you that this is not so. We are confronted with serious threats. Our economic foundation, although it has become noticeably stronger, is still shaky and very weak. The political system is not developed enough. The state apparatus is inefficient and most sectors of the economy are uncompetitive. The size of the population continues to diminish. Poverty is receding very slowly. The international situation remains complicated. Competition in the world economy is not diminishing.

We see around us countries with highly developed economies. Let us face it, they are squeezing out Russia from promising world markets wherever they can. And their visible economic advantages provide a reason for growth of geopolitical ambitions.

Nuclear weapons continue to spread in the world. Terrorism is threatening peace and the security of our citizens. Strong and well-armed national armies are sometimes used not to combat this evil but to expand certain countries’ zones of strategic influence. Can Russia seriously counter these threats if our society is divided into small groups, if we are concerned only about our own narrow-minded group interests, if parasitic sentiments grow, not subside, and these sentiments are fueled by bureaucracy’s complacent attitude toward the fact that the national wealth is not protected and accumulated but often wasted away?

I am convinced that without consolidation, at least around basic national values and objectives, it will be impossible to counter these threats.

I would like to remind you that throughout our history Russia and its citizens committed and commit truly historic deeds for the sake of the country’s integrity, for the sake of peace in it and stable life. Keeping the country together on vast expanses, preserving the unique community of peoples, with the strong positions of the country in the world, is not only a strenuous job but also tremendous sacrifices and deprivations of our people. Such is the thousand-old history of Russia, such is the method of its reproduction as a strong country. And we have no right to forget this. We must take this into account as we assess present-day dangers and our main tasks.

That we can solve them is evident from our common results we have achieved jointly in the last three years. Yes, we have already resolved very many problems, including those that until recently seemed simply insolvable.

We have finally—juridically and actually—restored the unity of the country. We have consolidated the state authority, we have brought the federal power closer to the regions. Thanks to restoring a single juridical space, we have been able to closely get down to delimiting the powers between the Center and the regions. Much still has to be done in this area but at any rate we have got down closely to dealing with it. We have begun building vigorous, well financed authorities at the local level. I am speaking about it quite carefully as you can see. We have just begun this work.

Having adopted the third part of the Civil Code of Russia we have completed a major stage of work of codifying legislation. A new Labor Code has also been adopted. The renewed legislation, the systematic dialogue with the trade unions and entrepreneurs have begun to mold a civilized labor market.

Serious headway has been made in the establishment of a really independent judiciary. We have adopted a new Criminal Procedure, Civil Procedure and Arbitration Procedure Codes, thus ensuring additional guarantees of human rights.

We have perfected the electoral system. Conditions have been established in the country for developing a full-fledged civil society, including for the veritable emergence in Russia of strong political parties.

We have made substantial headway in tax reform. We have begun the military reform. As a result of work that has not been simple we have been able to take off the ground the reform of land relations. I will remind you that this question remained for a whole decade a serious economic barrier on the way toward democracy and market.

The first steps have been made in reforming the pension system, infrastructural monopolies of the housing and utility sector.

We together overcame an absolutely unacceptable situation when some Russian territories were effectively outside the federal jurisdiction. The supremacy of the Russian Constitution and the federal laws, like the duty to pay taxes into the federal treasury have become the norm for all the regions of the Russian Federation. At this point I would like to make an important digression on a topic that is sensitive to all of us. The previous Address spoke of the need to bring the Chechen Republic back into the political and legal space of the country. It spoke about free elections, the creation of effective republican power institutions and let us face it, not many people at the time believed in it.

But a year has passed and reality has confirmed that together we can achieve a great deal. I would like once again to thank all those who have backed this line of the leadership of the country, those who took an active part in this policy and of course those who took an active part in the preparation of the constitutional referendum in Chechnya itself.

Today I offer particular thanks to the Chechen people for their courage, for not allowing themselves to be intimidated, now as in the past, for the wisdom that people who are simple but sensitive to the truth invariably have. People in Chechnya have felt in their hearts their responsibility and their human interest. And finally, the referendum has shown that the Chechens rightly regard themselves to be an inalienable part of the single multi-national people of Russia.

Yes, we have all had to pay a heavy price for restoring the territorial integrity of Russia and we bow our heads in memory of the dead servicemen and civilians in the Chechen Republic, all those who at the cost of their lives prevented the country from being rent asunder and fulfilled their duty to the last.

The constitutional referendum that took place in the republic drew a line under the time of troubles, the years when power in Chechnya had been usurped by bandits, when the citizens of the republic found themselves in the Middle Ages in the direct sense of the word, were denied elementary human rights, when public executions were held regularly and demonstratively in the streets of Chechen cities and villages, when thousands of people became live commodities in the hands of slave traders, when neither schools nor institutes nor hospitals worked.

All that has finished.

But for life in the republic to be finally brought back to normal a very great deal has yet to be done. It is necessary, on a democratic basis and in accordance with the Constitution adopted at the referendum to elect the president and the parliament of the republic, to form the local government bodies, to develop and sign a treaty on delimitation of powers between the federal center and the republic. And of course to restore the economy of Chechnya.

We also are to hand over to the Chechen militia the organization of law enforcement work in the republic. Besides, as part of the continued process of political settlement jointly with you dear colleagues, preparation is underway for an amnesty. It will create conditions for drawing into peaceful life those people who for various reasons have not done so before, but are ready to do so now.

All this have to be done in complex conditions. Obviously, the remnants of the bandits will try to use threats, murder and terrorist acts to intimidate the citizens of the republic, to disrupt the dynamic political process. And we see that the terrorist acts perpetrated by the bandits are more and more frequently targeted against the civilian population, against the common people.

But we will see this through. People in Chechnya will have a normal human life.

Esteemed Assembly,

Three years ago we decided that the most serious threats to the country were demographic degradation, Russia’s economic weakness, and the inefficiency of the state.

Have we succeeded in solving these problems? Yes and no. There are both successes and serious mistakes. We will talk about this frankly today.

The shrinkage of the Russian population was named as one of the most acute problems. This shrinkage is caused first of all by a decrease in the birth rate and an increase in the death rate.

In the last few years the death rate continued to grow and increased 10 percent over the last three years. Projected life expectancy also continued to decline—these are sad figures—from 67 years in 1999 to 64 in 2002. One of the reasons for this is a high rate of illness, deaths caused by accidents, poisoning and injuries. The spread of so-called new epidemics, is aggravating the situation, including drug addiction and AIDS.

However, over the same three years the birth rate increased 18 percent, the rate of death among infants decreased 21 percent and is now at a record low level in the history of our country.

Let me remind you that not so long ago we considered at the State Council a set of issues regarding an accelerated transition to health insurance. I believe this will help strengthen the financial basis of health care considerably. After organizational questions have been worked out in 16 regions of Russia in the second half of this year, health insurance will be offered to pensioners on the entire territory of the country from next year. I do hope that this will give good support to our elderly people.

The national census showed that according to the preliminary data the permanent population of the country is over 145 million. It’s almost two million more than current statistics showed. But it is also two million less than in 1989.

What do these figures speak about?

Firstly, that the population of the country continues to diminish, albeit at a slower pace than was shown by current statistics, but it is diminishing.

Secondly, despite a certain increase in birth rates, our population was increasing not thanks to them but rather thanks to the legal immigration. Over the past ten years a total of around seven million people have moved to settle in this country, mainly from the countries of the Commonwealth of Independent States.

It is a very indicative result and it indicates that despite all our difficulties, Russia remains an attractive country for life and work of millions of people.

One of the serious problems mentioned three years ago was the intensifying globalization of the economy and of the entire public life of the modern world. Today not a single country, whatever its size or wealth, can develop successfully if it is isolated from the rest of the world. On the contrary, success comes to those states that are consciously and intelligently and dynamically integrating into the world economy.

Over the past three years, on the road toward international integration, we have made a number of serious steps.

First and foremost, in June last year Russia was invited to become a full-fledged member of a club of eight most developed states of the world. In it, together with the partners, we are working to safeguard both our national interests and to solve the common problems faced by contemporary civilization. A major example of this is the global partnership in the matter of nonproliferation of weapons of mass destruction. Disposal of these weapons will enable us to restore the health of the ecology of certain regions of Russia.

I would also like to point out that the credit rating of the country has become the highest in the entire history of new Russia. Some of the Russian companies have joined the largest European and world companies. Some of them for the first time over the past ninety years have begun a serious expansion into the world markets. They have become notable participants in international economic relations, serious competitors to foreign firms.

I must say that we have made a significant headway toward joining the World Trade Organization.

And finally, mentioned as a strategic and principled challenge to the country three years ago was the economic weakness of Russia.

What has changed since then?

On the one hand, over the period in question there have appeared signs of changes for the better. Thus, the economic growth continued. During these three years the gross domestic product of Russia increased 20 percent. Investment into fixed assets—by more than 30 percent. The physical export of goods increased by one-fourth, including the export of machines and equipment and transport vehicles—by more than 70 percent. Not a bad indicator.

For the first time in half a century Russia ceased to be an importer of grain and became its exporter. From 1999 the sales of our food products in foreign markets increased three times.

The export of oil and petroleum products and gas increased by 18 percent. And today Russia is a major exporter of fuel and energy resources in the world.

Information technologies were developing at a high rate. The so-called new economy is growing in Russia. The increase in its output ranged from 20 to 30 percent a year. The standard of telephonization of the country has grown substantially. The number of mobile phone users has been doubling every year and has now reached almost 18 million. An estimated 10 million people in Russia today use the Internet.

These figures show that a balanced growth of the Russian economy, based both on traditional industries and on modern technologies, is possible.

The increased economic potential of the country has improved the lives of tens of millions of people. Thanks to economic growth almost 4 million people during these years have dropped out of the ranks of the jobless. The possibility to work and earn has seriously reduced the scale of strike activity from nearly 900,000 people in 1997 to less than 5,000 in 2002. And this in a situation when the trade unions are becoming more and not less active.

The real incomes of the population have grown by 32 percent. The average pension only three years ago was 70 percent of the living minimum of pensioners, last year it was equal to the living minimum.

And finally, end consumption per capita has increased during three years by almost a third. Last year that indicator exceeded not only the level of three years ago, not only of the crisis year of 1998 and even the pre-crisis 1997, but it hit a record in 2002 in the whole history of Russia.

Such an enumeration of dry figures may appear to be difficult to understand, but not to you. Behind these figures are the large assets that have become available to millions of our citizens. These assets have helped to boost people’s well-being, supported their health and made it possible to solve difficult social problems in the country.

And yet in spite of everything I have said I have to state that the economic results we have achieved are still very very modest.

First, one-fourth of Russian citizens still have incomes below the living minimum. One-fourth of the population of the country!

Secondly, economic growth in the country remains extremely unsustainable. While in the year 2000 industrial production grew throughout the year, in the year 2002 combined growth occurred only during six months. As a result, unemployment began to grow in the last few months.

And finally, the third point. The pace of economic growth is declining. Last year, after 10 percent growth in 2000, the economy grew only 4-odd percent. However, the declining pace of economic growth inevitably slows down social development and makes it impossible to solve many other problems facing the country.

We must admit that economic growth in Russia is owed mainly to a favorable situation on the world markets in the last couple of years. The unprecedented improvement of the terms of foreign trade for our economy gave Russia considerable economic advantages and big additional revenue. Part of this revenue was used to improve the quality of life for our citizens, part was invested in the Russian economy, another part was used to pay the foreign debt, which we have reduced by one-fourth. Finally, this revenue allowed us to augment our reserves. The combined reserves of the Finance Ministry and the Central Bank, and the foreign exchange and gold reserves of the Central Bank have reached an all-time high of 61 billion dollars, while only three years ago they stood at only 11 billion.

I think it’s clear that without this, I mean a favorable foreign economic situation, our successes in social and economic development would have been much more moderate. We must remember that such a favorable situation cannot and will not last forever.

In this connection, I would like to draw your attention to yet another problem. The total annual size of the social obligations of the state is at present 6.5 trillion rubles. This is practically twice the consolidated budget of Russia. Both the executive and the legislative branches have over the years given people more promises than the Russian economy is able to deliver. Moreover, under populist slogans and deceiving the citizens of the country, promises that cannot be kept are increasing. Some politicians, unfortunately, seek to build them up even today.

In addition to frustrated hopes, a serious consequence of growing empty promises is the deterioration of the quality of current economic policy. That also leads to disproportions and conflicts in the inter-budgetary relations. With state expenditure growing at a faster rate than the real economy, one can hardly expect anything different.

I think, esteemed members of the two houses of the Federal Assembly and esteemed heads of the regions, it is high time we all together put an end to this kind of policy. The authorities cannot and must not and have no right to deceive the citizens of their own country. If we have promised something to people, we should fulfill these promises. Otherwise, it is better not to promise and not to do it.

And the last thing. State regulated tariffs for the products of the infrastructure monopolies are increasing faster than prices are growing in the free sector of the Russian economy. As a result, there is growing redistribution of economic resources in favor of the monopoly sector and its share in the Russian economy is growing. And yet the monopoly sector is not exhibiting a high level of efficiency. So, the monopolists strangle the competitive sector in our economy. The government should control this more strictly. The continuation of such a policy obviously is the road to stagnation.

The conclusion from the above is evident: given the above-mentioned positive trends and indicators, the favorable external conditions and the stable political situation have not been used—certainly have not been fully used—to achieve our strategic goals.

Esteemed deputies,

Members of the Federal Assembly,

The last three years also showed what we can achieve if we work jointly to the same end.

They showed that Russia is not a country doomed to live in crises and misery, that Russian people are talented, initiative-driven and industrious, that they can work and deserve a better life, that they can build a better life. Of course, if they are not hindered, at least if they are not hindered. It would be even better if we help.

I believe the return of Russia to the community of rich, developed, strong and respected countries of the world must be our goal of principle.

But this will happen only when Russia becomes economically strong, when it no longer depends on tips from international financial organizations or unpredictable turns in the foreign trade environment.

This can be possible only in conditions of sustainable and fast growth that is based on the use of all factors, internal and external, traditional and contemporary, domestic and foreign.

Finally, fast and sustainable growth can be possible only when competitive goods are made. Everything must be competitive: goods and services, technologies and ideas, business and the state itself, private companies and state institutions, entrepreneurs and public servants, students, professors, science and culture.

In the meantime the economic growth is sometimes said to be opposed to reform. They say that it is dangerous to spur it up, that it is much more important to pursue structural changes and reforms. I would like to express my own opinion on this score. Such opposing is contentious, to say the least. Reforms for the sake of reforms are not needed. There is no need for a permanent revolution.

It is obvious that the engine of the economic growth is private initiative of both the Russian and foreign business working in the Russian territory. It is also obvious that the Russian business itself must become modern, enterprising, flexible, mobile. It must worthily continue the great traditions of Russian entrepreneurship and patriotism must be added to it for good measure.

I will repeat again that the success of the country to an immense extent depends on the Russian entrepreneur.

And finally, the policy of economic growth cannot be opposed to social policy. I would like to stress that the economic growth is necessary for us in the first place for raising the wellbeing of the citizens. It is directly linked with solving a number of essential problems. These include good quality nutrition and good and comfortable housing, the uninterrupted supply of electricity and hot water. It is also good education and modern health care. It is also protection from accidents and natural cataclysms. Finally, it is also the longer life expectancy.

Some time in the past we said that tough competition was a norm in the modern world. And that is why our ability to compete, the readiness to fight for resources and influence directly determine the situation inside the country and Russia’s weight in international affairs.

This approach—the perspective of our development—was heeded within the Russian society and accepted.

The idea that the high competitiveness of the country must become a major goal was accepted by practically all the influential political forces and our citizens. Now we should make sure that this goal is present in the practical activities of the bodies of state power and local government.

Meanwhile the Russian bureaucracy proved to be ill-equipped for working out and implementing decisions that meet the modern needs of the country. And conversely, it has become quite skillful in deriving the so-called administrative rent from its position. I spoke about it last year.

And we also spoke about the problem of inefficient state three years ago. We stressed that the weakness of the state nullifies economic and other reforms.

Our bureaucracy still possesses immense powers, but the number of powers in its hands is still not matched by the quality of power. I must stress that a major source of such power is excessive functions of state bodies. In spite of the huge number of bureaucrats in the country there is a dire shortage of personnel at all levels and in all power structures. A shortage of modern managers, efficient people. The above is the background against which the vital administrative reform must be carried out in the country.

As you know, the government has made an inventory of the functions of ministries and agencies and it has counted about 5,000. But in the course of this work it was found that almost every agency believes that its own functions should not be curtailed but broadened, sometimes at the expense of the agencies next door.

For all the awareness of the complexity of the tasks and the difficulties that have cropped up, the administrative reform has been dragging on too long.

Apparently the government needs to be helped. Apparently it needs an additional political impetus. Of course, it will get it.

I believe we must not convince bureaucracy to cut down on its appetite but to impose restrictions upon it through directives.

The functions of state bodies must be cut radically. Of course, everything must be calculated most thoroughly. Otherwise we may not be able to solve this problem. This must be done on the basis of the inventory that the government commission is finishing and it must be linked to a set of decisions on the delimitation of powers between different levels of government and on their financial autonomy.

At the same time it is necessary to create effective mechanisms for resolving disputes between the citizen and the state by perfecting administrative procedures and judicial mechanisms.

A few words about social and economic priorities. I can often hear that the Russian economy does not need qualitative rises and leaps, that there is no need for major national projects that will generate big growth, that it would be quite enough to be consistent in carrying out the current policy, even though it cannot produce the expected big growth.

I must say that with such an attitude toward business and with such a fear of making a responsible choice—I am not talking, of course, about large-scale projects of the period of stagnation—we shall not be able to go forward quickly and with good quality, but I believe that the problem of choosing a source of growth will arise only if there is a strong need to solve concrete ambitious tasks.

Such a task does exist. It is quite realistic although it is extremely difficult.

We should at least double the gross domestic product in a decade.

The doubling of the GDP is a systemic and of course a large-scale task. It will call for a profound analysis and adjustment of the existing approaches to economic policy. But the main thing that we have to do here and what we will need is, again, the consolidation of political forces, of society. Consolidation of all the branches of government, the pooling of the best intellectual forces, support of the social and political structures, cooperation between parliament and government, joint search for optimum ways of solving the truly strategic, vital, historic task for Russia.

I am convinced that all the conditions for setting and solving such tasks exist in Russia. There is a possibility to start a large-scale building of a modern and strong economy and ultimately forming a state that is competitive in every sense of that word.

Another major task that should be tackled together is achieving full convertibility of the ruble. Not only internal convertibility, but also external convertibility, not only in current, but in capital operations. Let me remind you that in the past Russia had one of the strongest and most respected currencies in the world. The dignity of the gold ruble was equated to the dignity of the power.

Let me tell you that the country needs a ruble that freely circulates in international markets. We need a strong and reliable link to the world economic system.

Russia which has become a full-fledged member of the G-8 of the most developed states in the world is under an obligation to solve this task.

The achievement of that goal will become a factor of Russia’s real integration into the world economy. And for the ordinary citizens of this country this will mean in practice that when preparing to travel outside Russia it will be sufficient to take along the passport and Russian rubles.

The basic principles of tax policy must remain the simplicity of tax registration and application of legal norms, the equality of the subjects of taxation and a reasonable level of taxes.

Allow me to say a few words on this topic. The tax reform in Russia is regrettably becoming permanent and continuous. Yes, the measures proposed by the government to reduce the tax burden are of course movement in the right direction. But the frequency of changes introduced into tax legislation clearly surpasses the permissible level. Let us put it straight: this is the measure of the quality of work, a quality that is not high. This hampers life planning for all: for the state, for the entrepreneurs, for the citizens.

Now in the tax policy, the government has for the first time switched over from annual planning to medium-term. Recently the program was approved for tax changes for the coming three years. This is of course a correct, important and needed step.

Now it is necessary to move further, to develop the contours of a tax system that would exist in Russia for many, many years to come.

I would also dwell on another, very important topic that affects the interests of very many people, the problem of citizenship.

At the present time over one million people who have come to Russia after the demise of the Soviet Union—and pending the passage of the new legislation on citizenship—found themselves in a most complex life situation. We have quite recently discussed this topic with the leaders of factions of the State Duma.

Those people who came to us lived and worked in Russia, participated in its political life; many of them served in the Russian Army. And now they have found themselves to be stateless in their own country.

The laws passed last year were called upon to bring order to the immigration flows, to make them transparent. What came out of it is not conducive to the solution of the task. Rather, it creates serious problems for a large number of people. I believe it is our duty to rectify this situation. I agree with the leaders of factions on this score. Let us think about it and introduce corresponding adjustments.

What we need of course is not bans and barriers, we need an effective immigration policy that is good for the country and convenient for people, especially for the citizens in the Commonwealth of Independent States, those who are close to us and with whom we understand each other well, with whom we speak the same language. These are people belonging to our common Russian culture.

Esteemed colleagues,

Russia seeks to and will maintain friendly, goodneighborly relations with all the countries of the world, solve common problems with them and protect common interests. The main task of the Russian foreign policy is to promote our national interests. But of course the basic principle remains compliance with the norms of international law.

The events of the past year have brought another proof that in ensuring national interests one needs equally an efficient diplomacy and a reliable defense potential of Russia.

In the modern world the relations among states are to a large extent determined by the existence of serious world-wide real and potential threats. Among such threats we count international terrorism, the spread of weapons of mass destruction, regional and territorial conflicts and the narco threat.

And it is extremely important that if a certain threat to the international community as a whole and to individual countries increases, a clear, transparent and generally recognized decision-making mechanism is used. Undoubtedly the most important mechanism of this kind is the United Nations and its Security Council.

Yes, decisions are not adopted always easily at the Security Council, and sometimes they are not adopted at all. Sometimes the initiators of a resolution do not have enough arguments to convince other countries. Not everybody always likes UN decisions. But the international community has no other, let alone more universal, mechanism. Therefore, it must be handled with great care.

Of course it is necessary to modernize international organizations and make them more efficient. Russia is open to discuss these issues.

I believe such approaches toward international affairs are civilized and correct. These approaches are not directed against anyone or in favor of someone else. This is our position of principle, and we will stick to it in the future.

Russia was one of the first countries that encountered the huge threat of international terrorism. As we all know, not so long ago it threatened the territorial integrity of the Russian Federation. After the terrible tragedies caused by terrorist acts, an anti-terrorist coalition was created in the world with our active participation and cooperation with the United States and other countries, and it proved its high efficiency in combating the threat of terrorism in Afghanistan.

Russia values the anti-terrorist community. It values it as an instrument for coordinating interstate efforts in combating this evil. Moreover, successful cooperation within the coalition on the basis of international law may provide a good example of consolidating civilized states in the fight against a common threat.

I will stress again that Russia is interested in a stable and predictable world order. Only this order can ensure the global and regional stability and on the whole—the political and economic progress. It will contribute to the struggle with poverty in the world, which is one of the major tasks.

Our unconditional foreign policy priority remains strengthening the relations with the countries of the Commonwealth of Independent States. These countries are our close neighbors. We are united by many centuries of historical, cultural and economic relations. The interdependence of our development is also obvious. In addition to all else, there are tens of millions of Russians living there.

And I must say it straight that we regard the CIS space as a sphere of our strategic interests. We also proceed from the assumption that for the countries of the Commonwealth Russia is an area of their national interests. Besides, our country is interested in stability and economic progress in the CIS space.

I wish to stress that the uniting economic processes now at work in the CIS are linked with the integration of our countries into the world economy and are helping to implement this integration more dynamically, on conditions more advantageous for all our partners. In the process, we will be consistently deepening our cooperation within the framework of the increasingly effective Eurasian Economic Community.

In addition, the events in the world confirm the correctness and timeliness of the choice we made in favor of establishing the Organization for Collective Security Treaty. In the immediate vicinity of Russia there are quite a few sources of real, not imagined threats of terrorism, transnational crime, narco intervention. Together with the OCST partners, we are obligated to safeguard the stability and security on a significant area of the former Soviet Union.

One major element of our foreign policy is the broad rapprochement and real integration with Europe. Naturally, we are talking there about a complicated and long process. But this is our historical choice. It has been made and it is being consistently implemented, at this stage through more active bilateral relations, the development of strategic partnership with the European Union and active participation in the work of the Council of Europe.

Together, in the interests of the Russian citizens, we have found a political compromise on the problem of transit between the Kaliningrad region and the rest of the Russian territory.

It is equally obvious that our interests and the interests of Greater Europe demand new qualitative steps to meet each other. This is interests of citizens, business, cultural and scientific communities in the European countries and in the Russian Federation. Our proposals on the prospects of the development of all European processes are known. They include free movement of citizens, the formation of a common economic space.

This is not the prospect for the very near term. To achieve these goals one will have to cover a difficult and fairly long road, but the dynamic of all European processes suggests that these are absolutely realistic plans and is actively backed by many of our partners in the European Union.

Now about the modernization of our military organization.

In the military reform the key issues are substantial rearmament, improvement of the principles of recruitment and the very structure of the armed forces.

We need a strong, professional and well-armed army for a happy and peaceful development of the country. This army must be able to defend Russia and its allies and to interact effectively with the armed forces of other countries in the struggle against common threats.

In accordance with the endorsed plans, we will continue to create permanent readiness units in the land forces, airborne troops, and marines on a professional basis. This work must be completed in 2007. In addition, service in the interior and border guard troops will also be professional.

In plain terms (this is not the only result but a very important one) it means the following: only well-trained professional units must be used in trouble spots and local conflicts, if Russia, God forbid, faces such challenges.

I also want to say that sergeants in the armed forces will also be recruited on a professional basis as quickly as possible.

From the year 2008, the length of service for draftees will have to be reduced to one year. During the first six months draftees will master military specialties in the training units. After that they will be allowed to choose between serving the remaining six months in the line units or signing a contract. Those who have served three years on a contract basis should receive certain preferences, including a guaranteed right to higher education with all costs to be paid by the state.

Also a decision of principle has been adopted that it would be expedient to hire citizens from the CIS countries into the Russian armed forces to serve on a professional basis. After three years of service on a contract basis, they will be entitled to fast-track Russian citizenship.

Much of what has been said about will require legislative decisions. In this connection, I hope for your support, for the support of the Federal Assembly.

In the upcoming period we are to substantially improve the equipment of our armed forces with modern weapons. A corresponding program of rearmament, as you know, has been developed, approved and will be unconditionally fulfilled.

A serious component of the reform of the armed forces will be the strengthening and modernization of the nuclear deterrent.

Besides, I can inform you that at present the work to create new types of Russian weapons, weapons of the new generation, including those regarded by specialists as strategic weapons is in the practical implementation stage. These weapons will ensure the defense capability of Russia and its allies in the long term.

Let me repeat, the country needs a combat capable army, an army with an intellectual officers corps, highly professional junior command and, finally, soldiers who sincerely want to and are ready to serve their country.

Esteemed deputies,

Esteemed members of the Federation Council,

The prospects of the development of Russia and the solution of many of our problems will to a considerable degree be determined by the outcome of the main political event of the year, elections to the State Duma. I cannot pass over this key event in the country’s life. It is an important stage in the evolution of our democracy.

In recent years the relations between the legislative and executive branches have qualitatively improved. In place of confrontation there is constructive cooperation based on substantive exchange of opinions, weighed criticism. Interaction has become a reality.

I consider the solidarity demonstrated by responsible politicians on the issues of combating international terrorism, the preservation of territorial integrity of the country who support our efforts in the foreign policy arena to be a key sign of the improved spiritual health of our society. I am saying it without any exaggeration, I sincerely thank these politicians of different orientation.

I also want to thank representatives of all deputies’ associations for active joint work. At the same time, some peculiarities of the national political life are a matter of concern to me. First of all the mechanisms of financing political parties remain a big secret for voters. The market of election and other political technologies is largely one of the sectors of the shadow economy. I hope that in the very near future our joint work will make party life more transparent, give people more objective information, and as a result, more chances to make a correct choice.

Lack of transparency in financial operations in the political scene is often complemented by unclear ideological positions, and sometimes, let’s face the truth, certain political insincerity. I will explain what I mean. Sometimes deputies who claim to be liberals and advocates of progressive economic theories in real life vote for bills that ruin the state budget. And they understand what they do. Those who shamelessly name businessmen robbers and blood-suckers blatantly lobby for big companies.

Parliamentary parties are a part of the state-political machinery and at the same time a part of civil society. I should add that they are the most influential part of civil society and therefore the most responsible one. We are all interested in the deepening of interaction of party structures with the regions of the nation, with citizens and their public organizations.

It is obvious that the active contacts with people cannot and must not be confined to the framework of electoral debates and the campaign deadlines. Only the daily link between the state and society, that the large parties can and must ensure, can save the authorities from making serious political mistakes.

We often talk about the greatness of Russia. But a great Russia is not only a great state. It is above all a modern, developed society which cannot emerge by itself.

The fully developed civil society will emerge only in conditions of a drastic cut in the functions of the state apparatus, of eliminating the mistrust between different social groups.

But the main thing is that this will become possible only in conditions of national unity in assessing the strategic tasks faced by the nation. Creating such conditions without the vigorous participation of political parties is impossible.

I consider the coming election to the State Duma to be yet another stage in the development of our multi-party system, development in the direction of greater openness of intentions, greater effectiveness of action, more responsibility vis a vis the people of Russia.

A strong and responsible authority, based on the consolidation of society, is necessary for preserving the country. Without a strong authority it is not possible to breakthrough into the future.

I would like to stress once again that we are being faced with serious problems and threats. We need to be clever and strong in order to survive in the toughest competitive struggle in the world.

We must not simply survive. We must possess a substantial economic, intellectual, moral, and military advantage. Only in this way shall we keep our positions among the major powers of the earth.

And that is why among the major objectives—I have already spoken about this today and I will repeat it—I regard the following:

doubling the gross domestic product;

overcoming poverty;

modernizing of the armed forces.

I believe our society is capable of achieving these results before the year 2010. The consolidation of public forces, the unshakableness of the Constitution of the Russian Federation and guaranteed rights and freedoms of citizens serve as the basis for achieving these goals.

I urge all those who consider the formulated tasks a priority for the country to mobilize intellectual potential, work out common approaches and coordinate concrete plans.

I have already said that I support the overall policy of increasing the role of parties in public life. Based on the results of the upcoming elections to the State Duma, I believe it will be possible to create a professional and efficient government that will have the support of a parliamentary majority.

As I conclude my speech, I want to say that it is possible to consolidate our efforts if the main political forces have civil responsibility that is needed for joint work.

I am convinced that Russia will most certainly rise to a height that matches its potential.

The consolidation of all our intellectual, government and moral resources will allow Russia to achieve the most ambitious goals.

The greatest goals that are worth of a great people.

Let us wish each other success.

Thank you very much for your attention.

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