Putin’s state-of-the-nation speech addresses the economy

April 26, 2005

Russian President Vladimir Putin spoke live on state television Monday in his annual state-of-the-nation address using high ideological rhetoric when calling on lawmakers and the public to strengthen democracy and the rule of law. His 50 minute address from the Kremlin's Marble Hall only briefly touched on the "epidemic of collapse", a reference to upheavals in Chechnya, Kyrgyzstan and the Ukraine, which was "a real drama" stranding millions of Russians beyond the borders of the Russian Federation.

Brushing off what was probably taken as criticism during last week's visit by Condoleezza Rice who commented the Kremlin ran a "managed democracy", Putin stressed that "Russia ... will decide for itself the pace, terms and conditions of moving towards democracy."

Putin was critical of the lack of progress in implementing his reform proposals. Calling for a crackdown on corruption, where treatment by tax inspectors are "terrorizing business", he addressed concerns of the business community by condemning a series of back-tax bills like the ones that dismembered Yukos and face other major Russian corporations.

He was also critical of a bureaucratic attitudes that treat "state service as some type of business". He made clear the need for investment must be met by "rules of the game" that are consistent, saying "Russia is certainly interested in the inflow of private investments on a large scale, including foreign investments. It is our strategic choice and our strategic approach."

Putin called for proposals to index wages to inflation over the next two years, and for the introduction of a flat 13% tax on undeclared earnings in the shadow economy, a slice that represents nearly 35% of the nation's economy, by legalizing what was previously defined as illegal income.

Putin supports the development of a strong state system with determination for Russia to avoid the disarray that led to the collapse of the Soviet Union. Saying, "First and foremost it is worth acknowledging that the demise of the Soviet Union was the greatest geopolitical catastrophe of the century." He sees the need for strengthening the legal system and the political environment to assure a more just society in avoiding a replay of a Russian downfall.

On politics, he pointedly abandoned the much-used ‘stability' catch phrase of the bureaucracy. Putin signaled to the bureaucratic caste who are on the eve of their upcoming parliamentary and presidential elections they should promote partisanship and civil society.

By studiously avoiding too many references to business, the thrust of his address sought to reassure the small property holder class, rather than big business and other elite investors.