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Cablegate: Putin's State of the Federation Address: Touting

VZCZCXRO8191
OO RUEHDBU RUEHLN RUEHPOD RUEHVK RUEHYG
DE RUEHMO #1932/01 1161500
ZNR UUUUU ZZH
O 261500Z APR 07
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC IMMEDIATE 9731
INFO RUCNCIS/CIS COLLECTIVE PRIORITY
RUEHXD/MOSCOW POLITICAL COLLECTIVE PRIORITY

UNCLAS SECTION 01 OF 02 MOSCOW 001932

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PREL ECON PGOV PARM RS
SUBJECT: PUTIN'S STATE OF THE FEDERATION ADDRESS: TOUTING
ECONOMIC ACHIEVEMENTS; SUPPORTING "MORATORIUM" ON CFE


1. (SBU) Summary: President Putin's hour-plus address to
the Federal Assembly on April 26 was - he emphasized - his
last. To loud applause, he declared support for a
"moratorium" on Russia's compliance with the CFE Treaty. He
again condemned U.S. plans to deploy BMD systems in Europe.
The bulk of Putin's remarks focused on economic initiatives.
However, the election-year economic measures he highlighted
represented more a repackaging of existing programs than, as
it might have appeared, a torrent of new spending. Putin
slammed efforts by unnamed "external forces" to interfere
with Russia's internal affairs. He noted he had discussed a
global digital library initiative with President Bush. End
Summary.
.
Last Speech as President
------------------------

2. (U) Putin began his (one hour and twenty minute) annual
State of the Federation speech by asking for a moment of
silence to mark Yeltsin's death earlier in the week. After
noting the difficult transition following the fall of the
Soviet Union, he underlined that Russia was only at the
beginning of the road to national revival, which would be
marked not only by political stability and economic
achievement, but by strengthened values. Putin stressed that
this was the last of his eight annual addresses as President.
The next address to the Federal Assembly, he said, would be
given by a new head of government. He did not tip his hand
as to his successor and stressed that it was too early to
discuss his political legacy.
.
CFE Moratorium and Missile Defense
----------------------------------

3. (SBU) Putin drew sustained applause (the loudest of the
address) when he announced that he considered it "expedient
to declare a moratorium on Russia's implementation of the CFE
Treaty until all NATO members, with no exception, ratify it
and, as Russia does unilaterally today, implement it
strictly." Putin justified the move by arguing that while
Russia had ratified the treaty and complied with its
requirements -- even when it disadvantaged Russia during the
Chechen war -- Western countries had not. He suggested that
Russia would consider withdrawal from CFE if no progress was
made. He proposed "to discuss the problem in the NATO-Russia
Council framework." Putin reiterated that U.S. missile
defense deployment in Central Europe threatened European
security and suggested that it be discussed in the OSCE.
Unlike in last year's address, Putin did not emphasize
military modernization.
.
Duma Elections: Referendum on Russia's Course
--------------------------------------------- -

4. (U) Turning to the upcoming Duma elections, Putin
stressed the role of political parties in maintaining
political stability. He predicted that the December 2007
election would show the degree to which Russian civil society
supports the current direction the country is taking, noting
that implementation Russia's strategic goals depended on the
makeup of the next parliament. The only significant
institutional change Putin flagged was the introduction of 10
year local residency requirements for Federation Council
seats.
.
Democracy Promotion = "Dirty" Politics
--------------------------------------

5. (SBU) In harsh terms, Putin slammed efforts by unnamed
"external forces" to interfere with Russia's internal
affairs. Foreign entities used the "dirtiest" of political
technologies to fuel ethnic and confessional conflict in
order to keep Russia down and steal it riches. He said that
NGOs played a role in the political process, but their
activities needed to be appropriately channeled through
institutions like the Public Chamber. Putin called on
Parliament to pass legislation countering extremism without
delay. He emphasized the role of the Russian language and
culture in encouraging patriotism and family values. He
noted he had recently spoken with President Bush about a
"world digital library."
.
Highlighting Economic Accomplishments
-------------------------------------

6. (SBU) Touting Russia's newfound economic strength, Putin
announced that Russia has "not only completely overcome its
long period of declining production, but has become one of
the ten largest world economies." He advocated a transition
toward a more efficient, innovative economy through

MOSCOW 00001932 002 OF 002


infrastructure development, more efficient use of natural
resources, development of nanotechnologies, stronger support
for small business, poverty reduction, and expansion of the
middle class. He named electric power development a
priority, calling for greater use of nuclear, hydro and coal,
and emphasized the need for better transportation
infrastructure, particularly airports and seaports. In a nod
to regional dissatisfaction with federal funding, Putin
announced plans to transfer 153 billion rubles (about $6
billion) to the regional governments.

7. (SBU) As expected in this election year, Putin
characterized as successful efforts under the National
Priority Projects to invest in human capital. His only
criticism was to call for improved management, particularly
stronger financial oversight. He highlighted the housing
project, setting a goal of building one square meter per
capita annually to better meet demand. Expressing particular
concern over the appalling state of the housing utilities
sector, Putin argued that part of the revenue the state
receives from the payment of Yukos debt should go to
improving utilities. Furthering his populist theme, Putin
announced that pensions would increase by at least 65% over
the next two years and affirmed that the retirement age would
not be raised anytime soon. Also, for the first time he
suggested splitting the Stabilization Fund into three funds:
the Reserve, Future Generation, and Social Program Funds.

Foreign Policy: Rote Speech
----------------------------

8. (SBU) Putin was at his least animated in discussing
Russia's foreign policy aims other than defense. Noting
Russia's economic and energy interests in the area of the
former Soviet Union, he highlighted the integration function
of the Eurasian Economic Community and the Shanghai
Cooperation Organization. After a perfunctory nod to the
Russia-Belarus Union State, Putin stressed the economic
potential of cooperation with Russia's European partners.
BURNS

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