PUTIN'S ADDRESS TO THE FEDERAL ASSEMBLY BREAKS

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SUBJECT: PUTIN'S ADDRESS TO THE FEDERAL ASSEMBLY BREAKS
LITTLE NEW GROUND

REF: MOSCOW 4839

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SENSITIVE BUT UNCLASSIFIED; HANDLE ACCORDINGLY


1. (SBU) SUMMARY: President Putin's hour-long Address to the
Federal Assembly on May 10 lacked the broad vision for
Russia's future that some had expected. In a lengthy
discussion of economic issues, he stressed national priority
projects and technological development, and expressed
commitment to IPR protection. He reiterated Russia's desire
to join the WTO but insisted it would be done on mutually
beneficial terms, whereas unidentified others were seeking to
use the issue for their own political purposes. Putin
devoted much time to Russia's demographic situation,
describing it as the most acute problem the country faces and
laying out financial benefits for child-bearing parents as
among the solutions. He spoke extensively on military reform
and on the need to maintain a strong military, but warned
against repeating the Soviet mistake of spending beyond the
country's needs on defense. Instead, Russia would pursue
asymmetric approaches to ensuring its security. On the
foreign policy side, he focused on Russia's "neighborhood,"
casting Moscow as playing a responsible role, and on
reforming the UN while preserving its prerogatives. Putin
did not use terms like "sovereign democracy" nor did he
otherwise share any broad vision for Russia's future course.
While he took a few swipes at the West -- including saying
that some countries were manipulating issues like human
rights for their own purposes -- he generally took the high
road in a speech aimed at showing that Russia is confidently
and realistically addressing its problems. END SUMMARY.
.
ECONOMICS AND DEMOGRAPHICS
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2. (U) Putin began his address with a lengthy exposition on
economic development. Commenting that Russia continued to
suffer from low public trust in both government and business,
he said it was essential to tackle those problems -- then
noted that he had borrowed his words of commitment from
President Franklin Roosevelt. Russia must continue toward
the goals he had set out in previous such speeches, including
doubling of GDP, but this could only be accomplished if the
conditions for fair competition, free enterprise and property
rights were finally put in place. He devoted much attention
to his national priority projects, which would improve
Russians' well-being.


3. (U) Emphasizing the theme of technological development,
Putin expressed concern that Russia's energy sector trailed
far behind that of the rest of the world technologically. He
noted that state-owned companies were performing well,
singling out Gazprom as the world's third largest company and
attributing its success in part to Russian government
policies. His approach to the storm created two weeks ago by
Gazprom CEO Aleksey Miller's suggestion that Russian gas
would be shifted from west to east was rephrased in a less
confrontational mode: "we should move into new promising
markets, while at the same time...meeting our commitments to
our traditional partners." Putin also stressed a need to
develop Russia's atomic energy sector, space and
nano-technology, all promising areas of growth where
innovation was essential.


4. (U) Putin made a point of expressing his commitment to IPR
enforcement, saying that "we should secure the protection of
the rights of authorship within the country, and it is also
our duty to our foreign partners." He also expressed
continuing interest in Russian membership in the WTO. While
noting that some countries sought to use WTO accession for
their own, non-economic purposes, he stressed that it would
take place "on terms that took Russia's economic interests
fully into account." In addition, Putin spoke of full ruble
convertibility by July 1 and hoped that the ruble would
become a major currency on the international stage. As a
first step, he called on Russia to set up an exchange to
trade oil and gas in rubles.


5. (U) As expected, Putin devoted much attention to
demographics, identifying it as the country's most acute
problem -- and one on which little progress has been made.
He cited in that regard Aleksandr Solzhenitsyn's call on the
Russian government above all to "save the people." While
calling for attracting ethnic Russians living abroad back to
the country, he saw much of the solution to the country's
demographic problems in providing substantial economic
stimuli to increase the birth rates in the country. He did

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not criticize foreign adoptions, but saw the need for
material incentives for caring for Russian orphans in this
country.
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NATIONAL SECURITY AND MILITARY REFORM
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6. (U) Putin then turned to national security. In a very
brief reference to terrorism, he noted that it was often
linked to ethnic conflicts, and commented that unidentified
"others" hoped that Russia would get bogged down in those
conflicts and thus be unable to resolve its own developmental
problems. He added that some unspecified "others" (clearly
the U.S.) were using human rights and democracy as a means to
pursue their own interests. He also stressed the threat that
terrorists could seize and use weapons of mass
destruction. Putin also expressed concern about
technological developments that threaten strategic stability,
such as nuclear weapons in space, and called for renewed
focus on disarmament. He underlined as well Russia's support
for existing nonproliferation regimes "without exception,"
and -- presumably referring implicitly to Iran as well as
Iraq -- said that "it is known that the use of force rarely
brings the hoped-for results, and its consequences at times
are more terrible than the original threat."


7. (U) The U.S. military budget is twenty-five times greater
than Russia's, Putin said. He did not explicitly criticize
that ("molodets," he said, essentially meaning "more power to
you,"),but referred to a Russian fable involving a wolf that
"knows whom to eat first." Russia should avoid the mistake
of the Soviet Union of trying to spend as much on defense as
the U.S., and instead should wisely target its defense funds
asymmetrically for maximum effect. Russia had already made
major strides, he continued, citing the launching of two new
nuclear submarines and the deployment of the TOPOL ICBM.


8. (U) As expected, Putin devoted much time to military
modernization. With the camera panning several times on
Defense Minister Sergey Ivanov, Putin focused on improving
the prestige of military service, moving toward a
professional military, and fighting negative qualities among
youth -- such as drug addiction and alcoholism -- to improve
the recruitment pool. He again voiced a patriotic theme,
quoting the nationalist thinker Ivan Ilin.


9. (U) On the foreign policy side, Putin was short on
details. Instead, he kept the focus squarely on pragmatic
concerns, stressing Russia's relations with its nearest
neighbors and its continuing reliance on the United Nations.
He emphasized Moscow's interest in expanding economic
cooperation in the CIS area and its willingness to help
resolve regional conflicts. Acknowledging the need for CIS
reform, Putin also singled out "parallel" organizations that
boosted regional cooperation, such as the Union State with
Belarus, the Common Economic Space, the Eurasian Economic
Community (EvrAzES) and the Collective Security Treaty
Organization (CSTO). Cooperation with the EU, including in
the energy field, was noted, as was the importance of
Russia's relationships with the U.S., China and India. Putin
put in a plug for the continuing central role of the UN,
noting that UN reform must be consensual and improve the
organization's efficiency.
.
COMMENT
--------------


10. (SBU) Putin's Address to the Federal Assembly was long
anticipated, and, as noted reftel, expectations had run high
that it would lay out a broad vision of Russia's place in the
world and how it would overcome its current challenges to
achieve that. In that sense, the speech fell short of
expectations. It offered policy directions on some of the
key challenges facing Russia, notably technological
development, demographics and military reform. And it sought
to demonstrate that Russia is confident of its ability to
tackle its problems. But it lacked any exploration of
concepts like "sovereign democracy," which some had expected
to surface, or other constructs aimed at showing a broader
vision.


11. (SBU) The address took some implicit potshots at the U.S.
Most notably, it suggested that some were using human rights
and democracy issues for their own political gain, and made a
similar suggestion about WTO accession. Overall, however,
Putin took the high road, seeking to show that Russia is
dealing confidently, realistically and responsibly with its

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problems.
BURNS