The highlights of President Putin’s address to parliament

For the seventh time, President Vladimir Putin has delivered his annual address to the federal parliament. In effect, he declared mobilization. At one time, Russia had war communism – and now Putin is working on war capitalism.

For the seventh time, President Vladimir Putin has delivered his annual address to the federal parliament. In effect, he declared mobilization. At one time, Russia had war communism – and now Putin is working on war capitalism.

“Delivered” is a dull, formal term. What took place in the Marble Hall of the Kremlin’s 14th Wing on May 10 should be described in entirely different words: a theater with more than one player. Putin’s performance was a solo, of course. But a supporting actor also emerged: Deputy Prime Minister and Defense Minister Sergei Ivanov. He permitted himself to prompt Putin, out loud, with the most important word in Russia: “love.” This interplay between the two of them suggests that the supporting actor may soon aspire to the leading role.


Evolution is unstoppable. It all began in 2003, with the arrest of Mikhail Khodorkovsky. That marked the start of Putinomics. Its distinguishing feature is reliance on the state. That’s the difference between the Putin era and the Yeltsin era, when the situation was reversed. Having started by strengthening the state, however, Putin then broke several taboos, one after another. First: restoring social justice should not be to the detriment of private property. Second: the state should not replace private enterprise; its task is to establish conditions in which private companies can operate successfully. But Putin’s approach is different. He knows only one way of solving the problems Russia faces: strengthening the state. Deep down, he still believes in the presumption of guilt for big business (his KGB years have left their mark). In the address, he repeated that “some” members of the business community “disregarded both laws and ethics in favor of enriching themselves at the expense of the majority of citizens, to an extent unprecedented in our country’s history.”

Mobilization for tycoons has been declared. In effect, their fortunes are being placed outside the law. Although Putin included the proviso that he will “support Russian business,” he included a warning for billionaires and state officials or bureaucrats “of all ranks” (the final warning, apparently). “The state shall not turn a blind eye to their activities if they derive unlawful benefits from special relationships with each other.” Such relationships are called corruption. But definitions are beside the point here. In effect, Putin identified corruption’s main culprits: ex-oligarchs.

Then again, they aren’t the only targets. Also under the gun are those who should be able to fire it: security and law enforcement agencies, federal and regional ministers, other bureaucrats, and even demographers.


Still, the federal government was fortunate. Its members (no names or titles mentioned) were praised for successful efforts to comply with Putin’s directive from the address of 2003: doubling GDP. “Overall, we are succeeding in this task, and over the past three years average economic growth has been right on target, around 7%.” Indeed, GDP growth of just over 7% per annum would suffice to double the GDP of 2000 by 2010, or (as the government has now decided) double the GDP of 2002 by 2012. In general, it’s possible to play with the numbers indefinitely. But growth rates are slowing. GDP growth for 2005 wasn’t 7%, as Putin seems to thin, but 6.4%. And Economic Development Minister Herman Gref’s most optimistic forecast for this year is only 6% (or perhaps only 5%).

Then again, Putin also proposed a kind of prescription for faster growth. All measures come down to this: innovation. Putin expressed support for the government’s measures aimed at introducing innovations into the raw materials economy. He approves of state investment – although he did warn that investment volume isn’t as important as “the ability to choose the right priorities.”

It’s good that Putin isn’t opposed to private investment. All investment (private and state) should, in his view, help the Russian economy to “develop its potential in high-technology fields like the modern energy sector, communications, and aerospace,” as well as exporting intellectual services.

Since Putin considers these sectors to be Russia’s traditional strengths, he is once again setting the objective of “using them as driving forces for development.” Energy and aerospace will change the structure of Russia’s economy and enable it to claim “a worthy place in the global division of labor.”

It’s interesting to note that Putin’s “modern energy sector” includes not only nuclear power, but also Gazprom. The natural gas monopoly earned some special praise for its prize-winning performance in the global capitalization race.

Another of Putin’s directives is to make the ruble fully convertible from as soon as July 1. Apparently, he hopes to cure Russia of the “Dutch disease.” Indeed, before 1917, the international trade in furs (Russia’s equivalent of oil, at the time) was conducted in rubles. And there was no “Dutch disease.” However, although Russia’s economy has always relied on exporting some form of natural resources, it was never as dependent on fur exports as it is now on energy exports.

In short, doubling GDP would only be detrimental for an economy of this kind.


In President Putin’s view, the economy is not the most important issue (although he did speak of the need to maintain macroeconomic stability). For him, it’s more important to supply the regime with future voters and soldiers.

It has to be acknowledged that Putin did this quite artistically. Even the word “demography” in his address didn’t sound dull; it was surrounded by sacred words like “love,” “family,” “motherhood,” “children.” According to Putin, children will get a great deal of money. In effect, he announced a fifth national project – more costly than any of the other four. Benefit payments for mothers with one child will more than double, from 700 rubles to 1,500 rubles a month, as soon as 2007. The benefit for a second child will be 3,000 rubles a month. And that’s not all. Mothers who were officially employed will receive 40% of their average income from the state for 18 months after having a child (although the government will have to set an upper limit for these payments).

President Putin maintains that it’s vital for families to have more than one child. Besides providing 3,000 rubles a month for a second child (payable until the child is 18 months old), Putin promised a one-time payment of 250,000 rubles – described as “primary, basic maternity capital.” Not in cash, of course. According to Putin, this money could either be invested in a mortgage or saved for a rainy day by placing it in a personal pension account. VneshEkonomBank might well be glad of these funds. As Putin admitted, this project will be very costly. Judging by his expression, Finance Minister Alexei Kudrin was astonished (to put it mildly) by the scale of federal spending involved. Nevertheless, as an executive official, he calculated how much the President’s Children will cost the federal budget: 30-40 billion rubles a year. And that’s not counting the “primary maternity capital.”

Putin made no mention of how these large-scale payments will affect macroeconomic indicators. The word “inflation” only appeared once in his address – when he instructed the government to index the 250,000-ruble benefit “in line with inflation.” Although inflation will eat up all his national projects, including the birth-rate project, Putin doesn’t seem to give a damn – after all, the government will be held accountable for everything.


Having announced mobilization, Putin went on to specify who is Russia’s enemy. The major external threat to Russia is still the terrorist threat; what’s more, “opponents” are artificially promoting localized conflicts. “I know that some would greatly prefer it if Russia… couldn’t achieve any of the objectives of full-fledged development,” said Putin. And he explained who stands to benefit from a weak Russia: the United States, and the West in general.

With unconcealed envy, Putin pointed out that the military budget of the United States is almost 25 times greater than that of Russia: “And good for them. Good for them!” Putin’s voice grew stronger and more animated: “After all, we see what is happening around the world. As the saying goes, Comrade Wolf knows whom to eat. So he eats them, not listening to anyone else, and doesn’t seem inclined to start listening.”

Putin called for continued efforts to ensure Russia’s national security “despite the financial disparity.” He gave a detailed description of how the Armed Forces should be reformed, and what kind of weaponry should be purchased, so that Russia will be feared. “Over the next five years, the strategic nuclear forces will be equipped to a substantially greater degree with modern long-range aircraft, submarines, and launch facilities for the Strategic Missile Forces.”

Putin didn’t miss a saber-rattling opportunity.

“Successful efforts are already under way to produced unique precision weapons systems and maneuverable warheads that will not give the potential opponent a predictable flight trajectory.” In Putin’s opinion, since we can’t afford to spend as much as the Americans on the military, “our responses should be based on intellectual superiority: they will be asymmetric and less costly, but they will certainly make our nucler triad more reliable and effective.”

By mentioning the “nuclear triad,” Putin killed two birds with one stone: threatening the West and scoring points with Russian voters. Maxim Dianov, director of the Regional Studies Institute, says: “There is a great deal of public demand for the symbols of a strong state, including a powerful military.” So Putin’s words about strengthening the Armed Forces are sure to be a hit with the public.

Putin seems to have taken note of how the West’s attitude to Russia has been changing. The Western media have already expressed displeasure about a Hamas delegation being invited to Moscow and Moscow’s indecision with regard to Iran’s nuclear program. US Vice President Dick Cheney’s speech in Vilnius could be the last straw: he criticized the Russian authorities for deviating from democratic values. Russia’s critics seem to have received an asymmetric response in the presidential address.

A number of observers are saying that Putin’s harsh remarks about “Comrade Wolf” might make some G8 leaders decide to stay away from the July summit in St. Petersburg.

Alexei Makarkin, deputy director of the Political Techniques Center, maintains that “the West will not break off dialog with Russia – that would be strategically disadvantageous.” But the G8 summit will be a formality. “They’ll talk about bird flu and see the sights in St. Petersburg,” says Makarkin. “This conclusion is prompted by the address itself, since President Putin has aimed to reduce the level of expectations regarding the summit.”

Vladimir Putin’s address: the greatest hits

“What is the most important issue for us? The Defense Ministry knows what the most important issue is. Indeed, we shall speak about love, women, and children. About the family.”

“Millions of people held great hopes when the changes of the early 1990s began, but neither government nor business lived up to those hopes. What’s more, some members of those communities disregarded both laws and ethics in favor of enriching themselves at the expense of the majority of citizens, to an extent unprecedented in our country’s history.”

“It’s high time to stop managing nationwide construction of schools, bath-houses, and sewers from Moscow.”

“There is a potential threat with regard to production and proliferation of low-powered nuclear weapons. What’s more, the media and expert circles are already discussing plans to use ICBMs with non-nuclear warheads. The launch of such a missile could provoke an inappropriate response from nuclear powers, up to and including a full-scale retaliatory strike using strategic nuclear forces.”

“All that pathos about the need to fight for human rights and democracy – wherever does it vanish when the talk turns to the need to pursue one’s own interests? When it comes to that, it turns out that everything is permitted, no limits apply.”

“After all, we see what is happening around the world. We see it. As the saying goes, Comrade Wolf knows whom to eat. So he eats them, not listening to anyone else, and doesn’t seem inclined to start listening.”

Is President Putin playing at war?

Yuri Glotser, vice president of the Entrepreneur Protection Federation: “He isn’t playing at war, but attempting to reorganize the military, making it more combat-capable and professional. President Putin’s actions are aimed at the quality of service in the military, not just getting through a compulsory period of military service. In order to make a soldier professional, it is necessary to reinforce material foundations as well as patriotic emotions. All armed forces in the West use this principle, so I don’t believe President Putin is thinking up some sort of special Russian military.”

Yevgeny Yasin, research director, Higher School of Economics: “We are seeing a certain trend toward muscle-flexing in the international arena, in imitation of the United States. The Soviet Union used to do the same kind of thing. Why did the presidential address mention that Russia’s defense spending, as a fraction of GDP, is less than that of France or Britain? Their GDPs are greater than ours, but we have set ourselves the task of doubling GDP, or quintupling it – in order to make our international standing mean more than the quantity of our weapons. Yes, rearmament and strengthening the Armed Forces is a relevant task. But our primary tasks today involve economic growth and making Russia more competitive – and we have some unique opportunities to do so at present. So we shouldn’t scatter our energies across all kinds of military objectives or excessive social security guarantees. And there is some danger of that, due to the heady aroma of oil.”

Eduard Vorobiev, reserve colonel-general: “President Putin isn’t playing at war, but the state of affairs in the military is such that declarations in support of the Armed Forces aren’t enough: some practical steps need to be taken to get the Armed Forces out of their present condition. Yes, the situation in the military is somewhat better than it was five or six years ago. But morale and the psychological climate remain low, and the human factor has been neglected. Continuing to say that the president and the government support the Armed Forces, while not taking any practical steps – that amounts to undermining the credibility of the president and the goverment. What President Putin said in his address to parliament gives me hope that the situation in the military will improve.”

Nikita Belykh, Union of Right Forces leader: “It’s hard to argue with the idea that two-thirds of Armed Forces personnel should be serving under contract by 2008. Yes, there should be civil oversight for inreased spending on Armed Forces development – but can the ‘civilian’ Defense Ministry provide such oversight? Spending on the Armed Forces is already a substantial item in the federal budget, and it’s not a question of how much – it’s a question of effective spending. Our defense budget is a kind of mystery box, since it’s impossible to determine how effectively the money is spent.”

Anatoly Lukianov, former chairman of the Supreme Soviet of the USSR (the Soviet Union’s last parliament), now chairman of the Central Advisory Council for the Communist Party’s Central Committee: “No, in this case President Putin is not playing at war. Some very important issues have been raised, and there is indeed a huge disparity between defense spending in the United States and in Russia. The Yeltsin regime did indeed destroy the military to a substantial degree, and Putin is right to be outraged about that – recalling that there weren’t enough suitable troops to send to Chechnya. The president has to be concerned about that situation, as the public in general is concerned about it. And the people are somewhat nostalgic for the time when the Soviet Union used to flex its muscles, so to speak. If the president wishes to express the people’s opinion, and considers it necessary, he does express it.”