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Mr Medvedev said that money must be invested in modernising the armed forces. The tasks include stepping up deliveries of new weapons to the troops, replacing outdated equipment, and completing the transition to digital communications by 2012.

The President also noted that the government-drafted arms programme for the period until 2020 must be analysed and approved by the end of the year.

Taking part in the meeting were Prime Minister Vladimir Putin, Deputy Prime Minister Sergei Ivanov, Deputy Prime Minister and Finance Minister Alexei Kudrin, Defence Minister Anatoly Serdyukov, Interior Minister Rashid Nurgaliyev, Economic Development Minister Elvira Nabiullina, Director of the Federal Security Service Alexander Bortnikov, Chief of the General Staff of the Russian Armed Forces Gen. Nikolai Makarov, Director of the Foreign Intelligence Service Mikhail Fradkov, and Secretary of the Security Council Nikolai Patrushev.

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President of Russia Dmitry Medvedev: Good afternoon. I want to say a few words before the meeting begins. In particular, I want to say a few words about military development and implementation of our state arms procurement programme.

As you know, we have until the end of the year to analyse and approve the Government-drafted programme for the period to 2020. We need to make the final decisions today on the financing that will be allocated to the armed forces and other law enforcement and security agencies for purchasing the necessary modern arms and equipment.

I will not jump ahead and talk about the current outlook, though the economic forecast the Government has drawn up suggests that we can expect a fairly stable rise in GDP. We are hoping for a figure from 3 percent to 6 percent a year. If the economic developments bear out this forecast we will able to maintain our military and security spending at the levels we have set as a share of GDP. This is something we need to talk about too, because there various proposals regarding the actual amount of money we need to spend as a share of GDP in order to maintain our military in a normal state.

Above all, we need to invest in modernising the armed forces. In 2008, we approved the plans for their organisation and composition, and we are now shaping the new features of army and navy. The big task now is to step up deliveries of new arms for the armed forces and replace outdated equipment. Just a few days ago, I held a special meeting in the Moscow Military District on communications. We have set the deadline of 2012 for making the transition to modern and effective digital communications systems throughout the armed forces. By 2015, modern arms must account for at least 30 percent of the arms in service in permanently combat-ready units. By then, these are the only kind of military units we will have in any case. At the same time, we need to correct the imbalance between maintenance costs and supplying new equipment. The goal should be to get this ratio to around 30 percent and 70 percent respectively.

There is a third type of spending that has become increasingly important over recent years – funding for sector-related, budget and targeted investment programmes in capital construction and funding for the state arms procurement programme. This is something we also need to take into account in examining the spending estimates the Government has drawn up for military structures in terms of defence, national security and law enforcement over the coming decade. This budget will be a determining factor in carrying out the arms procurement programme and in shaping our military development plans in general over this period.

One final point is that we need to make decisions on the arms procurement programme’s future development too. This is one of the aims of today’s meeting. As for important social issues such as servicemen’s wages and pay for law enforcement personnel, the funding to be allocated for providing them with permanent or service housing, and funding of other social programmes, we will discuss it at a separate meeting with the Government Cabinet as agreed, and not at today’s meeting.