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They discussed the economic development of the North Caucasus and the entire Russian south, and the ways to achieve political stability in that part of Russia.

Mr Putin said the Government budget policy had aroused criticism from the so-called donor regions. The situation is due to effective finance redistribution in favour of subsidised regions, which is true not only of the Russian south but also of Central Russia and certain Far Eastern regions.

The President said that the donor regions had received huge resources and production facilities due to the entire nation’s efforts over the course of many decades, and it would be unjust to bar other regions’ access to such resources.

Mr Putin announced that the entire North Caucasus, not Chechnya alone, would receive an impetus for economic development. He stressed that it would take time and hard and patient work to achieve that goal.

One of the worst problems in the region is the potential danger emanating from the North Caucasus. This potential must be reduced, and no efforts should be spared to put an end to the perception of the Caucasus as an exceptionally dangerous area. We must provide conditions for normal life and economic development there, Mr Putin said. He approved Ingush President Ruslan Aushev’s proposal to create permanent housing for Chechen refugees in his republic.

Attraction of capital investments to Russia, in particular, to the North Caucasus, was prominent on the agenda. The North Caucasus was until recently known as a danger zone, and so had little appeal for Russian and foreign investors, but the situation is gradually improving, Mr Putin said. He was due to meet with European Union spokesmen in Brussels in October, and intended to discuss with them infrastructural development of the Russian south, with an emphasis on transport, an issue he regards as a top priority.