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Mr Kasyanov informed the President about the situation in the world financial and commodity markets, and about preparations for State Duma debates on the draft federal budget for 2002 in its third reading. The implementation within the year of the privatisation programme also came under discussion.

Mr Kasyanov passed to Mr Putin the Cabinet’s suggestions for military reform. The Government drafted them in compliance with the decisions of a Russian Security Council meeting of November 2000. The Prime Minister said, in particular, that the reform demanded a gradual arrangement with no fits and starts to drastically change the existing situation, and that its implementation depended on the financial capabilities of the state.

An experiment was to be staged in several units to gauge reform costs, with the test units entirely manned by contract troops.

Mr Putin approved the gradual arrangement of the reform to switch part of the Russian Armed Forces from conscription to contract service.