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Vladimir Putin: Today, we are going to review the results of the work of the Russian Defence Ministry in 2000.

For you, and for the nation as a whole, it was not an easy, but a highly dynamic year. The Ministry had to tackle urgent operational tasks and simultaneously to continue the military reform, to modernise the Armed Forces and to contribute to improving the military organisation of the state as a whole. Other military and security agencies have to address similar tasks.

The Security Council discussed the issues of military development twice, in August and again in November. It has to be admitted that the course of military reform came in for some sharp criticism. The functioning of the Armed Forces was described as unbalanced and inefficient. The stark choice that faced us was between following the same road and bringing the situation to the brink or trying to turn the situation around at all costs.

We have summoned enough energy and resources in order to quickly address priority tasks. So on the one hand, I see this year as a breakthrough in the long drawn-out process of army reform. But that is only one aspect of the situation.

On the other hand, the present state of the troops and their command – moral, disciplinary, military-technical – still falls short of the goals and the magnitude of the tasks we face. We still talk and have meetings while the reform is in many ways marking time.

Our conceptual and operational decisions are still not carried out fully or precisely.

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The progress of the operation in Chechnya is a separate topic.

Summing up the results of the past year, I would first of all recognise the hard work of the military. Yes, much has been achieved: the main forces of the militants have been defeated, and law and order is being restored. The army also has to take part in humanitarian action and perform tasks for which it is not, at first glance, intended and to deliver relief to civilians. But I must say that there was no one except you to do that work at the initial stage.

Still, your main task is to completely destroy the bands of militants and their bases. Months go by, people suffer and the counter-terrorist operation must be carried through. Only then can we turn our attention to addressing priority economic issues.

But it has to be noted that we are not after “victory at any cost”. The Defence Ministry lost 1,670 men in the year and a half since the counter-terrorist operation began. The total casualties are a little over 2,600. Every loss is painful. It is always a tragedy. The casualties are too high.

We have to display professionalism and as a result reduce casualties among servicemen. These casualties are often the result of lack of professionalism and sometimes elementary lack of discipline. Such losses are unpardonable today.

I think, in this and in other areas there has to be concerted work of all the security agencies, in the first place the Defence Ministry and the General Staff. Assessing the counter-terrorist operation, the Defence Minister said today that its results, that is, what the state, society and the army have done, would be given marks later. Apparently, Mr Sergeyev had in mind a historical assessment. Perhaps the full assessment could wait.

It is not often that we gather in this format. And I would permit myself to philosophise a little. In the West, unfortunately, there are still forces that live according to the laws of the Cold War. They still regard our country as the main geo-political enemy. We have largely left that behind us, but certain circles in the West unfortunately have not.

I will allow myself a historical flashback to the tragic events of 10 years ago, the disintegration of the Soviet Union. The main reason was the total self-isolation of the country. One has to admit that it was the result of an imperial policy, the wish to seal the results of World War II, to ideologise them and to dig in Europe and the East. All this led to isolation and overstretched the resources of the state, leading to the collapse of the country.

Today – and this is undeniable – some are trying to present our actions in the North Caucasus as a relapse into imperial policies. We must categorically reject this approach. This is a continuation of the theory whereby Russia had to pursue such a policy, it should again go into isolation and be mired in constant bloody internal regional conflicts. In this connection we must correctly assess what is happening in the North Caucasus today. It is not so much the formal status of the Chechen Republic that matters for us. What matters is that this territory must never be used by anyone as a bridgehead for attacking the Russian Federation. This territory should never be a source of radicalisation of our population and of getting Russia bogged down in bloody inter-regional ethnic conflicts, which is the dream of our geo-political enemies.

The state has its job cut out to determine the prospects of the country’s development as a whole and the development of this region in particular. That work can be accomplished in a positive way only by political means. But everyone must know that no one will be allowed to resolve issues with Russia from a position of strength. And herein lies the vast significance of the work accomplished by the Armed Forces through incredible effort and great sacrifice. We should bow our heads to all those who have fulfilled this work, including those who gave their lives for it. No sacrifice has been in vain.

Now for some more specialised issues.

Let me say outright that the main task – strategic deterrence and prevention of aggression – is being successfully fulfilled. That is the result of coordinated work by many Government bodies. But the key role belongs to the Defence Ministry, the General Staff and the Armed Forces.

Today we must be aware of other threats as well. The army and navy should be ready to neutralise and rebuff any armed conflict and aggression in all strategic directions.

Another important task is to create and accommodate by 2006 permanently combat-ready groups in the strategic South-West and Central-Asian areas.

The state of general-purpose troops is of primary concern. Such troops must have modern equipment and methods, including methods of programme-targeted planning.

Supply of the latest weapons and materiel must be the rule in our work. We should put in place an efficient system of troop control. At present, there is a lag in the field communication systems, automation, reconnaissance and other areas. These are issues in the remit of the Defence Ministry and the General Staff.

The concept of creating a unified computerised system of troops and weapons control at the tactical level was approved this year. Its implementation is taking too long.

I would like to repeat that the state is interested in having a highly skilled and well-trained army. But we are well aware of the difficulties of the current period and are ready to help to the best of our ability. We expect that coordinated work of all the security agencies, correct identification of priorities and concentration of all the resources will produce even more impressive results and ultimately ensure Russia’s national security.

Now I would like to say a few words about the most pressing financial issues which are of concern to all servicemen.

This year, for the first time, we determined the budget for the Armed Forces for the period up to 2010, broken down by year and expenditure items. I believe that we should not just plan what we need, but plan proceeding from what we can afford. We have no right to fail the expectations of servicemen.

I also believe that the recent decision of the Security Council to reduce the troops of other ministries and agencies is a necessary and optimal decision…

…I have said more than once that to keep a disproportionately large military organisation is unpardonable and foolish because at the end of the day it tends to collapse. By concentrating effort and means on making the forces more professional we will be able to solve acute social problems. To meet that challenge calls not only for a high level of organisation, but for a clear awareness that state interests prevail over those of Government departments and individuals.

It is especially important not to infringe upon the rights of servicemen, in the first place those who retire. They must get everything they are entitled to by law, including housing for those who don’t have flats of their own.

There is much talk today about cancelling the social benefits for servicemen…

…Yes, the existing system of “perks” is outdated and inefficient. The main task is to put an end to the humiliating situation for servicemen. Obviously, the whole system needs to be changed. But reforms call for a clear-cut and well-defined mechanism. Otherwise, the flaws and mistakes at the early stage will lead to irreparable losses. And that will affect millions of people.

The problem is directly linked with national security interests. The trust of the army in the state, and having the army “feel good” about itself is the bedrock foundation of the state of the Armed Forces.

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This year, important decisions have been taken to strengthen the coordinating role of the Defence Ministry and the General Staff, and the military organisation of Russia as a whole. The transfer of military-technical cooperation, an important area of activity, under the jurisdiction of the Defence Ministry is part of this effort. The search for rational ways to distribute the functions and tasks between military structures is far from complete. But I am warning you that no frictions, not even the tiniest cracks between military structures can be tolerated.

An effective mechanism has been developed for implementing the military reform in the shape of the Armed Forces Development Plan for the period until 2005. It will be submitted for endorsement by the President of Russia in December. The document is called upon to be the central element in the reform of the Armed Forces.

I very much count on your awareness of the seriousness of the situation and the depth of your personal responsibility, and on effective joint work.

Thank you.