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President Vladimir Putin: Dear comrades!

Today you are set to sum up the results of this year’s military exercises and to analyse current and future issues concerning the development of the Russian Armed Forces.

Before going further with my remarks, I would first like to give an overall positive assessment of your work. The Armed Forces have done a worthy job of carrying out their responsibilities for defending our country’s security and national interests.

Probably one of the most important results of this year is that the drawn-out period of transformation and reorganisation has come to a close and we are now making a transition to planned development and general expansion of the Armed Forces’ possibilities.

These last years have been difficult for the country in general and also for the Armed Forces. We faced many problems, both economic and social problems, in society as a whole and in the army. We were living in a situation of ongoing conflict in the Northern Caucasus and we were unable to tackle our problems one at a time, concentrating our resources on resolving each issue separately. Instead, we found ourselves in the specific situation of having to deal with everything at once.

I am very pleased to point out that the Armed forces are now able to begin working smoothly on planned military development.

The process of optimising the Defence Ministry’s structure is now practically complete. I think that we have managed to put in place a system that considerably improves the quality of management and command of our forces.

I also note that progress has been made in improving our nuclear deterrent potential.

Prospective arms systems and complexes able to guarantee penetration of all existing and foreseeable anti-missile defence systems have been successfully tested.

We now have new developments in the area of national air and space defence. I can say today with complete certainty that air and space defence is one of the most important factors in ensuring strategic stability.

The level of operational preparedness at the headquarters and the level of troops’ training have improved in quality. A series of manoeuvres covering a vast area from the Barents Sea to the Pacific Ocean were held in 2005 and what is very important is that they focused intensively on coordination between the different branches of the Armed Forces.

Joint exercises were held with China and India. Our partners noted the high level of training the Russian military personnel displayed and their ability to resolve large-scale, complex military tasks, including in anti-terrorist operations. I would like to note that these exercises were of a high standard and I want to thank everyone who took part in them. I think our Armed Forces have not held exercises on such a scale for a long time now.

We need to continue giving our utmost attention to preparing the Armed Forces for taking part in counter-terrorist activities. The command-staff exercises that took place in the Northern Caucasus region in September gave us valuable experience in this area, including in coordination of the different branches of the armed forces and the law enforcement agencies. The recent events in Nalchik showed how effectively the law enforcement agencies including Armed Forces units were able to work together to neutralise this terrorist raid. The gunmen were given a deserved and tough lesson. I want to stress that this was above all the result of better coordination between the different law enforcement agencies and the Armed Forces.

Dear comrades!

As you know, the Security Council meeting in June clearly set out the main priorities for the country’s long-term military development through to 2015. These priorities were based on analysis and forecasts of the political and military situation in the world and the nature and level of current and potential threats that we face. I would like to stress that our military development plans are fully in keeping with the real economic possibilities our country has.

In allocating considerable resources to military modernisation we realise that our Armed Forces are one of the most important attributes of statehood and are a guarantee of our country’s sovereignty. Our Armed Forces must be ready to ensure global stability and to protect Russia from any attempts to exert military and political pressure or to blackmail us using force. Unfortunately, we see that such means of pursuing foreign policy do still exist in this world today.

Smouldering regional and interethnic conflicts, including close to Russia’s borders, represent a serious danger. And then of course, there is international terrorism, which is a direct threat to our state’s integrity and the lives of our citizens.

In this context we must not for an instant lessen the attention we give to key aspects of military development and to state defence and security policy in general.

First, we need to continue work on forming an optimum personnel structure for our Armed Forces. Permanently combat-ready units should form the central pillar of this structure. Next year we need to put into place the conditions for considerably increasing the number of contract servicemen as a share of total Armed Forces personnel. We need to take the necessary steps to reduce compulsory military service to one year as from January 1, 2008, without any negative impact on the Armed Forces’ combat preparedness.

Second, work has begun on the important stage of technical modernisation of the Armed Forces. Next year will see almost 1.5 times more money spent on arms and military equipment procurement than was the case this year. We need to give particular attention to equipping the permanently combat-ready units, including by providing them with high-precision weapons, effective reconnaissance and radio-electronic complexes, and automated control systems.

Overall, we need to follow a consistent policy of developing an optimum structure of spending on maintaining and equipping the Armed Forces. By 2015 we should reach a situation where we spend 70 percent of the defence budget on developing the Armed Forces and 30 percent on day-to-day maintenance. Only in this way will be able to not just patch holes but ensure genuinely high-quality technical modernisation of our Armed Forces. I realise that this is a highly complex task. I have discussed this matter in detail with the [Defence] Minister, with the Chief of General Staff, the Prime Minister and the main government ministries. It is a very difficult undertaking but it can and must be resolved. In this respect it is very important that we make our common defence procurement and military equipment supply system more effective. The increased centralisation this will give us will make it possible to get better results from the money spent.

Third, the future of the Armed Forces depends a great deal on military science and education. We need to preserve the best traditions of the Russian military school while at the same time constantly enriching it with new ideas and approaches, making extensive use of modern teaching methods and techniques and carefully analysing developments in military thinking in the world in general. Military education and science should not lag behind the Armed Forces’ development but should always be several steps ahead.

Finally, one of the key issues in military development is that of improving the level of social protection for military servicemen and their families.

Servicemen’s wages are set to rise by a further 15 percent as from January 1, 2006. Overall, servicemen’s wages will increase by 67 percent over the next three years and military pensions will also rise correspondingly.

I would like to draw the government’s attention to the fact that we must not forget the needs of military pensioners. I hope the government will give this issue its full attention.

But as well as raising wages in the Armed Forces, we also need to concentrate on putting in place a modern system of social benefits for servicemen: healthcare and housing provision, education and re-training for military personnel.

I ask you to get the mechanisms for an individual mortgage loan system for military servicemen up and running in full as soon as possible. It is essential to work through all the organisational issues very thoroughly in this area.

My experience speaking with servicemen in the army units and in the navy shows that they are far from being aware of how such system works. I have spoken with officers who do not have any clear picture of just what these proposed schemes actually entail. How can we allow such a situation?

Everyone in society and in the Armed Forces should be clearly informed about the opportunities offered by mortgage schemes. The tangible prospect of acquiring a home is something that can do a lot to attract young people to military academies. I would like to note that this system should and will apply to young people who join the army and the navy.

But as well as developing a mortgage scheme, we also need to increase the pace of service housing construction for military personnel and work consistently on implementing the housing certificates programme. We made important commitments to people and we must fulfil these commitments in full and on time.

In conclusion I would like to say once again that Russia today has all the possibilities and the means it needs to ensure development of the Armed Forces based on long-term strategy and effective planning.

The forging of a new image for our Armed Forces – that of a modern force equipped with advanced technology and enjoying public respect and esteem – depends directly on our well-coordinated work. I hope that you understand well just how very important and how great a priority this work is.

I thank you once more for your work and wish you success.

Thank you very much for your attention.