Russia's Putin lashes out at West's "arms race"

By Michael Stott and Oleg Shchedrov

President Vladimir Putin accused the United States of unleashing a new arms race on Russia's borders on Friday in a speech that is likely to provide a blueprint for his successor's policies.

Laying out his legacy three months before he is to step down, Putin said Russia had to wean itself off energy exports, compete in the world economy and stand up to the West.

In an address containing long passages of tough rhetoric aimed at the West, Putin said NATO expansion and U.S. plans for a missile defense shield in eastern Europe had touched off an arms race.

"It's not our fault, we didn't start it. ... funneling multibillions of dollars into developing weapons systems.

"NATO itself is expanding. It's approaching our borders. We drew down our bases in Cuba and in Vietnam. What did we get? New American bases in Romania, Bulgaria. A new third missile defense region (the U.S. defense shield) in Poland, where it's being built," Putin told the State Council.

"It's already clear that a new arms race is being unleashed in the world ... We must not allow ourselves to be drawn into this."

Putin's address to the State Council, which gathers minister, regional governors and lawmakers, will be one of his last keynote speeches before he steps down.

It was also widely regarded as a manifesto for Dmitry Medvedev, the man he has endorsed to succeed him.

Medvedev, a 42-year-old first deputy prime minister and loyal Putin ally, said this week he was not issuing his own program because it would be no different from his mentor's policies.

Putin, 55, opened his speech by emphasizing how far Russia had come in the eight years he had been in power.

In 2000, Russia was reeling from economic collapse, insurgents were marauding through the country and the Kremlin was being manipulated by tycoons, he said.

"Wealthy Russia had turned into a country of impoverished people. In these conditions, we started to implement our program to take the country out of crisis," he said.

"We have been able to rid ourselves of the practice of taking state decisions under pressure from financial groups and media magnates."

BOOMING ECONOMY

He hailed the strength of the Russian economy, pointing to a boom in investment, state coffers which are now full and gross domestic product growth of more than 8 percent a year.

But Putin also said Russia needed to develop its human capital if it was to compete in the global economy and reduce its dependence on oil exports.

He proposed tax breaks for companies investing in employees' training and healthcare and said the government should help promote scientific research and innovation.

Putin also touched on Russian democracy, which has come under close international scrutiny three weeks before the presidential election.

Opposition parties say the vote is a farce and slanted in Medvedev's favor. Europe's main election watchdog announced on Wednesday it was pulling out of monitoring the March 2 vote because of Moscow's obstruction.

Putin said democracy was a cornerstone of Russian society but that political parties who took money from foreign governments were guilty of "immoral" behavior and "demeaning the Russian people."