Medvedev warns Russia opposition not to rock boat

MOSCOW (Reuters) - President Dmitry Medvedev warned Russia's opposition in his annual address on Thursday not to use democracy as a cover to "destabilise the state and split society."

The harsh words came alongside modest pledges by Medvedev to boost regional democracy in Russia. They showed the Kremlin's desire to ensure stability and prevent unrest amid a deep economic recession.

"The strengthening of democracy does not mean the weakening of law and order," Medvedev said in his address to Russia's political elite gathered in the Grand Kremlin Palace.

"Any attempts to rock the situation with democratic slogans, to destabilise the state and split society will be stopped."

Prime Minister Vladimir Putin, Medvedev's mentor and the country's most powerful politician, watched from the front row flanked by his key lieutenants as the president spoke. The audience gave Putin a standing ovation when he entered.

Medvedev named worsening violence in Russia's volatile, Muslim-dominated North Caucasus as the country's biggest domestic political problem and called for an effort to "fight international terrorism and destroy bandits" there.

Killings in the North Caucasus have spiralled this year as a low-level Islamist insurgency feeding on poverty combines with feuds among corrupt local officials and businesses.

The president spent most of the 100-minute speech talking about the need for Russia to move its economy away from its Soviet roots in heavy industry and energy extraction towards 21st century sectors such as medicine, telecoms and space. Foreign policy was hardly mentioned.

"We haven't managed to get rid of the primitive structure of our economy," Medvedev said. "...The competitiveness of our production is shamefully low."

Amid a blizzard of targets, Medvedev called for Russia to boost the share of locally produced medicines to half the market by 2020, cut gas flaring dramatically by 2012 and launch broadband internet and digital TV nationwide in five years.

"The nation's prestige and prosperity cannot be upheld forever by the achievements of the past," Medvedev said, referring to Russia's Soviet legacy of nuclear weapons, infrastructure and oil and gas production.

"The time has come for us, the present generation of Russians, to make its voice heard: to raise Russia to a higher level of civilisation."

Despite his emphasis on modern technology, Medvedev did not neglect the country's powerful defence industry, saying that more than 30 ballistic missiles should be deployed in 2010 and three nuclear submarines commissioned.

WISHFUL THINKING?

The address contained no details on how Medvedev's ideas for economic modernisation would be implemented, which worried some financial market participants.

"It was disappointing from an investment point of view that it was very light on any specific point of action, just a reiteration of what we have already been hearing," said Chris Weafer, chief strategist at Russian brokerage Uralsib.

The president had tough words for the country's giant state corporations, saying they had "no prospects." Independent auditors should examine them and they should then either be closed down or turned into companies with shareholders.

Political analysts said that Medvedev, who reaches the mid-way point of his four-year term next May, had failed in the speech to explain how his ideas would be followed up.

"I haven't seen any tool being proposed to implement these theses," said Kremlin critic Stanislav Belkovsky. "Without those tools, it is all a compilation of wishful-thinking intentions and it all looks a bit like a joke. As we all know, the ruling elite is not interested in modernising the Russian economy."

Diplomats based in Moscow say that Medvedev has frequently made accurate diagnoses of Russia's woes and suggested what needs to be done. But little has changed in practice.

The global economic crisis, which hit Russia with particular force, has made the prospects for serious change even more slim. Pro-Kremlin analysts said that Medvedev was keen to guarantee stability amid a difficult financial climate.

"Stability is key after the chaos, the anarchy and the cold civil war of the 1990s," said ruling party deputy and political expert Sergei Markov. "Stability has a particular value here."

Medvedev's views may prove of academic interest in the long run.

Many expect Putin, the country's most popular politician, to return to his old Kremlin job in 2012, benefiting from a reform rushed through parliament last year extending the presidential term to six years.