UPDATE 4-Medvedev pitches modern Russia, warns opposition

By Guy Faulconbridge MOSCOW, Nov 12 (Reuters) - President Dmitry Medvedev said on Thursday Russia needed to embrace sweeping reforms to become a modern world power but warned the opposition against sowing chaos in the name of democracy. Medvedev spent much of his 100-minute state of the nation speech bewailing the state of Russia's economy which the Kremlin chief said was chronically obsolete and mired in corruption. Amid a blizzard of general themes, Medvedev gave few concrete details on how to move Russia away from its Soviet roots and reduce "humiliating" dependence on raw materials. "At the heart of my view of the future is the conviction about the necessity and ability of Russia to achieve the status of a world power on a completely new basis," Medvedev told the political elite gathered in the Grand Kremlin Palace. "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. 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. After offering modest pledges to boost democracy in Russia, Medvedev warned the opposition against any attempt to sow disorder under the cover of democratic slogans. "The strengthening of democracy does not mean the weakening of law and order," Medvedev said. "Any attempts to rock the situation with democratic slogans, to destabilise the state and split society will be stopped." Russia's fragmented opposition dismissed Medvedev's promises of reform and said Medvedev had failed to address concerns about electoral fraud after last month's disputed regional elections. Medvedev, who has ruled the Kremlin since May 2008, said that an upsurge of violence in the North Caucasus had become the country's single biggest domestic problem. The patchwork of republics along Russia's southern flank have seen a wave of attacks in recent months that local leaders say are fuelled by a potent mixture of clan feuds, poverty, Islamism and heavy-handed tactics by law enforcement agencies. WISHFUL THINKING? Medvedev said Russia's economy had been more badly hit by the global economic crisis than many other countries, a trend he said proved the need to bring Russia into the 21st century. "We haven't managed to get rid of the primitive structure of our economy, the humiliating raw materials dependence," said Medvedev, who read from notes for most of the speech. 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. He added that Russian scientists were working on a new nuclear spaceship engine powerful enough to reach other planets, though he gave no further details. 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. Medvedev had tough words for Russia's giant state corporations created under Putin, saying they had "no prospects" and calling for a probe of their use of state money. State corporations under scrutiny include bank VEB, whose supervisory board is chaired by Putin, and Russian Technologies, which is headed by a close Putin ally, Sergei Chemezov. The Kremlin's top economic aide Arkady Dvorkovich told reporters after the speech that VEB and Russian Technologies could be turned into joint stock companies as early as 2010. But the address contained few details on how Medvedev's ideas for economic modernisation would be implemented. "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. 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. "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." 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. Keywords: RUSSIA MEDVEDEV/ (Additional reporting by Michael Stott; editing by Janet McBride; [e-mail] [phone]) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved.

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