Banging The Tax Reform Drum

It began with music, as is traditional, and ended with polite applause, which was a bit less than the thunderous ovations that have many times echoed through the halls of the Kremlin.

But Russian President Vladimir Putin's state of the nation address, focusing on the economy and the withdrawal of troops from Chechnya, was nonetheless well-received.

"The president acted like a crisis manager, a manager of the Russian Corporation," said liberal politician Irina Khakamada.

"Whereas his address last year might be viewed as a declaration, this time it might be described as a business plan," agreed Igor Bunin, general director of the Center for Political Technologies Think Tank.

Putin's blueprint for economic, legal and social reforms also drew praise from maverick nationalist Vladimir Zhirinovsky, who said "it was the best address we have heard for the last six or seven years."

Others worried that former spymaster Putin might have something up his sleeve.

"I fear that this is some kind of new Gaidar plan," said Communist Party leader Gennady Zyuganov, referring to the shock treatment economic reforms that were launched by ultra-liberal Yegor Gaidar following the collapse of the Soviet Union.

"I had the impression that the president judges everything properly, but there will be no breakthrough development of the country," said liberal Boris Nemtsov. "The president is not revealing all his cards."

Putin did not mince words in his address, which notably did not discuss media freedom, military reform or the U.S., but did call Russian "standards of living still very low."

Putin said political changes, achieving stability, took place over the last year as Russia's economy grew at a rate of 7.7 percent - the best performance in nearly 30 years - but the nation still faces "serious risks, both economic and social."

The Russian leader outlined a broad range of policy initiatives from tax reform to the loosening of foreign currency restrictions and pointed to neighboring Finland as an example of just how far Russia's economy has yet to go.

"Compare the dimensions," Putin noted acidly, pointing out that the total capitalization of Russia's stock market is just a fifth of the value of Finland's largest companies.

Putin, who has already ushered in land sale and tax reform laws, says economic stability this year is too closely tied to commodities and the vagaries of world markets.

"In the last few months the worsening state of several economic indicators raises concern, especially against the background of the uncertain development of the world economy," Putin told legislators in both houses of parliament, the Duma and the Federation Council.

In London, Russia's 30-year dollar bond rose, trading at 40.625 percent at 0845 GMT, up 0.125, after creeping up as high as 41.0 during the speech. Russian shares firmed briefly but traders remained cautious, saying they wanted to see results.

"It would be great if he managed to do everything he said needed to be done, but we have heard these promises before," said Roland Nash, chief economist at Renaissance Capital.

Putin promised new tax reform proposals will be unveiled within four weeks, in an effort to improve Russia's investment climate and stem the flight of capital from the nation, an outflow which was over $20 billion just last year.

Opponents have criticized Putin for centralizing too much authority by reining in Russia's 89 regions and failing to launch structural reforms while the country is reaping the benefits of high oil export prices and has a largely compliant parliament.

In announcing the withdrawal of troops from Chechnya, Putin asked deputies and all Russians watching his speech at home to stand in a solemn moment of silence, to remember the troops killed in the most recent 20-month campaign to restore Russian control over the secessionist-minded region.

Putin then went on to observe that those who believed Russia could not prevail in Chechya were wrong.

"Not long ago, we heard the army was in a state f collapse and we could expect no results in the military sphere. In the political sphere, it was said we could expect nothing positive because not a single Chechen would be found who was willing to support the federal center in the struggle against terrorism and the enforcement of the constitutional order," said Putin. "Experience has shown both of these are lies."

"Having fulfilled its fundamental tasks, the army is withdrawing from the republic," said Putin. "This is a serious result, but achieved at high cost."

This is not Russia's first withdrawal from Chechnya, where rebels have waged a long and bloody war for independence. Russian troops pulled out of Chechnya after a 1994-96 defeat at the hands of separatists, but were sent back in September 1999, after Chechen rebels attacked a neighboring region and after bombings of apartments that Russia blamed on the rebels.

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