Arms treaty frozen

On the arms treaty, he said it made no sense for Russia to observe the pact when NATO signatories were ignoring it.

"(NATO countries) are... building up military bases on our borders and, what's more, they are also planning to station elements of anti-missile defence systems in Poland and the Czech Republic," Putin said.

"In this connection, I consider it expedient to declare a moratorium on Russia's implementation of this treaty - in any case, until all countries of the world have ratified and started to strictly implement it."

US Secretary of State Condoleezza Rice earlier dismissed as nonsense Moscow's concerns that the missile shield could pose a strategic threat to Russia.

"The idea that somehow 10 interceptors and a few radars in eastern Europe are going to threaten the Soviet strategic deterrent is purely ludicrous and everybody knows it," she told a news conference before NATO talks with Russia's foreign minister.

Russia's windfall from oil and gas exports - until now kept in a "rainy day" fund and spent sparingly - should be mobilized to improve citizens' quality of life, Putin said.

He said pensions would rise 65 percent through to 2009 and that proceeds from the state-forced auction of bankrupt oil company YUKOS should go towards a house-building drive.

Russia needs to increase its power-generating capacity by two thirds by 2020, Putin said, including by building 26 new atomic reactors.

Putin said a parliamentary election in December, widely regarded as a dress rehearsal for the presidential race, should ensure "continuity."

Foreign cash harms stability

He attacked unnamed political forces he said wanted to upset stability.

"There is a growing influx of foreign cash used to directly meddle in our domestic affairs," Putin said.

"Some people are not averse to using the dirtiest methods, trying to foment interethnic and religious hatred in our multinational country.

"In this respect, I am addressing you with a request to speed up the adoption of amendments to the legislation toughening punishment for extremist actions," he said.

In a clear reference to the opposition, Putin said there were internal forces in Russia which dislike its political stability and steady economic growth and wanted to steal its natural resources.

He said they were playing into the hands of foreign "colonialists" willing to control Russia. "We see that even in the epoch of colonialism there was a thesis about the so-called 'civilizing role' of the colonialist states," Putin said.

"Nowadays they make use of democratic slogans, but they pursue one single true goal to gain unilateral advantages... and protect their own interests."

Putin announced a minute of silence at the start of his address for his predecessor Boris Yeltsin, who died of heart failure aged 76 this week and was buried in a state funeral.

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