Putin hawkish in final state-of-nation address

MOSCOW, Apr 26 (Reuters) Russian President Vladimir Putin attacked US foreign policy and urged a revival of traditional values today in a hawkish speech that laid out a route for Russia to follow long after he steps down next year.

Making his last annual address to lawmakers, Putin said he was suspending Russia's commitments under the Conventional Forces in Europe treaty and linked the move in part to US plans for a missile shield in eastern Europe.

He gave no clear answer to the question preoccupying Kremlin-watchers and investors -- who Putin would endorse as his replacement when his second and final term ends next March.

But he set the tone for Russia's next presidency, announcing a spending splurge on housing, pensions, defence and mammoth infra-structure projects including a canal to link the Caspian and Black Seas.

In a swipe at opposition groups who have taken to the streets alleging he is backtracking on democracy, the president railed at ''extremists'' and said foreign cash was being used to upset Russia's political stability.

However, the thread that ran through his 72-minute address was what he called Russia's moral state.

''Our nation's spiritual unity and the moral values which unite us are as important a factor in our development as political and economic stability,'' he said, urging greater efforts to preserve Russia's culture and language.

First deputy prime ministers Sergei Ivanov and Dmitry Medvedev, the men regarded as front-runners for Putin's job, sat side by side listening to the speech along with lawmakers, religious leaders and ministers in the Kremlin's Marble Hall.

Putin confirmed next year's address would be read by a different president. ''It is premature for me to come out with political last wills and testaments,'' he added, to applause.

In his seven years as Russian leader, Putin has overseen steady growth in incomes and a return to political stability after years of turmoil.

SOURED DRAMATICALLY But relations with the United States have soured dramatically and his critics say he is turning Russia away from the West and tightening state control over all areas of life.

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.

Russia's windfall from oil and gas exports -- until now kept in a ''rainy day'' fund and spent sparingly -- should be mobilised 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.

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

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.

REUTERS JS BD1837