Russian President Vladimir Putin (search) told the nation Monday that the collapse of the Soviet empire "was the greatest geopolitical catastrophe of the century" and had fostered separatist movements inside Russia.
In his annual state of the nation address to parliament and the country's top political leaders, Putin said the Soviet collapse was "a genuine tragedy" for Russians.
"First and foremost it is worth acknowledging that the demise of the Soviet Union (search) was the greatest geopolitical catastrophe of the century," Putin said. "As for the Russian people, it became a genuine tragedy. Tens of millions of our fellow citizens and countrymen found themselves beyond the fringes of Russian territory.
"The epidemic of collapse has spilled over to Russia itself," he said, referring to separatist movements such as those in Chechnya (search).
Putin's statements were some of his strongest language to date about the Soviet collapse and come a month before the nation celebrates the 60th anniversary of the end of World War II (search) in Europe, a conflict Russians call the "Great Patriotic War."
In the address, Putin also tried to boost business confidence in the nation, reassuring skittish investors that rules governing the privatization of state property and tax collection would not be constantly shifting.
Putin said tax inspectors do not have the right to "terrorize business," and he called on the government to lower the time limit for challenging the results of past privatization deals from 10 years to three.
Some foreign investors have been unnerved by recent government moves to give massive back-tax bills to Russian businesses, attack a politically ambitious business tycoon and allegedly backtrack on democratic reforms, analysts said.
But Putin emphasized Monday that Russia needs foreign investment, and the "rules of the game" must be clear to attract it.
Ways must be found to collect taxes that "ensure the rights of state and don't destroy the economy or drive business into a dead end," Putin said.
He also said rules on defining strategic sectors where foreign investment would be restricted should be established.
Last month, Putin tried to reassure business leaders that a spate of back-tax investigations, apparently spurred by the politically charged probe against the Yukos oil company, would be brought under control.
Any reassurance was largely dispelled, however, when Anglo-Russian oil company TNK-BP was slapped with a $1 billion back-tax bill weeks later and antitrust authorities blocked a planned investment by Germany's Siemens AG.
Analysts said the question was whether Putin would follow through on his words. That was reflected in the fact that Russia's benchmark RTS index remained flat following the speech.
"It's already been said," said Steven Dashevsky, head of research at the Aton investment bank. "It's clear the Russian government wants to make life easier and more predictable for business. The question is whether all these reforms, all these improvements, get pushed down through the various levels of bureaucracy."
In an apparent response to foreign allegations that Russia has been backtracking on democracy, Putin said Russia's main political task was to develop as a free, democratic nation with European ideals. He stressed that individual freedoms would not be compromised by strengthening the state.
"We are a free nation and our place in the modern world will be defined only by how successful and strong we are," Putin said.
Critics have attacked Putin for slapping restrictions on independent media, ending the direct election of governors, ensuring a compliant parliament and attacking a politically ambitious tycoon, ex-Yukos chief Mikhail Khodorkovsky, whose verdict in a fraud and tax evasion trial is expected Wednesday.
"The words of the president about stable and defined rules of the game for investors sounds like a mockery coming two days before," said Sergei Mitrokhin, deputy head of the liberal Yabloko party.
Putin said the nation's main political challenges included boosting the rule of law and judicial institutions and deepening respect for both individual liberties and the activities of non-governmental organizations.
However, the only NGO he mentioned prominently was the Public Chamber -- a group of Kremlin-approved dignitaries, which he said should be responsible for ensuring that public television provides objective information and is not guided by corporate interests.
Putin said the threat of terrorism in Russia remained high and that parliamentary elections scheduled for later this year in Chechnya should lay the basis for stability and democracy in the region.
Putin's popularity has been dented over the past year by street protests over painful social reforms in Russia and unsuccessful attempts to head off a popular uprising in the ex-Soviet republic of Ukraine. Putin is constitutionally barred from seeking a third term, but many Russians assume the Kremlin will ensure that a Putin loyalist wins the balloting in 2008.