The collapse of the Soviet Union was "the greatest political catastrophe of the last century," Russian president Vladimir Putin said Monday as he delivered his annual state of the nation address.

The former KGB agent said the 1991 breakup of the Union of Soviet Socialist Republics was a "true drama" that left tens of millions of Russian people living outside Russia, in breakaway republics formerly under Soviet control.

"The epidemic of destruction extended even to Russia itself," he told the country's two houses of parliament, saying personal savings were wiped out and "old ideals" were destroyed.

Russian President Vladimir Putin delivers his annual state of the nation address in Moscow. (AP Photo)
Russian President Vladimir Putin delivers his annual state of the nation address in Moscow. (AP Photo)

Putin has come in for international criticism recently over what some see as a rollback in press and judicial freedom, as well as democratic rights.

His nostalgia for a time of superpower glory in which secret police spied on their fellow citizens and thousands were imprisoned for seeking reforms has also raised eyebrows.

But in Monday's speech, Putin said Russia's main goal now is to develop a free and democratic society, though he clarified that it would be a democracy based on Russian traditions instead of Western ideals.

"We must become a free society of free people," he said.

Putin said he aims to do that by strengthening the state, boosting the rule of law and continuing to implement economic reforms.

The president also said he wants to make Russia more attractive to foreign investors.

Putin said he will crack down on bureaucratic corruption and end the practice of pursuing businesses to pay past tax bills. He said he has also asked Russia's tax inspectors to stop looking into dubious privatizations of state businesses that happened more than three years ago.

His speech came at a time of falling approval ratings for Putin and his government, in part due to painful social reforms that sparked street protests earlier this year.

As well, the state's long legal battle against one of Russia's largest oil companies, Yukos, has shaken investor confidence in the country and faith in the independence of the country's judicial system.