Vladimir Putin state of the union defends aggression in Ukraine

In an annual speech ranging from economy to school tests, Russian President Vladimir Putin on Thursday evoked religious imagery and defended the Kremlin's aggressive foreign policy as necessary for his country's sheer survival.

Russia annexed Ukraine's Crimean peninsula in March and was later accused of supplying pro-Russian separatists in eastern Ukraine with ammunition and manpower.

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In his annual state-of-the-nation address at the Grand Kremlin Palace, Putin defended the annexation of Crimea and described it as Russia's spiritual ground, "our Temple Mount."

He added that national pride and sovereignty are "a necessary condition for survival" of Russia.

"If for many European countries, sovereignty and national pride are forgotten concepts and a luxury, then for the Russian Federation a true sovereignty is an absolutely necessary condition of its existence," he told a full room of Cabinet ministers, lawmakers and community leaders. "I want to stress: either we will be sovereign, or we will dissolve in the world. And, of course, other nations must understand this as well."

More than 4,300 people have been killed in eastern Ukraine in what the West and the Ukrainian government says is a conflict fuelled by Russian money.

Putin once again expressed his displeasure over the toppling of Ukrainian Presidential Viktor Yanukovych but did not offer any insight into what Russia's next actions in eastern Ukraine could be.

Although Russia is boosting its national defence budget, Putin said it is not going to get involved in an expensive arms race. He said unspecified "unusual solutions" are at the nation's disposal.

"No one will succeed in defeating Russia militarily," he said.

Moscow-based analyst Maria Lipman said that despite bellicose statements toward the West in the beginning of his speech, Putin "also spoke about how we are by no means going to isolate ourselves, we are interested in constructive work even with Europeans and Americans."

Striking a decidedly liberal note, the Russian president also announced measures to spur the flagging economy, saying that Russia's resurgent "geopolitical role" should be matched by a thriving economy.

Russia is expected to enter recession next year, for the first time in six years.

Ruble hits record low

Putin suggested a three-year freeze on impromptu inspections and tax checks for companies with a clean record, and said there should be no taxation of offshore money returning to Russia.

Putin praised the work of the Central Bank, which moved to free float the ruble this year even though the currency hit a record low on Wednesday.

Lipman said that Putin was trying to reassure both the liberal and conservative camps in the government, but realizes his hands are tied by economic factors.

"I think his freedom of manoeuvre is limited now and many important economic factors no longer depend on him: the ruble rate, the price of oil, inflation," she said.

Putin did not dwell on rising consumer prices or an expected decline in living standards but instead sought to portray the harsh economic environment as a necessary obstacle for patriotic Russians to overcome.

"This year, as in many fateful historical moments, our people clearly displayed national revival, firm resistance, and patriotism," he said. "And the difficulties we encountered will create new opportunities for us, we are ready to accept any challenge of our time and be victorious."