"We plan to increase the budget for defense orders by 40 percent, which amounts to 70 billion rubles (2.5 billion dollars, 2.1 billion euros)," ITAR-TASS quoted Putin as saying.

He added that military expenditures "will see overall growth" next year.

The report contained no detailed breakdown from Putin on how the extra spending would be allocated.

The procurement budget covers everything from MiG jets and new rockets to boots, food and other basic supplies for the cash-strapped and demoralized military.

Putin has placed his close ally, Defense Minister Sergei Ivanov, in charge of army reforms and has since promoted him to head the massive military infrastructure, demoting the status of the general chiefs of staff.

Ivanov, who once served in the KGB, became Russia's first civilian defense minister in 2001, but has struggled against entrenched and powerful generals in his bid to introduce reforms.

Putin and his predecessor Boris Yeltsin have issued repeated instructions to transform the army, now bogged down in a guerrilla war in Chechnya but originally built for fighting the United States during the Cold War, into a smaller, more mobile force.

Ivanov reported Thursday that the Russian armed forces would take on 50,000 professional soldiers and officers next year.

The plan has been opposed by generals who fear that a switch from mandatory conscription to contracted military service would decimate the numbers of Russian soldiers, and by implication senior commanders as well.

Russia had initially planned to eliminate the draft by 2000. Now the plan has been pushed back by at least a decade.

WAR.WIRE