He noted that this affects the quality of military hardware that is supplied to the Russian army and exported.

A solution to the problem, Medvedev said, could be adopting a federal program.

"Directors of companies and plants should take measures to cut production costs. It's a question of survival," Medvedev said.

The Russian President said the prices of military equipment should be reasonable enough to let the armed forces make purchases regularly, as opposed to one-time buys. Also, the prices must be attractive for foreign partners. “It's a crucial condition,” Medvedev said.

“On many positions, the attractiveness of our armaments is disappearing; the cost is so high that purchasing them makes less and less sense," he said.

'Bastion'

"A foundation of the armed forces modernization must be laid down by 2012," Medvedev said.

According to Medvedev, much money has been spent for production of the newest equipment. However, the priority should be given to manufacturing really promising models.

The most frustrating thing is when money is spent on "modernizing" obsolete equipment or equipment that will become obsolete within the next few years, Medvedev said.

To have a close look at the latest achievements of the country’s military industry, the president visited Russia’s Military Industrial Corporation – “NPO Mashinostroyenia” in the town of Reutov in the Moscow region.

Among other things, Medvedev was shown 'Bastion' – the new maneuverable inshore missile launch unit. The unit is designed to counter sea-based attacks and, among its capabilities, boasts self-propelled launching systems.

The head of state was shown how the missiles could be prepared for launch within 50 seconds. The missiles used in Bastion are the same as those on small naval ships.

The maximum range of the rocket is 290 kilometers – that's about 180 miles. According to officials, Russia may soon start exporting Bastions abroad.