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Hopes that President Vladimir Putin would use this week’s state of the union address to clarify where Russia is heading were frustrated. His speech had a little something for everyone, leaving liberals and nationalists alike grasping for their favorite sound bite. It is tempting to look to the case of “oligarch” Mikhail Khodorkovsky for some indication, as a guilty verdict against him is virtually a foregone conclusion.

The real question is whether Mr. Putin understands that the absolute control of Russian society that he seems to demand is incompatible with the requirements of a modern economy. Thus far, the answer appears to be no.

Liberals and free market enthusiasts will applaud Mr. Putin’s declaration that his main task is “the development of Russia as a free and democratic state.” He minced no words, noting that “ensuring human rights and freedoms is critical both for the development of the economy and for the social and political life of Russia.” He criticized Russian bureaucrats, calling them “an isolated and sometimes arrogant caste that sees the civil service as a kind of business,” and he called for the rule of law to check the unbridled power of government, saying “tax agencies have no right to terrorize business.”

Support for democracy and human rights is to be expected. Mr. Putin has taken a verbal beating in recent weeks from the United States and European countries for his government’s heavy-handed policies and its seeming unwillingness to tolerate dissent. With world leaders expected to visit Russia next month for the 60th anniversary of the end of World War II in Europe, Mr. Putin has his eyes firmly fixed on those political elites when he speaks.

Yet the former KGB colonel also has another audience in mind: business leaders. Mr. Putin and his government know that bureaucratic arrogance and public fear are not helping to build the stable and strong country that they desire. Worries about arbitrary arrests and appropriation of businesses are real: Capital flight tripled to some $8 billion last year, and the fear and uncertainty make goals such as the doubling of Russia’s GDP in 10 years impossible. As Mr. Putin explained in his speech, investors’ “money will only go where there is stability and where the rules of the game are clear and understandable.”

Mr. Khodorkovsky must have some thoughts about that. He faces up to 10 years in prison on tax and fraud charges if convicted. While Mr. Khodorkovsky acquired his company, Yukos, under questionable circumstances, many other “oligarchs” obtained their companies in the same manner during the pell-mell privatization of former Soviet industries in the late 1990s. His real crime was daring to finance an opposition party that challenged Mr. Putin.

The attempt to punish Mr. Khodorkovsky has underscored concerns about the rule of law in Russia, fears that have not dissipated despite assurances by Mr. Putin himself. The recent leveling of back taxes — the technique used to break Yukos — against two other companies has many wondering what the government’s agenda is — and who is setting it.

Outside observers are to be forgiven for wondering about Mr. Putin’s real intentions. His rhetoric about respect for democracy and human rights was balanced in his speech by the admission that the collapse of the Soviet Union in 1991 was “the greatest geopolitical catastrophe” of the 20th century.

Although the end of the Soviet Empire was an epochal event, few outside of Russia who would call it a catastrophe. Rather, it was the end of a totalitarian monstrosity that destroyed countless lives. That anniversary deserves to be celebrated with no less fervor than next month’s end-of-war anniversary.

His nostalgia for the Soviet past puts a worrying gloss on Mr. Putin’s language. His pledge that Russia “will decide for itself the pace, terms and conditions of moving toward democracy” makes perfect sense, until one wonders just “who” Russia is and who will make those decisions. He dismissed the popular revolts that have toppled governments in former Soviet states in recent years, warning that “the state will react to them in a legal but tough manner.”

In his speech, Mr. Putin said Russia’s “place in the modern world will be defined only by how successful and strong we are.” He is right. But his conception of “strength” is outdated. Rooted in Russia’s authoritarian past, it is woefully unsuited to the realities of the 21st century. When Mr. Putin adjusts his vision to these new conditions, Russia will assume its rightful place in the world. Until then, it will remain mired in suspicion, doubt and dangerous excesses.

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