By James Rodgers
BBC News, Moscow
President Putin chose to focus on a domestic not international issue
The content of President Vladimir Putin's annual address is kept a closely-guarded secret until the moment it is delivered.
That doesn't stop endless speculation about what he will say. This year, the Russian media have been full of stories that the speech was being written and rewritten in great secrecy.
When it came, most of the predictions proved to be wide of the mark.
The conventional wisdom was that Mr Putin would concentrate on foreign policy.
Perhaps the Russian president knew that with his country's role as an exporter of oil and gas growing along with prices, his foreign audience would be paying close attention anyway.
So, rather than concentrating on international affairs, he chose to highlight Russia's potentially disastrous decline in population.
"Let's talk about the most acute problem facing Russia - demography," he said. "The number of our citizens shrinks by an average of 700,000 people each year."
Threat to workforce
While Russia still has huge social problems - and President Putin mentioned challenges in the areas of health, education, agriculture and house building - the country is making progress.
Revenues from soaring oil and gas prices have filled the Kremlin's coffers in a way that was unimaginable in the cash-strapped 1990s.
While the wealth has yet to spread across the entire country, the capital just seems to get richer.
Moscow's supermarkets are packed with Russian and imported goods. The city's streets are clogged with cars in numbers that communist-era planners could never have foreseen.
The decline in population could eventually lead to a vanishing workforce and put the good times at risk.
Short life expectancy - for Russian men in 2005 it was 59 years - and a low birth rate are to blame. Many Russian couples have only one child.
President Putin promised financial incentives for those who want to have bigger families.
From next year, the state will give families 1,500 roubles ($55) a month if they have one baby and twice that for a second child. Average wages are below $100 a week.
The initial response to the new proposals has been mixed. President Putin received loud applause from his audience in the Marble Hall of the Kremlin.
Others watching the speech questioned whether the sum would really make much of a difference, especially in Moscow.
"He doesn't go in the shops, so he doesn't know the prices," suggested one unimpressed analyst. President Putin conceded that the problem was more than simply financial.
"The problem of low birth rates cannot be resolved without a general change in the attitude of our society towards the issue of family and family values," the Russian president warned.
President Putin didn't mention another factor which threatens Russian population growth: HIV/Aids. Last year, 350,000 people in the country were registered as HIV positive. The true figure may be much higher, and continues to grow.
Heavy drinking, smoking, bad diet, and deaths in road accidents are all other causes of death which will need to be tackled if Russia's population decline is to be halted.