Hundreds of Russian nationalists staged a racism-tinged rally in central Moscow on Saturday to demand an end to social payments for Muslim republics of the volatile North Caucasus region.

The sanctioned gathering came amid spiking social tensions and lingering security fears from a January suicide bombing at the main Moscow airport that killed 37 and was claimed by the nation's most feared Islamist warlord.

"We are tired of seeing the Caucasus youth creating mayhem on our streets and at our schools and universities and then going unpunished," rally co-organiser Alexander Khromov told the Interfax news agency.

The event was officially titled "Stop Feeding the Caucasus!" and included leaders from far-right organisations that rights groups link to deadly attacks on migrants from Russia's Caucasus and the Central Asian republics.

Recent polls have shown a rise in Russian xenophobia and a sense of voter frustration over the influx of mostly Muslim newcomers to cities that are already creaking under the strain of heavy crime and poorly-funded services.

Both Russian President Dmitry Medvedev and Prime Minister Vladimir Putin -- a former president who launched Russia's last war in the Caucasus in 1999 -- have condemned the racist violence that now periodically erupts on the streets.

Medvedev has called it a matter of national security while Putin met a top minister on Saturday to discuss a new social development programme for Russia's impoverished south.

But Moscow officials have sanctioned such events in the past and the city's mayor last month accused migrants of being responsible for half of the capital's crime.He has also instructed companies to give preferential treatment to locals during hiring and unleashed a campaign to shut down street stalls and open air markets that are often operated by temporary and illegal workers.

The mayor's office sanctioned Saturday's event after forbidding similar gatherings in defence of human rights -- a move that sparked a rare round of criticism from pro-Kremlin lawmakers.

"We have to try to stand up to such attempts to break up the country," ruling party lawmaker Pavel Zyryanov told Moscow Echo radio.

Saturday's demonstrators were comprised mostly of Russian youth wearing bomber jackets and hoods.

Several covered their faces with bandannas to hide their identities from the police while many more raised their right arms in Nazi-style salutes while chanting slogans in praise of ethnic Russians.

"We are not xenophobes. We are not Nazis. We are demanding equality for Russian regions," said rally co-organiser Anton Nosov of the little-known Russia Civic Union group.

Another speaker told the crowd of about 500 that "we spend too much money and too much blood" on the Caucasus.

The hour-long event was watched closely by dozens of policemen who closed off all roads leading to the rally square. No violence was reported.

The decision to allow the event drew rare criticism from the Public Chamber -- an advisory council set up by the Kremlin to debate various social issues.The council issued an official statement Friday conceding that the payments made by Moscow to the restless Caucasus region were "not small".

But it called the rally a "provocation" and accused its organisers of "thinking only about their political gains and forgetting about the interests of Russia".

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