President Dmitry Medvedev, setting out his credentials for a second term, said on Thursday that ethnic tension was rising in Russia but cracking down too hard would undermine stability.

In a speech to Russian and foreign experts, he kept Russians guessing whether he or Prime Minister Vladimir Putin will run in a presidential election in March.

But Medvedev said he wanted to live in a "modern, democratic state" and warned against silencing criticism -- remarks clearly designed to appeal to liberal political and business leaders in Russia, and to set himself apart from Putin.

"We must preserve the integrity of the country, otherwise we shall not have a country at all," Medvedev told the Kremlin-backed Global Policy Forum in the Russian city of Yaroslavl, about 250 km (150 miles) north of Moscow.

Medvedev said "separatism and terrorism" had not been defeated, a reference to the insurgency the Kremlin faces along its southern flank in the North Caucasus.

But calls to tighten the screws or limit human rights to deal with poverty or extremism would achieve nothing, he said.

Many Russians say they expect Putin, 58, to return as president in March. Medvedev, 45, has hinted he would like to stay on, but they are unlikely to run against each other and Putin is expected to have the final say.

Medvedev began his 30-minute speech by calling for a minute's silence for the 43 people, including one of Russia's top ice hockey teams, who were killed in a plane crash on Wednesday at the city's airport.

He did not mention Putin in the speech, but said Russia needed to boost the role of non-governmental organisations and develop an atmosphere of "free creativity", sharply different rhetoric to that of his mentor.

By raising concerns about ethnic tensions and the gulf between rich and poor, he touched on issues that are likely to figure in a parliamentary election on Dec. 4.

Putin steered Medvedev, a former corporate lawyer he has known for more than two decades, into the presidency in 2008 because a constitutional limit prevented the former KGB spy from running for a third term.

Putin's ruling United Russia party is expected to win the parliamentary poll. No matter who becomes president, officials and diplomats say he will remain Russia's most powerful man.

Despite a sharp fall in poverty since the Soviet Union's collapse in 1991, when about a third of Russians lived in poverty, Medvedev said the proportion had risen to 15 percent this year from 12.8 percent in 2010.

"The top 10 percent of the population receive 15 times as much as the poorest 10 percent," Medvedev said.

He repeated calls for reform but, seeking to temper criticism by more conservative forces, he signalled he would not endorse change that was too rapid.

"We need to develop but do this in an harmonious and gradual way," he said.