* Putin meets Security Council to discuss defence industry
* Russia plans to spend $680 bln on new weapons
* Minister invokes Stalin's disciplinary measures
By Gleb Bryanski
NOVO-OGARYOVO, Russia, Aug 31 (Reuters) - Russia needs a "leap forward" to rejuvenate its sprawling defence industry, President Vladimir Putin said on Friday, harkening back to the ambitious industrialisation carried out by Soviet dictator Josef Stalin in the runup to World War Two.
"We should carry out the same powerful, all-embracing leap forward in modernisation of the defence industry as the one carried out in the 1930s," Putin told his Security Council, without mentioning Stalin by name.
Stalin, who ruled the Soviet empire with an iron fist for 27 years, is blamed for the death of about six million people but also is praised by many Russians for winning the war and industrialising the country.
Putin made renewed industrialisation a priority during his third term in the Kremlin which started in May amid the largest protests of his 12-year rule. He conceded that the defence industry, once the heart of the Soviet economy, was in tatters.
"Unfortunately, many of our enterprises are technologically stuck in the previous century," Putin said, complaining about poor discipline at plants working on state defence orders.
In the 1930s Soviet leaders transformed a rural country devastated by civil war into an industrial superpower, using terror and executions to impose strict discipline at new plants built across the vast country.
Putin's top defence industry official Dmitry Rogozin posted on his Facebook page a copy of a 1940 letter from Stalin to gun factory managers and accompanied it with a sarcastic warning: "Such methods of improving discipline also exist".
Stalin's letter to the managers said: "I give you two or three days to launch mass production of machinegun cartridges... If production does not start on time, the government will take over control of the plant and shoot all the rascals there."
"Of course, it was a joke," Rozogin told reporters regarding his posting but added that failures would not be tolerated.
"Our satellites are falling, our ships are sinking, we had seven space failures in the last 18 months but not a single plant felt the consequences," he said after the council session.
"The culprits should come on stage. The country should know them."
Putin plans to spend $680 billion in the next eight years to modernise the military, with the bulk of the money going to 1,350 defence plants which employ about 2 million Russians. Many defence sector workers backed Putin during the election.
He sees the sector as a new growth driver for the stagnating economy which can help wean Russia off its dependency on energy. He promised to open up the sector to private businesses.
Putin's critics argue that the arms industry is too backward and corrupt to be given such money and point to numerous recent failures and delays such as space satellite crashes or failed test launches of new intercontinental missiles.