The Duran Podcast - Putin's Loyalty to Nabiullina Is Costing Russia Growth

Episode Date: July 5, 2026

Putin's Loyalty to Nabiullina Is Costing Russia Growth

All right, Alexander, let's talk about the Russian economy, which seems to be doing very well. All the numbers are pointing to an economy that is doing well. And we have the central bank, Nabilina, refusing to cut interest rates again. Or she cut just a little bit, half a point, I believe you said, was her interest rate cut. And of course, you have people like, like, Svered Bank, their CEO of Sred Bank, saying, you've got to do more. Got to cut more. Come on. What are you doing?

All the numbers are showing that things are going well and we have space to make those cuts. What's happening with the Russian economy? I would actually push back on some of that. I think that what we're seeing is another iterative. another period of time when, again, Nebula is keeping interest rates very, very high. And the result is that she's choking growth. Now, firstly, she did announce what was supposed to be a cut on the 19th of June. She cut interest rates from 15%, this is the key rate, from 15% to 14.5%.

a half point cut. Actually, that is not a cut at all. Because if you read what Nabilina herself is saying, inflation, underlying inflation is in Russia is falling. So given that underlying inflation is falling, the cut that she made means that the distance between inflation, the inflation rate and the interest rates remains about the same. It's about 10%.

And that is the real rate of inflation. That is, sorry, the real rate of interest. That is the actual cost of money that Russian banks have to pay to the same. central bank, when they pay, when they borrow from the central bank, as all banks in any economy do. And of course, when the banks themselves lend to business and businesses and to consumers in Russia, they charge 10% to cover themselves for what they're paying in interest to the central bank and more. So the kind of interest rates that people who are borrowing in Russia are paying continue to be around 12, 13%. That is the real rate of interest that most people in Russia are

experiencing. It's higher. It's probably, well, for, for, I would actually, 12 to 13%, I make, maybe I should correct that, for bigger companies. Okay. So the bigger companies. So the bigger companies, smaller companies, homeowners, people who want to take out loans to buy houses, people who want to buy cars, they're paying much more. They can be paying up to 20% and above. So she is keeping interest rates incredibly high. And I don't think the economic numbers are actually showing that, you know, things are going so superbly well. Let me explain. So In January and February, we had an overall contraction in the economy. In March and April, there was a rebound.

Not entirely clear why. Perhaps it's because, you know, there's been a build-up in demand when people went buying things in January and February and they come to the shops and they start buying and things start to grow again. But then in May, we got a dip again. Not a big one, but nonetheless a dip. Now, what has happened is that the first figures for June suggests that we're back in expansion territory. And industrial expansion apparently is relatively high.

We got a PMI reading of 50.3, anything above 50. points to expansion, anything below 50 points to contraction. It's actually the strongest reading we've had since February 2025. But with interest rates remaining as high as they currently are, even as inflation continues to fall, inevitably, unavoidably, one has to wonder whether whatever positive readings we're getting for the first weeks of June are going to be sustained for very long. And there is now increasing calls from businesses, from the banks in Russia. They're all telling the central bank, interest rates are too high. We can't have interest rates, real interest rates, at 10% for very long.

You've got to start reducing interest. rates, what is happening is you are suffocating growth and risking a recession. And you're also risking the possibility that inflation is going to fall below your target. The central bank's target is 4%. We've had other situations in the past where Nebula has overshot that target, and we actually get deflationary periods in Russia. And the central central. bank for its part is coming back and saying, no, there is no risk of this. We've looked at all the numbers. Overall expansion in the economy is taking place. Maybe not very high expansion, but expansion is happening. Inflation risks have not gone away. And we must keep real interest

rates at this sky high level. And this is becoming now very rancorous. And Germain Greff, who is the head of spare bank, the CEO of spare bank, which is Russia's biggest bank by far, and the bank with which most Russians keep their money. And by the way, a bank, spare bank, which is actually owned by the Russian Central Bank. Anyway, he's come out, he spoke two days ago, and he said it very straightforwardly. He said, my point of view is that the economy, cannot exist for long at extremely high rates, real high rates that exist today, and our real rates are around 10%. That is the central bank's policy rate minus current inflation, and 10% is a

rate that can be applied in the short term in order to cool the economy. What we see today, in my opinion, is quite obvious. We have already overcooled. the economy. In other words, he's calling for a bigger cut in interest rates. And bear in mind, many people have always considered Greff to be something of a monetary hawk. He's always been seen as being very much on the liberal side of the Russian political system. And yet even he is saying that Nubulinus interest rate policy makes absolutely no sense. It's keeping. It's keeping. It's keeping interest rates far too high. PMI is up.

Real wages? Real wages are growing. Wealth. Growing. Wealth is growing. I mean, again, we've had figures about this. These come from UBS, by the way. Just say something, which is that it turns out that between 2020 and 2025,

average wealth in Russia, the average value of things that people own, increased by 37%. And median wealth, which is perhaps a better indicator. In other words, what most people who are not in a big owners of businesses or owners of property, they experienced a rise in their wealth of just over 9%. So people are feeling richer and real wages are growing. And I think this is causing the central bank to believe that it can keep real interest rates at this incredibly high level because also profits of companies, the big. industrial groups are very strong. So big industrial groups don't borrow. I mean, we were talking about companies like Rostek or Rostatom or those sort of companies. They don't borrow. They don't

go, they don't take loans of the banks. They simply fund their actually very large investment programs out of retained profits. So investment remains quite high. Net wealth is growing. Real wages are growing, all of those things. But I think that this is complacent because of course the people who are being hammered are the small and medium sized businesses, the SMEs, and of course certain types of consumers, people who want to take out car loans, and that is creating imbalances in the economy, which it would be very unwise to perpetuate for very long. And remember, if we're talking about SMEs, not only are they playing a very important role in the consumer economy now, but they're also very important in food production, in agriculture, in things of

that kind as well. These people need loans and the price that they are paying for those loans is very high. Okay, so my final question is that the numbers appear to be good. Yes. Why is Nabilina not making the correct moves? Why does she want to strangle the economy? What's the reasoning? She does this. This is a history that she has. Between 2014 and 2019, for five years, she kept interest rates, real interest rates of 5%, which again, everybody was telling her these are too high. And she does the same. She's doing the same now, only to an even greater degree. And this, I think, is based on an assessment of the economy, a calculation about the economy. which you often find economists make in Russia, which I think, and people like Greff at Spare Bank think is wrong. Nebula in a thing believes that the economy is functioning at full capacity, that if she reduces interest rates and growth increases because it is at full economy, that is going to lead immediately to overheating, and that will cause inflation to go very, very much higher.

So she wants to keep growth down in order to keep inflation down. And she says if we keep inflation down and we maintain investment at the current levels and gradually capacity in the economy will increase, and then over time, we will start to be able to relax. The trouble with nebudinate is that that point when that happens is never quite reached. Graf, who runs a bank that is involved in retail, and which lends money to businesses, and who therefore in some ways probably is closer to what is happening in the actual economy than a mulean is. He says, no, this isn't true.

The economy has significant ability to grow. It's got more spare capacity than the central bank imagines. Let's ease monetary policy. He's not talking about, by the way, cutting interest rates to zero, where real interest rates to zero, anything like that. But let's reduce interest rates from 10%. And what we will have is we will see growth increase, and we can do that without risks of significant overheating.

Nebula has never accepted that. And back in 2023, 2024, she cut interest rates very much. People like Gref told her at the time, you're cutting them too far. The result was we got overheating in the economy that has scared her, and she's frightened of going back to that position again. Okay. We will end the video there.

I'm just wondering what does the Kremlin think? Well, this is it. I'm going to tell you what I think. I think the Kremlin would obviously like to see faster growth. This is something that obviously Putin, wants to see. Putin, however, also wants economic stability in Russia. And whatever you think about Nebula, she is delivering that. You're not going to see a major crisis in Russia. You're not going to see inflation take off. There's never any risk of hyperinflation because you have a central bank

that is overcompensating on the anti-inflation side. So I think at one level, Putin likes this. factor, which is that Nubulina has been extremely loyal to Putin and has been in many respects an outstanding central banker. She cleaned up the banking system, which was in chaos. She sorted out the problems with the exchange rate. She took decisive action in 2022. We've stabilized the economy. Putin never forgets these things. He is always fiercely loyal to the people. who execute for him. And he's never, in my opinion, going to sack her. And so long as Nebula wants to remain,

head of the central bank, she will, she will continue in that position, and she will always be over-cautious on interest-rate policy. It's a reality that anybody who deals with the Russian economy, has to accept. I mean, I accept it. I understand it. But you're trying to run an economy.

Loyalty is great. You were loyal to me. That's awesome. But you know, you got to run the country. It should be based on purely on loyalty. It should be based on performance. Well, eventually in 2019, this is after she'd run, as I said, 5% real interest rates for five years. eventually even Putin said to Nebula, look, this is going on too far.

We're not getting 4% inflation. We're getting 2% inflation. And you accept that this is actually not good for the economy. So we must start to cut interest rates. And she did cut interest rates. And growth jumped. But then, of course, the pandemic came. And the growth.

that was being achieved was not consolidated, and then we got into the situation special military operation. And I'm afraid what looked like a breakthrough in terms of interest rate policy was delayed. Sooner or later, in some formal or other, even Putin is going to say to no, but, look, this has gone on for too long and too far. We must cut interest. straights now. And probably that will happen. Maybe next year. We'll see. Okay. The durand.orgals.com. We're on Xronro, but we're on Telegram. We're also on substack. So check us out there. And also go to Duran shop, pick up some merch, all those links in the description box down below. Take care.