The Duran Podcast - Russia, economic stability in time of conflict w/ Rhod Mackenzie

Episode Date: October 11, 2025

Russia, economic stability in time of conflict w/ Rhod Mackenzie

All right, Alexander, we are here with Rod McKenzie, joining us on the Duran for the first time. Rod, how are you doing? Welcome to the Duran, and where can people follow your work? Well, you can find me at SCO Bricks Insight. In fact, I published quite a lot of stuff on your website, the durand.com. But you can find me on YouTube or SEObricksinsight.com. All right, and I will have those links as a pinned comment, as well as in the description box down below.

So you can follow Rod's work and his analysis. And Rod, Alexander, we are going to talk about everything going on in the Russian economy. And there is lots going on. So let's just jump right into it, Alexander. Let's do so. Let's absolutely do so. Now, as many will probably know this is a subject that I've always been quite very interested in and have discussed on numerous occasions.

But of course, I discussed it from a distance. I am in Britain. Obviously, I take an interest and I follow the statistics and the changes that take place there, but there is no substitute in talking about the economy of a country for being there on the ground. And Rod McKenzie is there on the ground. And so he's able to discuss with us what the current state of Russia is. And, of course, he's been in Russia for a long, long time. He was there at the time, I think, with the Soviet Union,

itself collapsed and he's seen the entire sequence of changes that have taken place since then. So firstly, Rod, greetings to you. Good to see you. It's a long time since we've been in touch. Tell us a little bit about your impressions of the state of the economy today. Donald Trump appears to believe that Russia is on the verge of economic collapse. We get these reports appearing all the time. I've been reading about the enormous queues and the gasoline stations and how these are round the block and about how Russian industry is grinding to a complete stop. But tell us from your perspective what you see the situation as. Okay, well, I'll just address some of the points. I mean, you mentioned the petrol or gasoline situation. You have to remember about

28% of Russia's refining capacities never used. Because the majority of petrol, stroke, gasoline, or diesel is actually exported because they don't use enough. And yes, there has been some damage, and there's been a few problems. But as far as round the block, that might have been the normal traffic situation in Moscow, because everybody equates Moscow as Russia. And pretty much everybody knows that Siberia begins at the Garden Ring Road, right? Or the MKVD. But real Russia, I have a petrol station about 250 metres from me,

and they certainly haven't been queuing around the block there. My wife, who drives every day back and forward to school, certainly hasn't had any problems getting any petrol. And to be clear, just to say where you are, you're in the Western Urals. I'm in the Urals. I mean the way between Yekaterinburg and Kazan and just above a place called Kazakhstan, which is the largest landlocked part of the world.

Yeah, which is, and by the way, we are talking about the big industrial heartland of Russia, the Urals, it's major industrial cities. One of the cities I know very well, which is Perm. I've had long acquaintance with Perm. but obviously this is again an enormous region, as all regions in Russia. What is your general sense of the state of the economy? I mean, is it stable?

There's talk that it's in recession. Others say that it's experiencing very high inflation. There's reports of stresses and the financial system that living standards are falling. Others say living standards are rising. What is the reality? Well, the reality is unimplicated. is at the lowest level ever since Soviet times. It's 2.6%. Now, when you get down to 2.6%, it's the walnut works that are unemployed, not people who are looking for employment, for a start.

Now, inflation currently is about 8.6%. And it's much higher in the West, although because the way that they do their retail price index, it basically excludes everything that actually cost any money. So here, the major problem is for the reason for rising prices is incomes are rising, not lowering. I mean, incomes in the last year have gone up 16%. So you work that out. Ifflage is 8% and salaries have gone up by 16%. That's in the private sector, not the public sector. But even the public sector have had 5% pay rises and pensioners and social benefits have also been raised. Now, I noticed that Alex was in Mosque earlier in the year in the springtime or early summer, ambling around patriarchy ponds, etc. Now, I bet he didn't see any sort of signs

of serious recession and the streets not being cleaned or anything like that. What about concerns about interest rates? Now, we did a program about this, or in fact, we did two programs. about this, Alex and I, and I discussed how the central bank in Russia has a propensity to push up interest rates very high whenever there is an inflation problem. And they did that. And they have now begun to lower interest rates. But I get the sense that there was a lot of disappointment in September when it only lowered interest rates by 1%. Have you heard people talk about that? Is this impacting on industry, other expectations that interest rates will go down? And is it true that the rate of price growth generally is falling?

Yeah, I mean, the rate of price growth certainly has fallen. I mean, for example, about a year ago, there was a major thing about eggs. Now, it was because of the bird flu and flocks had gone. So eggs were actually over 120 roubles for a pack of 10. Now, today, you can buy a packet of 10 medium eggs for 50 rubles. So that's less than half than what I used to call. Now, as far as interest rates are concerned, yes, I know they are a problem.

I mean, the thing is about debt levels amongst people and companies is so much lower than that. In Russia, people are debt-verse, certainly the public. And companies too tend to loop very hard before they'll borrow money from the banks. Because nobody wants to borrow it 16%. Just remember England and London back in 91, 92, when mortgage rates were at 17, 18%, and inflation, etc. So now, they're averse. I mean, most average Russians buy on credit two things.

A house through a mortgage. and that's mainly with a hefty deposit and also a car. Anything else, they basically save their money out from. So where you don't have credit card debt and you don't take on debt. So it's not such a severe problem as it is in the West. I mean, you take the Russian government debt, for example, it's 17% of GDP. So overall, a stable economic situation.

What about, for example, supplies, one of the, things that people always bring up to me. By the way, I had it brought up to me recently when I was in Oxford. Not at the place I was actually speaking, but by somebody, the famous pictures of Soviet shops with the shelves empty. Is there anything like that happening today? Are we seeing anything like that now? Are the shortages? Oh, the only shortages, as far as I'm aware, is a number of people to fill the job vacancies. Now, they say that industrial growth is only going to be one and a half percent in 2025 in Russia after 4.8% in 2024 and 2.7% in 2023. Now, the Germans would give their eye teeth, as would Rachel Thieves in the UK for growth rates of above half a percent.

So it's hardly a recession. So, an overall, a very stably-eastern. economic situation is that? It's a totally stable economic situation that's balanced. I mean, you have to remember Russia's not working on a wartime economy. It's working on a military operation. I mean, what's happening here is it's not affecting anybody. I mean, the day-to-day basis, yes, it isn't me because my nephew is a member of the Russian

military who's involved in the special military operation and I have close friends in the Donbass. Oh, yeah, I get a report. But on the day-to-day basis, it's more headlines in the UK than it is here. And economically, you go to a Russian supermarket. You'll find pineapples in December, cheaper than you'll find them in Sainsbury's in London. Yeah. Well, this is something which Westerners perhaps find difficult to understand.

And I think they also perhaps find difficult to understand that, this stability that has been achieved in Russia has had to be worked for very, very hard, and that it is, in fact, something which Russians are very anxious to preserve because they had to work for it very hard. I said you were there from the time when the Soviet Union was created. I mean, I'm sure you can remember far more unstable times. Oh, the 1990s in Moscow where I lived, I didn't actually travel much out of Moscow, apart from a place called Tula, which is an armament's town.

It's also where they make samovars, actually. And basically, it made the depression in the US look like a Sunday school picnic. I mean, life expectancy dropped dramatically. People went in government and state-run companies. Didn't get paid for months, but they still turned up. I mean, if it wasn't for the dacha, and thatcher's like a small holding that everybody has where you grow your own vegetables,

most half the people would have star. I mean, life expectancy for adult males in Russia dropped to 63. Fortunately, it's now back up to 74. But that gives you an idea of how absolute poverty was inflicted and the damage. Now, I've heard Jeffrey Sachs on your show talking about how he regrets some of the things that happened.

Well, he was involved with the Chicago boys that basically decided that the shock in awe of economic treatment after the Soviet Union was necessary. But it was very, very extreme. And it wasn't until much afterwards. I mean, 1998 was incredible. August the 17th, when the Russian banking crisis, and basically what happened is Russia had been born.

borrowing on a monthly basis at 30% and only raising as much money on a monthly basis to pay off the interest, not the capital. So it was a Ponzi scheme and that collapsed. And of course, the whole banking system collapsed. But my favorite joke of all time is a guy walks into a Russian bank and he says to the young lady behind the reception desk, who should I see about opening an account at your bank? and she looked at him and she said, that's a psychiatrist. This is, again, something that people don't understand. Russian banks are now not just very stable. Most of the big ones, as I understand it, are state-owned, publicly owned.

Spare bank, I believe, is actually owned or controlled by the central bank. And what about the new payment systems? systems like the MIR card and all of those, are they functioning? And what's happened to all the other credit cards, the Mastercards and the Visa cards that existed before? I mean, I've heard that they're still functioning too. Yeah, MasterCard and Visa are still accepted, but they go through what is known as the MIR payment system.

So if you had a card that was still valid, it basically runs through the same system. Now, the MIR system is faster and cheaper than the old master. the card system was. And I wouldn't be surprised if once the sort of sanctions against Russia are sort of forced away, that other countries start adopting this payment system because it's faster and cheaper than the MasterCard and visa system. Right. So where does it go? Where does the Russian economy go? Because Pudence had a number of meetings recently about discussing the way forward. This being Russia, they're very big on long-range strategies and plans and things of that kind.

I've been reading, I mean, this is the kind of thing that I like to read in my spare time, but I've been reading about, you know, what happens with gas turbines and new gas turbine series coming in, aircraft engine programs coming in and about the expansion of industrial factories. Ufa, where you are, I believe, is an industrial city itself. I mean, are we going to see further industrial development in Russia? Is this the direction? And what do you say to people who speak about this as a technologically backward country? I read a long piece in the financial, well, actually, it wasn't a long piece,

A very short piece on the contrary in the financial times, saying that Russia is nowhere at all, for example, in AI, that they have no AI programs. What is the reality? Okay, let's go back from AI to technology. Back in the early to middle 2000s, Russia decided that it would export its hydrocarbons and commodities, and in return it would import European and America, and Japanese technology and stuff. So things like turbines came from Siemens in Germany, trains came from Germany, all sorts of stuff. But when the things started to go wrong in 2014 after Crimea decided

it wanted to rejoin the motherland after the Medan coup, Russia decided that perhaps being dependent on the West or the G7, if you like, was not a great idea. So they embarked on what was known as an import substitution program. And for the last 11, 12 years, that has been hugely successful. I mean, as far as trains are concerned, they've now replaced the Siemens, Saipan, Joint Venture, with their own Logotica train. And that's now going to be built for a new high-speed railway

that's going to link St. Petersburg and Russia and Moscow first. And it will take place over the next three years, and it will be opened by 2029, before they've even dug out laid a line of track for the high-speed railway in the UK. Now, on technology itself, they've now managed to break the Siemens cars of building their own turbines for large-scale,

not only power stations, but they're now using the same technology for LNG plans, because Lindy, the Swiss so-called neutral, decided to join all the sanctions. As far as AI is concerned, I'm not fully inverse. I think that the Chinese and the Americans are at the forefront of that. But as far as other technologies are concerned, let's remember, Russia still needs the weight in nuclear technology and space technology. And I mean, Elon Musk might be able to put rockets into space and put a few satellites up, but Russia's been doing that successfully since 1958.

So tell us what people think. I mean, is there a sense of contentment there? Do people think the country is going in the right direction? Are they grumbling about the situation? Is there a sense that, you know, Mr Putin himself, maybe the time has come for someone else? Or are people saying, you know, we want him to stay because things are stable and we want to continue with him?

What is the general sentiment? You said people have jobs and that their incomes, their real incomes are increasing in most countries where that happens. In other countries, I know of where that happens. happens, that tends to make support for the government grow, not for. But maybe Russia is different. Tell us what you. But his overall approval rating is plus 80%.

Now, that's an approval rating that you could put all five on the European leaders of Macron, of Merce, Starmar and his Meloni, etc. you still wouldn't reach 80%, because they're all under water. As far as people, they're now, the only thing that's really annoying people here is they think that Putin has been too light on the Ukraine and the Americans, and they should spank the Americans who they know are in the Ukraine, who are the ones pulling the puppet strings, and give them a serious slap. That's what ordinary people would think.

As far as the government, they have immense confidence in Vladimir Putin and Sergei Lavrov. They watch on television Sergey Lavrov humiliating BBC and other correspondents and making them look ridiculous, which is what they are.

So, yeah, I mean, the confidence in the government is fine. They've got no quarrel with the government. Apart from, you know, there's a minor thing, that they might increase a little bit in VAT. But you can't remember the taxation rates here are ridiculously law where you live in a country in Greece and in the UK where they're ridiculously high.

Lastly, another subject which always gets brought up. I had it brought up again when I was in Oxford. Again, not oddly enough by the panel I was on. What about corruption? I mean, because this is the perennial thing, corruption, law and order, all of that kind of thing. Is it as bad as it was in the 90s? Is it getting better? Is it getting worse?

What is the situation? Well, I don't experience it simply because I'm not involved in things that would see that. But from what I read in the Russian press, there have been about three or four governors in the last six months and several other single officials, including a senior official within the Russian Ministry of Defense has been arrested and charged and been on trial for corruption. So it would appear that they are cracking down on it. I certainly, having had dealings with officialdom here and a business level, have never been asked for a bribe, ever. And I don't know whether it's because I'm the talking Scotsman in Ufa, the man known as the foreigner or the Englishman, although I'm Scottish,

that they decide that there's not worth hitting on me. I don't know. But corruption levels compared with some places like the Ukraine, etc., yeah, it probably does go on, but I haven't experienced it. Rob McKenzie, thank you very much for your very clear and precise and direct answers to all my questions. Very Scottish way of answering questions, if I can say straight to the point. Thank you, Rod, for joining us on the Duran one more time. Where can people follow your work? You can find me on YouTube at SEOBricks Insight or you can find me on the web

SEObricksite.com where my articles appear and are published. Rod McKenzie, thank you. Those links are in the description box down below and as a pin comment. Take care.