The Duran Podcast - Russian economy: SANCTIONS backfire, return to growth, investment surge

Episode Date: May 16, 2026

Russian economy: SANCTIONS backfire, return to growth, investment surge

All right, Alexander, let's talk about the Russian economy. Let's do an update on the Russian economy because the European Union, people like Kayakalis, believe that now is the time to really go after the Russian economy, to really crank up sanctions because the Russian economy is on the brink of collapse. And we have new numbers on the Russian economy, which point to something totally different. So what is the state of the Russian economy? Well, the first thing to say is that there was a significant rebound in March. Now, as we discussed in recent programs, there was a contraction in January and there was a contraction in February.

We've had revised figures for both of these contractions and they turned out to be slightly smaller than initially reported. So the contraction in January was reported as 2.2%. as compared with this situation the previous year. And it turns out it was closer to minus to 1.8%. So it's still a contraction and a sizable one, but not quite as big. And in March there was a significant rebound. And the economy grew in March year on year, 1.8%.

So overall, we've had a contraction in the first quarter of 0.3%, which frankly, is not really recession territory. Now, that's still a weaker performance in the first quarter than the minister's and the central bank were predicting and which Putin had been led to believe. And the result is that they've had to reduce their growth estimate for this year. So they're now saying that growth will be 0.4%, not 1.5%. And I think this is largely based, as I said, on this stagnation in the first quarter. It's possible, however, that these figures are going to be underestimates. It's based on an assumption that oil prices across the entire year will average at $59 a barrel.

At the moment, of course, oil prices are much higher than that. So if oil prices remain higher, we will get a bigger growth. a GDP readout. But anyway, we are moving back into growth. The situation with the budget is stabilising, and it had begun to stabilize before the receipts from the new oil sales were coming in. So the sort of shock contraction that we saw in the first two months

seems to have been a product of the high interest rates, which are now starting to come down, and of the VAT increase, not anything substantive overall. So overall, the situation of the economy continues to be stable. And Putin had a meeting with his economics minister, a man called Roshetnikov. And Roshetnikov gave Putin some really quite interesting, interesting information, which of course we've also received.

Firstly, even in the first quarter of 2026 and throughout 2025, real incomes in Russia continue to rise. Russians continue to get richer. They are earning more and they are still able to spend. and with inflation going down, these gains in disposable income are going to increase. Now, this is, of course, important because, of course, there's been an awful lot of commentary about people getting fed up with Putin and people getting angry with Putin. And there is some of that.

some of the businesses have been understress, people have been struggling with high interest payments, and that kind of thing. But mostly, most people are seeing their household budgets improve, and you don't get a political crisis whilst that is happening. But the other thing that Rishatnikov said, which is, I think even more interesting, is that the overall rate of investment in the economy remains, well, significantly higher than it was. Investment is now at 23% of GDP. It used to be very low in Russia. I can remember in the 2000s, the mid-2000s,

when it was 11% of GDP. So this has been a substantial rise in investment within the economy. And that continues. and that is a long-term growth driver. And it probably explains why real incomes are still rising. So the economy is continuing to grow. And probably with interest rates falling, we are going to see investment continue to rise

above that 23% level. And faster growth over the next few years. The economics ministry is talking about 2.4% growth in 2028. At the moment, based on what they're saying, that looks conservative. The investment is being driven by the sanctions, right? Yeah, yeah, it is exactly. That's a strange thing to put out there. Given that the West believes the sanctions are depleting Russia's economy.

This is the great paradox of the sanctions because Russia continues to produce. Companies continue to make profits, despite the interest rates. The profits have to be, the interest rates in a way are contributing to this process because they are. are also encouraging savings. Those savings eventually have to be invested. Five years ago, what would have happened is that a lot of that money would have left Russia and gone to Europe and would have ended up, you know, buying real estate in London or nice villas of the Mediterranean and all that kind of thing. Instead, it has to remain in Russia where it is being reinvested, in the economy, which as a result is cumulatively growing faster.

And so it's the paradox of sanctions which people like Ayacalas don't seem to get. They want to move on to the 21st. Absolutely. Absolutely. But of course, they're mostly targeting, not exclusively, but they're mostly going after the shadow fleet. They're hyper-focused on the oil and the energy. Yes.

Yes, they are hard to focus. Again, without this being very successful, actually, because now that the Russian fleet is escorting tankers, well, I just saw a report this morning that since Prime Minister Stahma in Britain announced that the British authorities are authorised to seize Russian tankers if they enter British waters. Since then, 238 tankers from Russia have transited through British waters.

They've been protected by Russian warships and the British haven't attempted to seize a single one. So, there you go. What would happen if they seized one? Well, indeed, what would? But so far, they're not prepared to take the risk. Now, I think, Reschetikov did say some other things. he said that the Russian economy has grown by 20% since 2016.

Now, remember that since 2016, we had the pandemic when there was actually a big contraction. So you have to take that period out of the equation. That is significant economic growth over 10 years, maybe, I mean, so Chinese levels of economic growth, but it is significant economic growth. And as he correctly pointed out, much higher than in Europe. But he then made one claim, which, if it's true, did seem to me extraordinary and very indicative. He said that GDP per capita in Russia in 2016 was 43% of the American level, it's now increased to 56%. So that would mean a very substantial rise in living standards over the last 10 years, just to say. But if per capita GDP in Russia is at 56% of the American level,

then it's drawn level practically with per capita. GDP in Britain. Now, that would be an extraordinary thing. I mean, there has never been any points in history where Russians have been as rich as Britons. Just saying, I mean, this would be the first time that has ever happened. Now, calculating per capita GDP is an incredibly difficult thing. and maybe we shouldn't take these numbers entirely seriously,

though I tend to trust Russian statistics, actually. But it does perhaps highlight the trend, and it does suggest, as I said, that people over the last 10 years have become much more affluent in Russia than they used to be. And that accorded with my impressions when I went to Russia last June.

Oh, you also have to factor in, Don't you have to factor in tax, tax levels and cost of living as well in all of this when you're making these comparisons? Well, of course you do. Absolutely. But then, you know, that's where the Russians tend to benefit because they've had higher inflation. They've had rises in real living standards. And the trend in inflation in Russia has been downwards, whereas the trend in inflation in, say, Britain has been. firmly upwards. Yeah.

All right. We will... Not mentioned taxes, which in Britain are not. The tax rates in Britain are now at absolutely the highest level since the Second World War, the period directly after the Second World War. Where in Russia there, they're at a fairly reasonable rate, I would say? Well, very, I mean, compared to Britain, very, sir. Very much, sir.

Yeah, you can make that argument. All right, we will end the video there, the durand. Dotlogs.com. We're on X, we're on Rumble, we're on Telegram. We are also on substack and go to the Duran Shop, pick up some merch. We have a special 30% of all t-shirts on the Duran Shop. All those links in the scripture box down below. Take care.