The Duran Podcast - Russia's Economic Model: Growth Without the Debt Trap

Episode Date: August 24, 2026

Russia's Economic Model: Growth Without the Debt Trap

All right, Alexander, let's talk about the Russian economy, and let's discuss Putin's statements on the Russian economy, which is getting a lot of attention. Growth, but not high growth. And the focus, once again, from the Russian president and from the Kremlin on the domestic side of things moving away from the collective Western focusing internally on Russia. Yes, let me first of all begin with the economic. numbers for this year. If I have to beat Frank, they surprised me somewhat on the upside, given how tight monetary policy has been, given how high interest rates have been up to now, I actually was seriously concerned. In fact, I half expected that we might at some point this year slip into recession. And I think that possibility was there. And I think, especially you,

when you were in Russia some weeks ago back in June, heard some of the complaints about this. And if you go to the Russian media, there were lots and lots of complaints about this from business people in all sorts of places. And what eventually happened was that the pressure on the central bank became simply too strong. And they cut interest rates and began to solve from monetary policy altogether. So the result is that there has been a rebound and where there was basically stagnation. The economy was flat completely in the first quarter. In the second quarter, it grew, admittedly, only by 1.3%, but that is growth. And the word is that there's going to continue to be growth in the second quarter as well, that growth, if anything, is picking

up. So we could see what a difference monetary policy makes in Russia, which is something that, you know, we've discussed in many, many programs. It is much more important than all of the other things we hear about, you know, attacks on refineries, harassment of ships, all of these things. They have their effect, but ultimately, what makes the biggest difference is macroeconomic policy, the policies of the government and of the central bank. If the central bank imposes a very, very tight monetary policy, as it did throughout 2020, and in the first quarter of this year, the economy is going to slow with a real risk of recession. If the central bank relaxes his grip, you see the economy immediately start to rebound.

Now, that is a historic thing, but I just wanted to explain that. Now, Putin shared this very important meeting in the Kremlin and all the people, all the key people, all the key people in the economy were there. Siluanov was there, Roshachnikov, the economics minister was there, Nubulina was there. They're all there, all of them were there. And what they were talking about, wasn't just Putin, by the way, is a new economic model. And it is basically one completely different from the model that Russia which Putin inherited when he took over Russia in the early 2000s, which was basically that Russia focused on exports,

mostly exports of energy products, run a big current account surplus, and use that current account surplus to develop the domestic economy and to improve living standards. And Putin ran that model very, very well until it began to sag in 2008, with a financial crisis then. And then after 2014, when sanctions started to be imposed, the Russians began to change the model.

So they began to focus less on exports, more on domestic production. They shifted policy on the exchange rate. They allowed the ruble to, they made the ruble convertible. They allowed it to float. And they began to emphasize the domestic economy more. And they prioritized first and foremost inflation and bringing down inflation on the basis that if inflation fell to a 4% level, that would itself result in faster economic growth.

Now, that model is still, I think, to some extent, in being applied. But it's being applied in combination with something else, which is again an evolution of previous ideas, which is a kind of return, if you like, to a certain type of planning. Very different, it must be stressed, from Soviet planning. but an attempt to increase investment in the economy. Investment has already grown in the economy very much over the last seven, eight years, but to increase it even further to focus on building up roads, railways, ports, airports,

rebuilding, developing the science base, but also picking particular key industries, aerospace, electronics, those kind of things. And it's a model that is perhaps closer to that of China than it is towards, that it is to that of the West. So it's a departure, if you like, a further departure from a completely free enterprise model. It's one which involves many more elements of dirugism, direction by the government that we've seen before, and increasing use of planning mechanisms to guide and control and direct the economy, with the emphasis of Val being on investment.

How are things looking in Europe? Because when you look at Putin's statements on the Russian economy, contrary to what the Europeans and the collective West are saying, Russia seems to be doing pretty good. Things in Europe look really bad, and one thing I'm noticing in Europe is all their talk about Russia being in a war economy. It seems as if Europe and the EU is definitely heading into a war economy. Well, I think that is correct.

I mean, the first thing to say is, I mean, even this lower growth that the Russians are getting this year, I mean, it's still growth. I mean, their economy continues to chug along. Living standards continue to grow. Infrastructure continues to be built. It's growth with low debt. I think that's really important, given all the talk about debt and the 40 trillion of the U.S. and all the debt that Germany is now occurring because they've removed the, you know, the break on borrowing.

The Russian economy is, as you say, chugging along, but it's doing it without racking up huge debts that the collective west is racked. I just think that's a really, really important distinction that no one, ever. People rarely mention that. You're completely correct. Can I also quickly add that it comes with a significant reindustrialization, which is again the opposite of what you see in Europe. And, you know, I talked about some elements of central estate direction that are now coming into the economy. But a lot of it is not. I mean, as you know, I was

recently in Russia and I took a, I was on a coach trip from Moscow to Pskof, which is a very, very long road journey. And it was very striking to see, you know, you pass through these small towns on the way to Pskof. And you see new factories being built. including a significant one, which apparently was making chips, you know, silicon chips and all of that. I mean, I don't know what level of chips, but anyway, they were doing. So you are seeing elements of re-industrialization, and they come as much from below. In other words, businesses, companies are opening these factories because they see niches within the domestic market that need to be. supplied. They are aware of, for example, that if you're talking about chips, the aerospace

industry, which is expanding quite rapidly, needs chips. These are difficult to get from the West. Obviously, you can get them from China, but the Russians prefer, the government wants you to use whenever you can Russian-made chips. So factories are opening up to produce those chips. So, you know, There is that difference as well. There is clear signs of re-industrialization taking place across Russia, which once it's all, you know, up and running properly, it's going to eventually lead to higher growth as well. And by the way, probably lower inflation too. In Europe, as you absolutely correctly say, it is completely different because in Europe, we don't have

what the Russians have, which is an economic policy. In other words, a policy that is focused on economics, on trying to strengthen the domestic economy, increase its size, raise living standards, enhance the technology and infrastructure base, or any of that kind. What we are increasingly reduced to in Europe is a economy, a policy to increase weapons output.

And we do this in the classic way that we increasingly do in Europe, which is by throwing money at the problem, large amounts of money. When I said increasing investment, that the Russians are talking about increasing investment, most of the investment, by far the greater part of it, is expected to be private investment. In other words, the banking system, the stock markets, all of those sort of things. And investment has already grown in Russia, but to enhance it even further, which is where the central bank also, by the way, plays a significant role. In Europe, it's increasingly about raising spending, government spending, mostly through debt to finance spending. on the weapons industries and to pay back the interest on the existing debt, which is already

enormous, and to meet the very heavy welfare and pension demands that exist across the entire European economy. So it is completely different. So they're not going into debt with this war, are they? No, no, they're not going into debt. I mean, they're still keeping debt below 20% of GDP, which is extraordinary. Now, for a country at war, that is remarkable. Countries that are at war usually increased debt levels. But the Russians have avoided doing it. Now, that's not to say that they don't engage in fiscal maneuvers, which they absolutely do, that they don't engage in monetary maneuvers as well, that the banking system isn't enlisted to help. But the point is that these are

wartime measures, which are kept very much under control. In Europe and in the West, we do all of those same things on a far bigger scale, and we do those supposedly running peacetime economies. We say it's the Russians who run a military economy, a war economy, and that we in the West don't, but we in the West use many more of these unorthodox instruments than the Russians do. So that is a major difference. Now, where is this all going to go? Well, of course, mistakes can always happen. The Russians are not immune to mistakes. And Nabilina has made her share of mistakes. We've talked about those many times in many programs, monetary policy often too tight, In 2024, she brought down interest rates too far too fast.

So they can make mistakes. One mustn't assume that because they have a plan or it will turn out well and it will turn out better and that things won't go wrong. There's also the fact that Russia operates in the wider world and if there is a global recession, then Russia is going to be affected by it too. But in general, and this is my belief, my overall belief, my observation in life, and economics is the second, is no different. Those who know what they are doing always ultimately do better than those who don't. You can argue points about this economic model that the Russians are developing, but it is coherent and rational, and they're likely to work on it.

They know what they are doing. In Europe, at the moment, we don't. We don't have a proper policy, a policy for growth, even an idea of a policy for growth at all. We've seen the best we've had up to now is Mario Draghi's plan for Europe, which is always impractical and went completely wrong right from the beginning. It wasn't really a plan for Europe. It was a plan for tighter central EU control. And we've had the METS plan, which we can see is failing disastrously. And the METS plan was simply a debt plan, ultimately. and nothing else.

Europe's economic plan is fine the big tech companies in the United States to generate revenue. Yeah. It's drones. That's going to be the new manufacturing, drones. And Project Ukraine. Yeah. That's Europe's economic plan. And in the South tourism. And in the South tourism. You summed it up perfectly. I mean, there's nothing to add to that. because there's nothing there is absolutely nothing there. Yeah. All right. We will end the video there at the durand.locals.com. We are on XRumble and Telegram.

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