The phrase comes from an address Churchill gave (while First Lord of the Admiralty) on October 1, 1939.

It gets interpreted as him saying something about Russia in general, but he was specifically talking about the stunning upset in geopolitics of the USSR and Nazi Germany (seeming mortal ideological enemies) signing the Molotov-Ribbentrop Pact on August 23, 1939. The full passage:

"I cannot forecast to you the action of Russia. It is a riddle wrapped in a mystery inside an enigma; but perhaps there is a key. That key is Russian national interest. It cannot be in accordance with the interest of the safety of Russia that Germany should plant itself upon the shores of the Black Sea, or that it should overrun the Balkan States and subjugate the Slavonic peoples of south eastern Europe, That would be contrary to the historic life-interests of Russia."

What Churchill is essentially saying is that "Russia" (really, the Soviet leadership under Stalin) was incredibly hard to predict in their next moves, but that sooner or later "Russian national interest" - meaning, in effect, Soviet security interests as well as its broader political, economic and military self-interests, would guide its foreign policy. Churchill was essentially saying that the Soviet Union was in a pact of convenience with Nazi Germany, but that at a certain point it would be threatened by German expansion into Eastern Europe.

In short, the passage taken together can be read as saying "Moscow's decisions in the short term can be hard to decipher, but in the long term they will always be concerned about threats to their national interest, the biggest of which is an expansionist Germany."