Transcript: Putin’s nemesis in the west

This is an audio transcript of the Rachman Review podcast episode: ‘Putin’s nemesis in the west’

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Gideon Rachman
Hello and welcome to the Rachman Review. I’m Gideon Rachman, chief foreign affairs commentator of the Financial Times. This week’s podcast is about Russia and one man’s fight to turn Vladimir Putin and his circle into international outcasts. That man, and my guest, is Bill Browder. He was once the biggest foreign investor in Russia. But over the last decade, he’s been leading the fight to sanction Russian officials guilty of human rights violations or corruption. Putin’s invasion of Ukraine has given a huge boost to that campaign to isolate Russia. But what more could or should be done?

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Welcome to prime minister of the Russian Federation. (Applause) Mr President, ladies and gentlemen, I am extremely grateful to Professor Schwab for his kind words addressed to Russia.

Gideon Rachman
That was Vladimir Putin being welcomed by Klaus Schwab, chair of the World Economic Forum in Davos, in 2009. What a different world that was, before the Ukraine war and the annexation of Crimea and all the other events that now make it inconceivable for Putin to be invited to Davos.

It’s actually Davos week again this year. And one man who is there is Bill Browder. As you’ll hear, events in and around the World Economic Forum have played a significant role in Browder’s life and in the relationship between Russia and the west. But before we got on to the Browder story, I began our conversation by looking at the wider picture. How is the effort to isolate Russia going?

Bill Browder
Well, in some respects, it’s going unbelievably well. I mean, I spent literally more than a decade trying to visit foreign governments and foreign parliaments, explaining to them the criminal nature of the Putin regime, and nobody wanted to listen. The British wanted to do business, the Germans wanted their gas, and so on and so forth.

And then since the war started, people I couldn’t have even imagined getting tough on Russia are getting very tough on Russia. And so we have a situation where a week after the war started, more than $300bn of Russian central bank reserves were frozen. We had a situation where the oligarchs, not all of them, but a good proportion of them, have had their assets frozen. Russian state institutions, banks, etc, companies can’t borrow money on the international capital markets. Western companies have pulled out pretty much en masse, with a few exceptions. And so I would say way more than I could have ever imagined.

Now, having said that, there is one elephant in the room when it comes to isolating Russia and that is oil and gas. And we in the west, well, we’re all very disappointed with what Putin is doing, don’t want to push up the price of oil and gas, and therefore we’re not willing to embargo Russia’s oil and gas. And as long as we’re not willing to do that, they continue to sell literally hundreds of billions of dollars of oil and gas to the west. And that money then comes back and is used to pay for weapons and soldiers and drones and other types of things. And that’s the huge loophole which we haven’t figured out what to do about. And until we do, Russia will continue to have the financial wherewithal to execute this war, and they might have the economic wherewithal to outlast us.

Gideon Rachman
But are those direct sales? Because, you know, the Germans and others have made a huge song and dance about trying to find other sources of gas, and also criticised India for continuing to import Russian oil directly. So are these sales going in a circuitous route, or there’s still a lot of direct sales to the west of Russian energy?

Bill Browder
So you’re right about Germany, and Germany has been probably one of the biggest unexpected isolators of Russia. You know, they were completely dependent on Russian gas, and they’ve become completely independent from Russian gas in a matter of a year, which is really remarkable. But Hungary is not, as far as I’m aware, Austria is not. They continue to buy Russian gas. And then you have the oil. And we may be criticising India about buying the oil, but they continue to buy the oil and China’s buying the oil and various other countries are buying the oil.

And the numbers are down. They’re not nearly as high as they were when the whole thing started. But there’s still a lot of money being generated from the sale of oil and gas, no matter how much we complain about it. And there are things we could do about it to make countries like India stop. If we said to India, we will penalise you economically if you continue to buy Russian oil, they probably wouldn’t, because it’s not that important compared to everything else they’re doing. But if we don’t say that to them and they say, well, look, we can get all this oil at a 50 per cent discount, why wouldn’t they? And that’s kind of the attitude they’ve taken.

Gideon Rachman
Yeah. Now you’re speaking to me in Davos. And Davos has played an important role over the years in the integration of Russia into the global capitalist system, and also in your sort of personal odyssey with Russia. And there’s a very striking anecdote in your book, I think, was it in 1995 that you saw this crucial deal being cooked up in a Davos hotel?

Bill Browder
Indeed. So it was actually 1996. Yeltsin, who is the president running for re-election, looked like he was gonna lose by 40 percentage points to Gennady Zyuganov, who is the head of the Communist party and running against Yeltsin. And at the time, all of these Russian oligarchs were coming to Davos. Interestingly, they all stayed at the same hotel. It was the Sun Star Hotel, and I went and hung around the lobby of the Sun Star Hotel.

And in that lobby of that hotel, you had basically a bunch of oligarchs meeting together to decide that if Zyuganov, the communists were to win, they would lose all their assets and become impoverished, and therefore they were gonna throw all of their differences aside, because all these people were fighting with each other constantly, and use their resources — and when I say resources I mean TV stations, newspapers and other methods — to get Yeltsin re-elected. And I was literally in the lobby of that hotel when they were cooking this scheme up.

And that was a deal that Yeltsin did with the devil, because they wanted their share afterwards. And their share was a very big chunk of the Russian economy, which is what led to such unbelievable distortions between the richest and the poorest. That had set the stage for populism and people wanting some kind of alternative to that. And that’s where Putin came in.

Gideon Rachman
And how important was Davos in launching your own business? Because you did extremely well in Russia. You made a lot of money for yourself and for clients. I think you were for a while the single largest foreign investor in Russia. Was Davos a big part of that story?

Bill Browder
Well, Davos has been part of my life. I started coming to Davos in that year, ’96, and I’ve continued coming to Davos until now. Davos was a place where big decisions like that got made. Davos was a place where when things went really terribly for me, I was able to muster the support of different government officials. Davos has always been the centre of decision-making, of influence, and so I’ve been here regularly. And it’s very inconvenient to come here and very expensive and pretty unpleasant. It’s not what you read about in the newspaper. It sounds really like a great party, that everyone’s having a good time. It’s not at all like that. But for me, it’s been a really important part of my life when good and bad things were happening.

Gideon Rachman
Yeah, I know when the Russians turned on you. I think you describe in the book a dinner where Dmitry Medvedev, who was being introduced as the guy who was gonna take over Putin, was at and you were able to speak to him. And actually, I remember being at that dinner as well. The whole of rich Russia seemed to be there.

Bill Browder
I think the dinner was taking place in 2006, and I had been expelled from Russia in November of 2005, had been declared a threat to national security of Russia. The reason that they turned on me was that I had a huge portfolio of state-owned companies that were being robbed, and I started to very publicly complain about it and point fingers at people who were doing the stealing. And so they expelled me from Russia, and I was the largest foreign investor in the country at the time. And I was desperate to get back to Russia so that I could carry on with my business.

It was January 2006. There was this dinner, it was the Russia dinner, and I was sitting at a table full of dodgy Russians, I think some people from Gazprom or some other company. And then Medvedev walks into the room about halfway through dinner, and first thing I noticed about him is he’s like 4’11. He’s the shortest guy I’ve ever seen. And he didn’t look at all presidential. He wasn’t president yet. He was prime minister at the time. And he walked into the room and my wife nudged me. She said we should go and ask Medvedev to help you get your visa back. And I was a bit reluctant. She kept on nudging me and we finally did. And he said, OK, I will look into it for you. And we gave him some documents after that.

And it turned out he didn’t try to get me my visa back. My offices in Moscow got raided, police seized all of our documents, and the next thing that happened, we no longer owned our investment holding companies in Russia. And then subsequently, we hired a lawyer named Sergei Magnitsky that discovered that our investment holding companies had been used in a complex fraud to steal $230mn of taxes that we paid to the Russian government. We then expose that fraud, and Sergei was involved in exposing and testifying against the people involved, and he was subsequently arrested, put in pre-trial detention, tortured for 358 days, and ultimately murdered in Russian police custody at the age of 37 on November 16th 2009. And that was the point in which I went all guns blazing, you know, using every bit of resource I had to go after the people who killed him to make sure they face justice.

Gideon Rachman
And you did succeed, really, in persuading Congress and others to introduce what became known as Magnitsky sanctions. How did those work?

Bill Browder
Well, originally, after they killed Sergei, my thought was that the people who killed him should go to jail for murder. And we had all sorts of evidence, both direct evidence and all sorts of other information, which made it pretty obvious who to investigate and who to look at. And the Russian authorities refused. They circled the wagons. Putin personally got involved in exonerating everybody who played a role in Sergei Magnitsky’s death.

And I said to myself, if we can’t get justice in Russia, we should get justice outside of Russia. And then the question is, how do we get justice outside of Russia? And it became pretty obvious to me. And we see it here in Davos, and we see it in London, in Paris and in New York that the Russians love to splash their money about. They love to travel to the west. They like to spend their money in the west. They like to buy houses, and they like to send their kids to boarding schools and keep bank accounts. So that became their Achilles heel.

And I thought to myself, well, we might not be able to prosecute these people for torture and murder in Russia, but we don’t have to allow them to travel to our countries, and we don’t have to allow them to have bank accounts and own properties. And so I went to the US Congress. I met two senators, a Democratic senator from Maryland, Benjamin Cardin, a Republican senator from Arizona, the late John McCain, and told them the story of Sergei Magnitsky and presented the evidence and said, can we freeze the assets and ban the visas of the people who did this? And they said yes. And that became the Magnitsky Act. It became a federal law on December 14th 2012.

And Putin went out of his mind. He thought this was the most awful thing that had ever happened, because this puts his money directly at risk. And he made it his single largest foreign policy priority to try to repeal the Magnitsky Act. And he sent emissaries to Trump Tower in June 2016, before Trump was elected, to try to get him to repeal the Magnitsky Act. But in fact, instead of being repealed, it’s now blossomed all over the world. There’s now 35 countries with Magnitsky Acts, and this was the template which was used when Putin invaded Ukraine. There was no debate needed about what should be done. As one of the tools to go after the Russians, we should freeze their assets. The Magnitsky Act was basically the template that set the scene for what has since emerged as a very strong policy.

Gideon Rachman
Yeah. As the Russians revealed with the murder of Magnitsky and with so many other violent acts, they have no compunction in killing people. Have you felt under threat personally, and do you still feel under threat in this new environment after the Ukraine war and the tightening of the isolation of Russia?

Bill Browder
I have and I do. They’ve come after me in all sorts of different ways. They love using international legal frameworks to try to go after me. I was arrested in Madrid, Spain on a Russian warrant. I was detained in Geneva on a Russian warrant. They’ve surveilled me. In fact, I was even contacted a few years ago when I was coming to Davos by the Swiss security services, warning me that there was a plot being hatched by the Russians here in Davos that they had foiled. But I shouldn’t be travelling too comfortably here. I’ve similarly been warned by the US Department of Justice that there was a kidnapping plot being organised for me a few years back. So they were definitely after me. And they continue to be after me.

And the thing about it is that, yes, Putin has a lot of other enemies now more than just me. I mean, I was definitely at the top of his list, you know, before the war started. And there’s a lot of other people on his list now. But the one thing I can say, which is not very comforting, is that before, if they’d murdered me in broad daylight, there would have been massive sanctions and economic penalties for Putin and the Russian government. Now, there already are massive sanctions and economic penalties, and so the deterrence is not there. Having said that, there is also now a bandwidth issue because there’s so many other enemies they have. And so I’ve gotta weigh those two things up. But it’s not as if I can live comfortably and relax because, you know, I’m on their list and I always have to be on guard.

Gideon Rachman
Yeah. And in fact, you know, reading your book, you were aware, really from the very beginning or made aware of the threat of violence against you even when the business was still on the rise. So in your first clash with a Russian oligarch over an attempt to essentially expropriate your assets, Potanin, your business partner at the time, sends you 15 bodyguards to protect you in Moscow. So in a sense, you kind of knew what you were getting into, didn’t you?

Bill Browder
I knew what I was getting into when it all happened, but it’s all very incremental. So when I first went to Russia, I didn’t know then what I knew now. I thought, well, you know, I could probably lose all my money here. I might have to, like, leave very quickly. But I never imagined the kind of criminality and horribleness that I’ve encountered. I never imagined that my whole life would be marred by this thing forever. And in fact, I’m the lucky one. I mean, I have many friends and confidants who were either in jail or dead.

But it was sort of, I guess, naive when I first went into Russia. And in fact, that’s why I had an advantage, because nobody else in their right mind would have gone to Russia back in 1992. You know, I was the only one. I went there because of a strange, romantic notion that my grandfather was the leading communist in America and communism has ended in Russia, and I’m gonna become the leading capitalist in Russia. That was my motivation, which wasn’t really an economic motivation, and it wasn’t really a motivation driven by proper analysis of security. But here we are, you know, now, 30 years later.

Gideon Rachman
Yeah. And I mean, you said earlier in our conversation the oligarchs who helped to put Yeltsin back into power were doing something that was very damaging to the country, massively increasing the inequality, laying the ground for populist backlash. But you, in a way, were part of that, weren’t you? Because the business opportunity that you spotted very astutely was the massive underpricing of Russian assets through the voucher privatisation, and you were able to buy this up for a fraction of their real worth. And that made you and your investors a lot of money. In retrospect, do you have any qualms about that?

Bill Browder
Well, there’s sort of two sides to that whole story. One is, yes, I bought a bunch of assets at a very low price. But what I did after I bought the assets, and this is what got me into trouble, was I said, let’s say I own a minor fraction of Gazprom, the national gas company, and we did the analysis of Gazprom and we said, this is outrageous. The management of the company are stealing all the money. And this is a company that was majority-owned by the state, owned by minority shareholders. We found huge, I mean, just unbelievable theft going on in the company.

And so what did I do? I started these campaigns to expose the theft. And as I did the campaigns for some period of time anyways, they say that evil tends to wither under the bright light of publicity. And many of the scams actually stopped because they were so outrageous. And so I would argue that I was very much a force for good in Russia, because I was there trying to clean it up when very few other people had any intention of doing that at all. But of course, I was punished severely for doing that, which led to my expulsion. And then all these terrible things that led to the murder of Sergei Magnitsky.

Gideon Rachman
Yeah. And of course, though I accept the motivation to clean it up, but there was a profit motive as well, wasn’t it?

Bill Browder
Of course. But there’s a profit motive in all business. But I think that I should have probably been given a special award from the government of Russia for cleaning up Gazprom and Sberbank and Unified Energy Systems. Unfortunately, they’re not so clean now anymore. But what I was doing was a great thing, not just for me, but for everybody else. If I’d just done it for myself, maybe one could be more critical. But I was just a tiny shareholder in these big companies. The state benefited and so did the minority shareholders.

Gideon Rachman
At what point did you realise that they weren’t gonna tolerate it any more, because you encountered opposition throughout. I mean, as I say, right from the beginning, you were having to wander around with bodyguards and so on.

Bill Browder
So when Putin showed up on the scene, at first he wasn’t the same strongman that he is right now. He was really sort of weak because the oligarchs were the ones who were the strongmen, and he was just the president of the presidential administration. And so he was fighting with the oligarchs because they were stealing power from him. And at the same time, I was making these big public campaigns because they were stealing money from me. And so for a brief period of time, we had this alignment of interests when I would publicly declare somebody to be doing something terrible, and then he would use whatever limited powers of his presidency to shut it down.

And so there was this period where he was actually on the same side as I was, but he wasn’t really interested in cleaning up Russia. He was just interested in getting rid of the oligarchs. And he achieved his goal when he arrested the richest oligarch in Russia, a man named Mikhail Khodorkovsky, the owner of Yukos, in late 2003, put him on trial and sent him to jail in 2004 for 10 years. And the other oligarchs watched this and they were flabbergasted that the oligarchy was no longer all-powerful. And they went to him and said, what do we have to do so we don’t suffer the same fate as for Khodorkovsky? And Putin said 50 per cent. And that was the moment when he became the richest man in the world. And that’s the moment when basically nothing else was gonna be tolerated in Russia, because he wanted to control and eat everything. And that was where my interests completely diverged with his.

Gideon Rachman
Yeah. And you say he is the richest man in the world. I have heard that phrase. I mean, can we be sure of that? Do we know where he keeps his money, or that this 50 per cent deal still operates?

Bill Browder
Well, maybe it’s no longer 50 per cent, maybe it’s 90 per cent? So the answer is no. And it’s very much by design no. I mean, we can find evidence that he benefits dramatically financially from the oligarchs. There’s yachts that are paid for by the oligarchs. There’s billion-dollar villas that are paid for by the oligarchs. There’s all sorts of things paid for by the oligarchs for Putin that we know about, but we can’t prove it, actually prove beyond that what’s going on. And the reason that we can’t is that he doesn’t want us to be able to. And none of this stuff is in his own name. So he’ll go to some oligarch or some friend and say, I want you to hold these assets for me. And there’s no contract or document or bank statement with his name on it. And as a result, he can’t be blackmailed with that document or that bank statement. But at the same time, you can’t write in the front page of the Financial Times that Putin is worth $300bn, whatever the number is, because you’ll be sued because you can’t prove it.

Gideon Rachman
Right. I mean, the picture that you paint of Russia in this interview in the book is a very depressing one. I mean, even setting aside the invasion of Ukraine, there’s a point where you write that Magnitsky, your friend and lawyer, was a younger generation who believed it didn’t have to be that way, who believed in a law-governed Russia. But you say, actually, Russia was run by men and they were crooks. Does it always have to be that way? I mean, was Magnitsky just naive about what was possible in Russia?

Bill Browder
Well, I think he was idealistic about what was possible in Russia. He wanted a Russia that didn’t exist, and so did a lot of other people. And there are good Russians. I have a lot of them who surround me. They’re all in the west now, because you can’t be a good Russian and sit in Russia right now. You either have to be part of the system and be a criminal and a murderer, effectively, or a co-conspirator, or you have to be in exile that’s either self-imposed or imposed by the regime.

But the main problem with Russia is that they don’t have the institutions, the laws, all the sort of plumbing of a proper system to allow individual freedoms and property rights and so on to flourish. And as long as they don’t have that, then it depends on the person running the place. And there is such a huge financial incentive for the person who runs the place to be dishonest.

And so it’s kind of hard for me to see any possibility while Putin is in power for anything to improve. I can’t see any possibility for anyone in the Putin regime to take over for things to improve. But there is a small possibility that the whole system breaks. It could break because the Ukrainians eventually throw them out of Ukraine, and then the people turn on Putin, and all these guys get on their private jets and leave. And if they do that, then there are people like Alexei Navalny, a political prisoner, Vladimir Kara-Murza, Ilya Yashin — these are all very well-known political prisoners that could emerge from prison the same way as Nelson Mandela and the African National Congress did in South Africa many years ago. It’s a low-probability scenario, but it’s not a totally no-probability scenario.

Gideon Rachman
And it’s, I guess, something that you and a lot of your Russian friends continue to work for. But the image of your experience with so many of the people in Putin’s circle, Putin himself, as people who are very cynical and very greedy. But how do you fit the decision to invade Ukraine into that picture of them? Because whatever else it was, it wasn’t a sound business decision.

Bill Browder
It definitely wasn’t. But it’s very simple. So I would estimate that Putin and about 1,000 people around him over a 23-year period stole $1tn from the Russian state, the Russian people. This is money that should have been spent on hospitals and schools and roads, instead was spent on private jets and villas and yachts. And you can do that for some period of time for some amount of money and get away with it. But they did it for such a large amount of money over such a long period of time, 23 years, that it was like spreading gasoline all over the ground in Russia, and all it takes is a match to light it.

And Putin understands that there’s no elegant exit from being president. He can’t just set up the Putin presidential library, quietly resign and do paintings in his spare time. If he ever loses power, he loses his money, he goes to jail, and he probably dies. And so from Putin’s perspective, he’s basically a little man who’s scared of dying, who’s stolen too much money, who’s terrified of the people turning against him, and they’ve got a good reason to turn against him.

And so what do you do in that situation? It’s like straight out of Machiavelli 101. You create a foreign enemy and you start a war so the people are angry at your foreign enemy, not at you. And that’s why he’s invaded Ukraine. It has nothing to do with Nato enlargement or a grand vision of Russian empire. It has to do with having stolen too much money and being afraid of dying. And so you’re right. It’s a terrible business decision. But it’s probably, you know, a rational survival decision for a psychopath like Putin.

Gideon Rachman
So to conclude, Bill, you’ve been an incredibly successful and dogged campaigner on Magnitsky Acts, particularly even as an investor. What are your goals now? What are you trying to get accomplished?

Bill Browder
Well, the day that the war started in Ukraine, when Putin started murdering Ukrainians, I think everybody who turned on their television wanted to do something to help. Some people sent medical supplies. Some people even went to Ukraine to help out in different ways. One of my great skills is that I spent more than a decade travelling to just about every western parliament and government in the world, convincing people to freeze Russian assets.

And so after the war started and a bunch of Russian assets were frozen by western governments, it seems to me that my skill set can be used one step further, which is why are we just freezing those assets? Why don’t we seize those assets and seize as assets specifically for the defence and reconstruction of Ukraine? There’s somewhere between $300bn and $350bn of assets at the moment sitting in the Federal Reserve, the Bank of England, the European Central Bank, Euroclear, etc. And there’s also a war going on where Ukraine is running out of bullets and ammo and so on.

It seems like the logical thing to do, the moral thing to do, the politically right thing to do: confiscate those assets. And so that’s been one of my very important big projects that I’ve began since the war started. Everybody really pooh-poohed the idea in all western capitals when I first started talking about it. But we’re now at a point when the war’s been going on almost two years. People are starting to get tired of funding Ukraine, and this is a way to fix that problem. And so that’s what I’m here in Davos doing. And that’s what I’m spending a lot of my time on where and when I can.

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Gideon Rachman
That was Bill Browder, investor and campaigner, speaking to me from the World Economic Forum in Davos. And that’s it for this week. Please join us again next week for another edition of the Rachman Review.

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