Oligarchs cannot overthrow Putin, says investor banned from Russia

Although Russian millionaires are losing money on Western sanctions, they lack the strength to stand up to President Vladimir Putin, who decided to invade Ukraine in late February. Thus, the situation can be similar to that of North Korea, where as much as the population suffers from economic problems, it is not able to confront the government.

The assessment is by Bill Browder, CEO and founder of Hermitage Capital Management. He was one of the biggest foreign investors in Russia, but was eventually deported and banned from the country in 2005.

His lawyer, Sergei Magnitsky, was tortured and killed after revealing a case of local corruption in 2009. The case led the US and Europe to adopt sanctions against Russian officials from 2012, which were called the Global Magnitsky Act.

In April, Browder, 57, launches in the US the book “Freezing Order”, in which he claims that Putin has US$ 200 billion hidden abroad. He says he discovered the money while investigating Magnitsky’s death. The work will be launched in Brazil in the second half of the year.

He is also the author of “Red Alert” (ed. Intrinsic), in which he tells how he made a fortune investing in the privatization of Russian state-owned companies in the 1990s and, later, his clashes with the Putin government.

In 2013, the Russian Justice convicted him of tax fraud and asked for his arrest to Interpol, which refused to comply with the order, considering that it was a political action.



How do you assess the sanctions applied so far? They are the strongest that have ever been imposed on a country in history. The economic damage done by them to Vladimir Putin is extraordinary. That said, I don’t believe he will back down from the invasion based on sanctions. I don’t think I’m going to say “ok, I won’t do that anymore, because it’s too expensive”. The purpose of sanctions at this point is to bleed him financially so he doesn’t have enough money in the future to continue this expensive war.

However, more sanctions need to be imposed to achieve this objective. The main measure to be taken is for Europe to stop buying gas and oil from Russia. It is estimated that since the start of the war on February 24, Europe has provided $18 billion in cash to Russia for oil and gas. The Europeans are sending Putin a huge amount of money, and that has to change.

Can Western sanctions create space for other countries to invest in Russia, such as China? It depends. There are countries that are not honoring the sanctions. China has been talking about becoming more active in Russia, but it may pay the price with consumers in the West, who can blame other countries and companies that continue to do business with Russia. That could be the price to pay for any country that wants to take advantage of Russia’s depleted market.

Will Russia’s economy take time to overcome the impact of sanctions? It is expected to shrink by 30%, which would be equivalent to the Great Depression in the United States. The economic situation is expected to remain catastrophic for the Russian people for years to come, until Putin is no longer in power. If a democratic leader takes over, the West could relax sanctions and allow Russia to “return” to the world. But I don’t think that possibility exists as long as Putin rules Russia.

Do you see any way for Putin to be removed from power? Could the oligarchs unite against him? Do not. I find it very unlikely that he will be taken down by the oligarchs or the people of Russia. The oligarchs are afraid of him, and so are the people. We’re more likely to have a scenario like North Korea, where there’s a lot of poor, angry guys who don’t have the ability to do anything.

How do you rate the current relationship between Russian businessmen and the government? They are terribly angry with Putin because his assets have been taken away, both by the stock market crash and sanctions. However, oligarchs may be powerful, individually and economically, but they have no power over Putin. It doesn’t matter what they think. If Putin feels any disloyalty, he will put them in jail, take their money and kill them.

Your new book, “Freezing Order,” is about Putin’s fortune, which you estimate is at least $200 billion. How did you arrive at this value? The book is about the mission I undertook a decade ago to find information on the $230 million related to the case of Sergei Magnitsky, who was my attorney. he exposed [um caso de lavagem de dinheiro] and was murdered. We investigated where the money had gone and saw that some of it went to Putin. And he was so annoyed by this investigation that he ended up interfering with the US political process, to help elect [Donald] Trump [em 2016]. He thought Trump would be more lenient with him than Hillary Clinton. And we also found that Putin and his cronies had stolen not $230 million, but $230 billion. A thousand times more.

How would Putin have gotten that money? Basically for extortion and theft from the Russian government. It is money that should be spent on public services, education, health, etc. But instead it’s been spent on mega yachts, mansions and other things. He lives like a king. And one of the main reasons he started this war is because he was afraid his people would revolt. And the best way to avoid a revolt is to create an external enemy, a distraction. That’s what he did with this war.

What do you think should happen with this conflict? Can it escalate towards the third world war? Putin will continue to advance until he is stopped. I don’t think he’s going to start a third world war because he can’t afford it. He can barely run a war against Ukraine, let alone the world. He has no natural allies. It could threaten nuclear war, but we can easily threaten it back with nuclear weapons. The West needs to stop it properly. I speak militarily. Make him understand that if he rises against America, it will only last one afternoon.

If Putin succeeds in Ukraine, he will move against other countries. By doing so, he will reach NATO countries. And it’s in the West’s great interest to stop it before then, because we don’t want a nuclear war with Russia. A no-fly zone and various things like that need to be put in place in Ukraine to prevent him from winning.

Could a no-fly zone be used by Putin as a reason to escalate the conflict and attack other countries? He can do that. But he also said supplying Ukraine with weapons was a red line. That taking Russia away from Swift would be a declaration of war. We cannot hear what he says. We have to do what it takes. He has weak military capability. It is very unlikely that he will go to war with the West.

Why do you think Putin decided to invade Ukraine at this moment, after so many years of crisis with the neighboring country? There are several reasons. One is that several dictators around him were threatened. [Nursultan] Nazarbaiev, dictator of Kazakhstan, was overthrown. In Belarus, Aleksandr Lukachenko was almost overthrown. And then he felt that his time was running out. And he saw that he had a big advantage now, because the West is economically weak after Covid. There is a lot of inflation, huge deficits in public budgets and a great desire in Western countries to get back to normal. He thought that the West’s economic weakness would give him an advantage, because people in the West would think about their economic situation before reacting harshly against him. He has misjudged the West all wrong.

Do you still have contact with people in Russia? I don’t have any close friends anymore. Everyone left. But what I can see from the economic numbers is that the situation is dire. The stock market was suspended, the ruble was ruined, bank accounts were frozen. All the products you could buy before, now you can’t.

Would Russia be able to recover its economy by betting on domestic solutions, such as producing locally the things that mattered? Absolutely not. Russia has no local solutions for almost anything. The entire economy is basically an oil economy. This means that Russians will not have access to almost everything they used to like. There will be no more Netflix, Disney, McDonald’s, Ikea furniture. It will be like in the time of the Soviet Union. I was there shortly after the end of the Soviet Union, and it was terrible, because many of the comforts of the West weren’t there. And this is the situation they are returning to.

X-ray

Bill Browder, 57

Born in Princeton, United States, in 1964. He studied economics at the University of Chicago and an MBA at Stanford. He then moved on to investment funds in London, where he specialized in businesses in Eastern Europe and Russia. In 1996, he founded Hermitage Capital Management, together with Joseph Safra. In 2005, he was deported from Russia and deemed a “national security threat”. After that, he became one of Vladimir Putin’s main critics abroad.