Interview With Prominent Putin Critic Bill Browder, CEO of Hermitage Capital Management

03/13/2015 01:32 pm ET | Updated May 13, 2015

On March 5, 2015, the CEO of Hermitage Capital Management, William F. "Bill" Browder made a speech at the Oxford Union describing his personal experiences investing in Russia, the death of Sergei Magnitsky and the kleptocratic nature of Putin's regime. Browder was the largest foreign investor in Russia until 2005, when he became blacklisted from Russia as a "threat to national security." He has since emerged as one of Putin's most strident critics, and a prominent human rights activist, after the death of Hermitage's lawyer and auditor Sergei Magnitsky in 2009. Following his speech at the Oxford Union, Browder agreed to sit down for an interview with me. The transcript is below:

You contributed to a book called "Why Europe Needs a Magnitsky Law: Should the EU follow the US?" Have you tried to incentivize other countries to adopt legislation on Russian human rights similar to the 2010 Magnitsky Law in the US? How successful have your efforts been?

Bill Browder: The main countries I am interested in working with are the United States, Canada, the EU and Australia. Its complicated, the more you go into the developing world, the less interest there is because many regimes there are perpetrating human rights abuses of their own. And it is much harder to get anyone to care. And the countries where the bad guys, like Russia, care about visiting are the civilized countries where they can keep their money safe. So that's why we want to go after the main developed countries of Europe and North America.

With regards to Europe, everyone wants to hide behind the EU. Nobody wants to make any individual decisions for the right reason, because they don't want to be targeted specifically by Russia. But the EU is a very complicated place because it requires a 28-country consensus. I think in the end the Russians, through their own behavior, will create the opportunity for us to enact more effective legislation. When people finally stop trying to appease Russia, the environment will be much more conducive for multilateral cooperation on combatting Russian human rights abuses.

When discussing Putin's seizure of assets, you have often emphasized the energy sector and trust agreements with oligarchs (which explains the $200 billion wealth figure), as major revenue sources. Considering the proliferation of Russian arms contracts to rogue regimes and around the world more generally, do you think that Putin has benefitted financially from defense deals as well? And if he has, to what extent has Putin's kleptocracy shaped Russian foreign policy?

Bill Browder: Absolutely. There is no question that he has benefitted. Putin is like a typical Mafia boss, with no interest in anything other than money. As for his concern for Russian strategic interests, he wouldn't sell arms to Ukraine, for example, but aside from that, he doesn't care about the national interests at all. He just cares about the money.

Bloomberg recently published a report marking the correlation between stock market prices in Russia and foreign policy decisions. Do you agree with their assessment that investments are having a significant impact on foreign policy decisions?

Bill Browder: No, even though I think a lot of Putin's money is held in companies that are trading on the market. Basically, he started by stealing as much money as he could. And now he is worried about being overthrown, so he started a war to distract people. His overriding concern now is just not being kicked out of power. Military policy has superseded the provision of economic growth as the main source of his legitimacy. He has stayed in power by creating a war and rallying people around the flag as a result.

Luke Harding has described Putin's Russia as a "Mafia State" and discusses the Boris Berezovsky case. Do you agree with the Mafia State description and what are your thoughts on Berezovsky's death?

Bill Browder: I completely agree with the idea that Putin's Russia is a Mafia State. With regards to Berezovsky, it looks very suspicious that a major Putin enemy somehow supposedly commits suicide and a very unusual suicide, without a note. All the questions that came up at the inquest, which was inconclusive, raise further doubts about whether he was killed or he killed himself.

How do you think Putin will handle the aftershocks of the Boris Nemtsov assassination? And if the Kremlin was involved in his assassination, why do you think that they handled Nemtsov differently from Alexei Navalny?

Bill Browder: Well, I think that Navalny has a lot more popular support than Nemtsov. They are really scared of Navalny, so they are more hesitant to be aggressive towards Navalny. With regards to the Nemtsov murder, Putin will find some patsies and convict them. We'll know they are not the real people, the people who ordered the hit. We'll never get to the bottom of it. Actually, this is not true. In Russia, there are so many crowd-sourcing and investigation materials now. He was killed in the open in the center of Moscow. I think in the end we will find out what happened and its not going to look good for the Kremlin. There is no way they can do an impartial investigation we need to do an international investigation. The OSCE or the Council of Europe can lead that investigation. Whether the Russians let them is another question.

Do you think Vladimir Putin has vetted a successor for the Russian presidency as he has pledged to resign from office in 2024? Do you think Mikhail Khodorkovsky could stage a political comeback?

Bill Browder: I think that Putin has sought to eliminate viable potential successors like Boris Nemtsov. Boris Nemtsov had very strong political aspirations, and you might think he didn't have a lot of popular support, but this stuff can change over night with the economic crisis going on in Russia. I think Mikhail Khodorkovsky has a chance of making a political return. He is a smart man. He has a lot of resources and has done his time. I don't think a Western liberal would be able to rise to power. There is a very low likelihood of oligarch coup, which is a scenario I am often asked about, as Putin retains control over maybe 30 or 70%, lets say 50%, of their assets through verbal trust agreements and the FSB power to arrest. The most likely successor would be a Navalny-type nationalist, in my view.

There is no way that Putin has designated a successor, by anointing a replacement he loses power. I do not think Putin is going to make it anywhere near 2024. I don't think the Russian people will keep him as president. I think Putin could be removed via a Maidan-type revolution, a palace coup, or by assassination. There are a million different things that could happen. For Putin, there is no life after Putin. I don't think he is going to leave the office alive.

Many scholars and analysts have described current hostilities between the West and Russia as a "new Cold War." Do you agree with this assessment?

Bill Browder: I think we are entering into a hot war right now, and that the best possible outcome is a Cold War. Russia is sending out bombers to violate our airspace. They have sent troops into Ukraine. They are killing people and violating treaties. They are doing everything possible to contribute to the most dangerous situation we have had in the past 50 years. We were lucky during the Cold War, because everybody knew where they stood. Right now, Putin is bluffing the whole world and saying he is ready to do anything and ready to go crazy. Nobody wants to engage with Putin, and since no one does, he can effectively do whatever he wants.

Do you envision further Russian military interventions and/or territorial annexations beyond Crimea and Ukraine?

Bill Browder: I think he absolutely will engage in further military campaigns. With regards to the Baltic States, many have claimed that these countries' status as EU and NATO members will deter Russian aggression but I think Putin is trying to show us that we have no deterrent. And even if we claim to have a deterrent, we will not act on it. He is seeking to divide and conquer wherever he can. He is working to create divisions within the EU and NATO in any possible way. He will continue to be obstructionist towards the West in every situation. Putin's power comes from causing trouble- he is a troublemaker.

We are all decent, consensus-driven and democratic people. We have to look to each other to make positions. But Putin doesn't so he can run circles around us. There will always be some kind of lowest common denominator that disagrees with being tough with him.

Since you believe that we are in a hot war with Russia right now, do you think Russia would risk a nuclear confrontation?

Bill Browder: I do not think that Putin will risk an open nuclear confrontation. But I think he could use nuclear weapons to make a point with somebody who doesn't have them, so they won't confront him. He will not even use them as a bargaining chip, if he does use them, he would like to convey the message that he is absolutely out of his mind. Imagine if he were to use one nuclear weapon in a country in Eastern Europe, a country that does not have NATO membership, our mouths will just be agasp. We would have no idea how to respond.

In order to contain the threat Russia poses, is it a good idea to provide lethal arms to Ukraine? Especially since that lethal aid might end up in the hands of oligarch-funded militias that the central government does not control?

Bill Browder: For sure, give the Ukrainians some equipment to go defend against Russia. Even if they end up in the hands of oligarchs, its better to have Ukrainian oligarchs fighting the Russians than nobody fighting the Russians. Putin's aim is to keep the war going as long as possible and he intends to invade other countries, so to keep him mired in Ukraine is preferable to him sweeping through Ukraine and then attacking the next place.

What is your opinion on the relationship between Putin and former Ukrainian president Viktor Yanukovych? Do you think Yanukovych will ever face justice at Interpol?

Bill Browder: I do not think that Putin will ever hand over Yanukovych. I think that if the Putin regime falls, that is the only way Yanukovych would ever face a trial. Putin and Yanukovych are similar in their motivations; Putin started this war because he saw Yanukovych being overthrown and realized that he needed to create a massive distraction quick or he would be overthrown as well.

What is your assessment of the current Russian economic crisis? Do you think the Russian economy can recover in the near future?

Bill Browder: I think the Russian economy is in a desperate state. If oil prices were to go up a lot, then its fine, it's a one-commodity economy and Russia is a one-commodity country. The destabilization of the Middle East through military intervention to manipulate oil prices is something the FSB might have as a strategic option. But at these oil prices, Putin is in a desperate situation. Putin cannot diversify the Russian economy even if he wanted to. Diversification takes twenty years; it's a long-term policy and it requires people to be willing to risk their capital. There will capital controls in place in Russia in the not too distant future. Nobody will invest a penny in that country. As for Russia's deals with China, the Chinese are just licking their lips to get cheap opportunities off of desperate seller. The Chinese are happy to buy Russian gas as long as its cheap and pretty much anything else that Russia offers at a discount.