An Interview with Bill Browder

Bill Browder
Bill Browder

19th March 2015

Bill Browder started the hedge fund Hermitage Capital Management in 1996. It quickly became very successful by investing in newly privatized Russian companies in the aftermath of the collapse of the Soviet Union. A few years later, Browder began an activist strategy, and in the process, exposed wide-scale corruption. In 2006, he was barred from entering the country. When some of Hermitage’s holding companies were seized, lawyers in Russia were called in. One of Browder’s lawyers was arrested, thrown into prison, deprived of medical attention he desperately needed for months on end, and eventually beaten to death. His name was Sergei Magnitsky. Browder then started campaigning to have action taken against those responsible for this, and many other, human rights violation in Russia. He recently released a book called Red Notice, in which he recounts his experiences.

Q: Is there anywhere else in the world where you think investing in recently privatised companies will become a viable investment strategy?
A: The situation in Russia 23 years ago was an entirely unique situation; it will never be repeated again in our lifetimes. They made the decision to go from communism to capitalism, and they decided to give all the state assets away for free. It was a terrible idea, because they hadn’t set up the rules for capitalism when they gave everything away for free, so without any rules, the law of the jungle prevailed. As a result, instead of everybody being participants in the whole thing, 22 individuals ended up with 40% of the economy, which is probably the single most concentrated distortion of wealth that has ever happened in the world. The other 60% of the economy was out there and some of these shares were trading very cheaply as a result of the privatisation, but I can’t imagine that anyone will replicate such a policy again.

Q: What do you think about the current situation in Ukraine?
A: I have a very clear view of what Putin has been up to for the last 14 years: he has been running a government with the specific purpose of stealing money from the state for his own account, and the account of about a thousand other people around him. He was able to get away with this type of kleptocracy when the oil price was rising and the average Russian was doing a little bit better each year. When people have food on the table and money in the bank, they tend to be politically apathetic. But recently, the economy has gone down, and when people get hungry and have less money, they start wondering why the government has allowed this to happen. And then they start looking at their leader, and Putin has, over the last two years, been challenged to improve the situation of the country, and he has no capacity to do that. So he needed to come up with a plan to distract people from their current woes. He picked the most obvious thing: creating a foreign enemy and starting a war, to distract the Russian people from his own bad governance. So the war in Ukraine is, in my mind, a massive distraction strategy.

Q: Do you honestly think the primary motivation behind his behaviour is commercial rather than just trying to hang on to power for its own end?
A: His main motivation has been commercial, and the reason he wants to hang on to power is because if he were to lose power, he would go to jail, lose his money, and potentially lose his life. Power and money go hand in hand. But power by itself is only interesting accompanied by money, and losing power is fatal.

Q: Do you think that governments are underreacting to the situation, and that Russia should be further punished?
A: Yes. I think that we’ve been blessed with fifty years of peace, and as a result we’ve ended up with a group of world leaders, not just here in the UK but everywhere, who are not used to dealing with war. And as a result, the current leadership of the world is desperately trying to use diplomacy in a situation where diplomacy isn’t working and hasn’t worked; they’re trying to negotiate with a man who absolutely doesn’t keep his promises, and so one needs to force him to keep his promises. The way you force him is by using more aggressive tools, more aggressive economic sanctions, and even supplying military equipment to Ukraine.

Q: And so what do you think the endpoint for this scenario will be?
A: I don’t think anybody knows. So there are two possible outcomes: there’s a hot war or there’s a cold war. At the moment, we are engaged in a hot war, meaning that there are people with tanks and guns shooting bullets and mortars and so on. At the moment they are shooting at the Ukrainians and not shooting at us, but at some point they’ll be shooting at our troops if we don’t stop them. I don’t know if the hot war will be containable, but in my mind the best possible outcome is a cold war. This is where everybody’s pointing their guns at each other, but nobody’s shooting. One thing which is not possible is what I call the status quo of three years ago, where everything goes back to normal.

Q: What do you think about the murder of Boris Nemtsov? Do you think that Putin had him killed?
A: I believe that Putin was the main person with the motive and the means to kill Boris Nemstov. Boris Nemstov posed a serious risk to Putin because there’s an economic crisis going on in Russia, and Boris Nemstov was calling for people to come out onto the streets. Putin is desperately afraid of losing power in the way Ukrainian President Viktor Yanukovych lost power, and it’s absolutely clear to me, having had my own experiences with a murder in Russia, that the law enforcement agencies are so skilled at cover ups, and all the facts of this case point to a clear cover up. If there are no external bodies involved in the investigations then the Russians will cover the murder up completely.

Q: For how long do you think Putin will be President (or act as puppet Prime Minister)?
A: I think Putin could be President for anywhere from two months to twenty five years: we could have a Mugabe situation like in Zimbabwe, where he runs Russia into the ground and just creates a nationalist frenzy where he’s able to stay in power, or we could end up with a Ukraine-Tunisia-Kyrgyzstan-type of scenario, where people rise up and throw him out. It’s dependent on two variables: one, how angry people get about his governance, and two, how scared they get of his oppression. And if the anger overcomes the fear, then they’ll rise up. If the fear overcomes the anger, then they won’t.

Q: Recently you’ve been working on bringing those who murdered Sergei Magnitsky to justice. What country has helped you most with this, how much progress have you made, and how much progress do you still want to make?
A: The possibility of justice in Russia was impossible to obtain, because the Russian government has covered up the murder. So we sought justice outside of Russia: we looked to obtain visa bans and asset freezes on the people who murdered Sergei Magnitsky, and the people who commit other similar crimes. We were able to have a law created, called the Magnitsky Act. It was passed in America, which was the first country to act decisively in this area. America has been the real leader here, but the real goal for us is Europe. The reason is that the Russians love coming to the south of France, they love coming to London, they love coming to Italy, and places like that, and if we have stopped human rights abusers visiting Europe, then it creates a real consequence for the first time. Europe is a much tougher place to get this law passed, because a lot of people enjoy the money that Russians bring, and so it creates a very big conflict of interests among certain people in certain countries, which has so far been impossible to overcome.

Q: What is Russia doing in retaliation against you enforcing these laws?
A: Russia have done two things so far in retaliation: one is to ban the adoption of Russian orphans by American families, which effectively is a death sentence for certain sick orphans, who are getting medical attention in America. That was a general retaliation against America, and there has also been a personal retaliation against me and Sergei Magnitsky: they put Sergei Magnitsky on trial three years after he died, in the first ever trial against a dead man in the history of Russia. And they put me on trial as his co-defendant, where I was sentenced to nine years in prison in absentia. Russia has since gone to Interpol to try to convince them to issue a Red Notice, which is the name of my book, for my arrest. Thankfully, Interpol rejected it.

Q: Finally, do you think that you will ever be allowed to re-enter Russia?

A: I should point out that they would love to have me back at any moment, to have me serve my nine year sentence! Having said that, I’m not planning on returning to Russia, but I’m sure that when the Putin regime falls, I’ll be quite welcome back into the country.

6 thoughts on “An Interview with Bill Browder

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