120. The Man Most Feared By Putin: Part 1

0:11Hello and welcome to The Rest is Money with me Robert Paxton and me Steph McGovern. Now, today we're joined by Sir Bill Browder, recently knighted because of his extraordinary campaigning work to persuade governments to put in place laws that allow them to seize assets, impose sanctions on sort of individuals, business people, but in particular state actors, particularly in Russia, who are criminals or try and indeed undermine our democracy. And he's responsible for these laws that are called the Magnitsky Act across the world, which we'll talk about in more detail. And he's also made an absolute fortune as an investor in Russia before he fell out with Putin.

1:01Yeah, because he was at one point, his company, Hermitage Capital Management, was the biggest investor in Russia. and then as you say, I mean his life actually reads like a thriller. It's like a good old John Grisham, his life. You know, he's the man apparently that Putin fears most. He's had all kinds of death threats and smear campaigns against him. At one point he thought he'd been kidnapped. He's faced so much in his life but he is someone who we really want to talk to now because given the fact that it was his work around these financial sanctions which were crucial when Russia invaded Ukraine in 2022.

1:41We're going to first of all talk to him, aren't we, about what's going on now, what he thinks needs to happen to kind of stop Russia, and then we'll have a second episode all about his life. But here is our first interview with Bill Browder. Hi, Bill. Really good to see you. We're at this critical juncture in the West's attempt to prevent Putin gaining permanent control over huge swathes of Ukraine. And you believe that we have not used all the economic weapons in our arsenal. Tell us about what you think UK, European Union, the US should do now in respect of economic warfare. Well, at the end of the day, war is about two things, weapons and money to buy more weapons.

2:33And Ukraine has been at a natural disadvantage since the beginning of the war. Russia was outgunned and outmanned Ukraine 10 to 1. And so what we did to try to help Ukraine not hand over their country is to arm Ukraine, to give them military aid. And we did that at the beginning of the war. And the hope, I guess, was that the war would be short and that Ukraine would defend itself. And that would be the end of the story. But what started out as Putin's three-day war has now turned into a three-year war. And the money is starting to run out. And a lot of people are complaining about the money, most notably the president-elect of the United States, Donald Trump.

3:14Donald Trump has threatened to cut off military aid for Ukraine. And if that were to happen, Ukraine would end up losing the war. Without money, they would not be able to fight off the Russians. They would run out of ammunition. And eventually, Russia would succeed in three years, what they intended to do in three days. And if they did that, then we have a real problem. Ukrainians are not going to sit around waiting to be raped, tortured, killed, and kidnapped. They will leave. and we'll end up with 15 million Ukrainian refugees flooding across Europe, many of them coming to the UK. And the second thing is that if Putin gets Ukraine, you'll make a move on the Baltics, on Estonia, Latvia, and Lithuania.

3:59And then we have a choice. Do we go to war with Russia to protect our NATO allies? Or do we not go to war with Russia and allow him to take over those countries? Either of those two things is catastrophic in its own way. But there is a solution. The solution to this problem is very simple. But a week after the war started, the West, and when I say the West, I mean the United States, UK, EU, Canada, etc., froze$300 billion of Russian central bank reserves that were held outside of Russia in central banks of the West. And we can solve this whole resource problem very simply by, instead of freezing those assets, confiscating those assets, and handing over those assets to Ukraine so they could continue to buy weapons to fight off the Russians.

4:46And if we did that, we wouldn't have Ukraine capitulating, we wouldn't have 15 million refugees, and we wouldn't have a huge attack on our NATO allies. Tell us where these reserves are. physically? Where are they? Well, that's a very good question. And we only know in orders of magnitude. We don't know exactly because everyone is being a bit secretive about it. But roughly 200 billion of the 300 billion are held in Belgium in an institution called Euroclear. Euroclear is a custodian. When Russia bought government bonds, they were held at the custodian. And then about 35 billion is held in the UK and then money held in Switzerland and Japan and various other places.

5:33But most of it is held in the UK and in the European Union. How would it work? So it's not like this is a new idea that's just been introduced today. This is an idea which has been discussed. I've been discussing it and many other rational people have been discussing it for almost three years. And where we have gotten to today is a compromise situation where the governments have not agreed to confiscate all the money, but they said, well, let's make a compromise and confiscate the interest on the money. And so they've already started to do that. Legislation has been passed and regulations have been put together to take the interest.

6:07And so it's not a particularly big step to go from taking the interest to taking all the money. And for example, in the United States, they passed a piece of legislation called the Repo Act, which allows them to do it. And then regulations have been passed in the European Union to do the same thing when it comes to the interest. And so I don't believe that it's such a dramatic and difficult step from a legal standpoint. I think it's just a dramatic and difficult step from a political standpoint because we haven't made this decision. But the thing is, do we have to wait until we have 15 million refugees flooding across Europe to take this step, which would probably be too late because at that point, Russia would already have effectively won the war?

6:46Or do we do it before that happens. So the reason I'm assuming it hasn't happened is because central bankers, finance ministers are terrified that if they take this step in respect of Russia, that pretty much every other autocratic regime, including China, would at that point withdraw all their reserves from the West, and that would have a dramatic impact on the viability of the global financial system. Is that why they're terrified of doing it? Well, so that's the argument for sure. But let's just think about this for a second. So what are the Saudis, for example? That's an autocratic regime that generates enormous amounts of money from their sale of oil.

7:37What do they do with that money if they didn't want to put that money in dollars or in euros or in sterling or in Swiss francs or in Canadian dollars or Japanese yen, where do they put that money? Do they put that money in Brazilian real, Argentine peso? The answer is no, because you can't. There's no way you can hold those currencies in large amounts. They have huge inflation. They have all sorts of other issues. The reason why people keep money in dollars and euros is because they're what's called reserve currencies. And so the only way that this argument works, of course, is if all the major civilized countries of the world do it together.

8:17But if they do it together, then all the autocratic regimes don't really have a choice. There's no place else to put the money. And so they could be whining about it. But at the end of the day, they've got to put their money somewhere and they'll continue to put their money in the reserve currencies of the world. And all this does then is it does have one unintended consequence, which is if China China, which has a lot of foreign exchange reserves, sees that countries that invade foreign neighbors have their foreign exchange reserves taken away, the Chinese may have a serious second thought about invading Taiwan, for example.

8:53Or what might happen, and this is something that I know Western leaders are concerned about, is that the plan that the BRICS countries were talking about only a few weeks ago in Russia to create their own reserve currency based on work that's going on in the Bank for International Settlements. So the worry would be that if we take this action against Russia in this way, that just accelerates the division of the world into essentially the world that we think shares our values, the West, and a polar opposite that we're deeply concerned about. And at that point, they're less dependent on us and our ability to conduct economic warfare against them is reduced because they will be able to get around all our sanctions if they have their own payment mechanisms.

9:38Well, there's a big if in your question, which is if they decide to trust their Brazil, Russia, India, China, South African currency. But again, let's just look at these countries. So at the moment, Russia has inflation running at 28%. Brazil has had hyperinflation, currency crashes, all sorts of other stuff. Same thing with the South African Rand. China has effectively, I mean, you want to talk about having your money arbitrarily taken away, put your money in China. People can't get their money out of China. These people aren't going to put their money in each other's currencies and nor is anyone else going to put their money in this Brazil, Russia, India, and China currency.

10:20Before I became a political activist, I was a fund manager for many, many years. And I can assure you from my own experience, there's never going to happen that there's going to be an alternative reserve currency from the BRICS. It's this impossibility. I totally take your point. But isn't this kind of what people have also said about cryptocurrencies that they'd never take off and no one would ever put money in them? And actually, that's how countries like Russia are actually managing to get around some of the sanctions by using cryptocurrency. Well, the reason why cryptocurrency has become stronger is people trying to avoid arbitrary inflation and expropriation like you have in Brazil, Russia, India, and China.

11:01Those are the people who are using cryptocurrency. So is the argument that all these countries are going to then plow their hard-earned foreign exchange reserves to cryptocurrency? Again, I don't think so. The price of Bitcoin goes up and down by 50%. So is that how China wants to hold its foreign exchange reserves? I don't think so. Cryptocurrency is a speculative instrument and a money laundering instrument. It's not a foreign exchange reserve instrument. How much money is being held in escrow, frozen in the West that has been taken from oligarchs and those who are regarded as too close to Putin.

11:41And why are you talking only about handing over the central bank reserves? Why not simply hand over what I assume is many tens of billions of dollars of the former oligarchs' assets, the houses and the yachts and the cash and all the rest of it? So you're absolutely right. There's two types of reserves that have been frozen. There is the Russian government money that's been frozen and then Russian oligarch money that's been frozen. And in my opinion, the Russian government money that's been frozen is much easier and much more lawful to confiscate in the short term. And believe me, I'm no friend of Russian oligarchs.

12:21And the answer is simple. So who invaded Ukraine? The Russian government. The Russian government, Vladimir Putin, made a decision to invade Ukraine. What was the result of that invasion? Hundreds of billions of dollars worth of damage, perhaps a trillion dollars worth of damage. Where are the reserves held that belong to the Russian government who caused this damage? They're in our custody in the West. And so it's not a hard legal case to say, you are the guys who caused the damage. We can prove that. We can quantify how much the damage you've caused is. And we have the custody of the money and we should take that.

12:56That's an easy criminal legal case to make. However, when we get to the oligarchs, it becomes a more complicated case. And the reason why it's more complicated is we say, well, the Russian government's caused all this damage, et cetera, et cetera. And then we are making the allegation that these people are proxies for the Russian government, but they are private citizens. And so we can't just arbitrarily take it. We have to go to court to take it. And when we go to court, and I know this from my own experience, the oligarchs hire the best KCs that money can buy in London. These people are as clever as you can imagine.

13:33And they put up every possible roadblock and obfuscation and everything. And you could be literally 10 years into it and still not have the money. But why can't the governments of all relevant Western countries simply pass laws to expropriate these assets? We could potentially do that. But everybody, when I started talking about the confiscating the Russian government money, everyone said to me, well, that's not legal. And I'm saying, well, it's not legal to invade a neighboring country as well. And I think it's pretty easy to make the argument and a very clear argument that we should take the government's money because we can point to them as the responsible party.

14:12When you start going after private citizens, if you start just saying that private money is at risk if you come from the wrong country, I think that that indeed does what we were talking about before, which is it scares everybody into the idea that all property is not safe. Now, again, I'm no friend of the oligarchs. I spent the last 15 years putting legislation in place all over the world to freeze oligarch money when it's connected to kleptocracy and to human rights abuse. So I'm not arguing in favor of the oligarchs. All I'm saying is that having been at the coalface and actually litigating, going to court and trying to confiscate money connected to oligarchs who have done terrible crimes.

14:53I'm still 10 years into a lot of these battles in court and the money hasn't been handed over. And the Ukrainians can't wait 10 years for the money. The Ukrainians need the money like today. And so I would say that we should go after both types of money. We should go after the central bank reserves. And I think that there's a very easy case to be made and we've already legislated for that. And we should go after the private money. But I don't think that it's fair to go after the private money unless we can prove that the private citizens are formally engaged with the Russian government. And I think that needs to be proved in court.

15:24I mean, obviously, you're talking about this now in America. You met with our Foreign Secretary, David Lammy, didn't you recently too? Is this the kind of things you're saying to him, like what the UK should be doing on all of this too? So I took David Lammy through the exact same logic that I've just taken you through, which is, here's what happens if the resources, the funding for Ukraine dries up. you know, we have the refugee crisis, we have a NATO crisis. And when I told Lammy this and told him all the consequences, he just then added on things to my list of consequences. For example, he mentioned to me that our defense budget goes from 2 % of GDP to 7 % of GDP.

16:00So he fully understands this situation. He buys into the idea, as by the way, the previous foreign secretary, David Cameron did. And so I don't think that the British government needs convincing on this thing. I think at the end of the day, it's the European Union that needs convincing. They're the ones who have made the compromise decision. Why did they make this compromise decision going after the interest and not the full amount? Because the European Union is not sort of a decision-making body per se. It's a collection of countries where all it takes is one of the countries in this collection to object one way or another, and then they have to sort of negotiate down to the lowest common denominator.

16:39And in the case of the European Union, in this discussion, you had Hungary, for example, run by Viktor Orban, who is a friend of Vladimir Putin and has been doing lots of Putin bidding in the European Union. He objects, and you have a few other people objecting, and then you end up having this sort of lowest common denominator decision. So what I talked about with David Lammy, what I've been talking about in Washington, I was in Washington all of late last week, is that there needs to be some strong political will. and particular, it needs to be pushed on some of the more strong European countries, like France, like Germany, to understand the consequences and to take the lead on this thing so that they don't have the tail wagging the dog, the Hungarians basically putting us in a situation where pre-World War III scenario when Putin wins in Ukraine.

17:29So if this saves Donald Trump as president hundreds of billions of dollars, do you think that is enough to persuade him that this is the right way to go? Or, I mean, there are some who think that the Russian president has some kind of hold over him and that for whatever reason, he just wants to bring this war to an end. I guess this is literally the$100 billion or$300 billion question is what is Donald Trump going to do in this situation. He has expressed various strange positive sentiments towards Vladimir Putin. But at the same time, you know, he is a person who's running a country or will be running a country where he requires the support of the American people.

18:18And so if he's presented with an idea, which is that, you know, he's complaining about sending the money to Ukraine and that there is an alternative, which is taking Putin's money and spending it on military aid for Ukraine. I don't know how he publicly denounces that idea if his real concern is U.S. funding for Ukraine. But then again, nobody really understands what his ideas are. And we're only going to find out on January 20th. What difference do you think it's going to make now we've seen Assad fall in Syria? And what do you think is going to happen there in terms, you know, we know he's in Russia, he's being looked after there.

18:55What do you think is going to happen next and all of that? And is that going to make a difference to everything going on? Well, I mean, I think it's probably the most significant thing that's happened in recent memory, that Russia, who had been backing Assad, has basically been humiliated. It creates the question, if they can't handle the situation in Syria, can they handle the situation in Ukraine? And in a certain way, it kind of emboldens the Ukrainians to carry on fighting. It's a very, very clear sign of Putin's weakness and Russia's weakness and the fact that they aren't invincible. It also is a sign that even having Russian troops kicked out of their bases in Syria, they didn't start a nuclear war there.

19:38Whatever red lines they put out there that have been crossed hasn't led to massive escalation. And it kind of, in every possible way, shows Putin to be who he is, which is not nearly as strong as he would like us to believe he is. Bill, I don't want to stop you because this is incredible, but we do need to go to a quick break.

20:20You've obviously been talking about financial sanctions and made incredible changes to global politics around them from everything you've done with the Magnitsky Act and everything. How does it compare now, the conversations you're having with politicians now, compared to getting that incredible act through and the difference that that's made? Is it harder now, though, trying to get this next level of financial sanctions you want that you think will make a big difference? So my whole story began with the murder of my lawyer, Sergei Magnitsky, on November 16, 2009. and the Russian government tried to cover up his murder.

20:55They tried to exonerate everybody involved. And that's when I then began this campaign to get justice for Sergei Magnitsky, which resulted in something which became called the Magnitsky Act, which would freeze the assets and ban the travel of the people who killed him and the people who do similar types of things. And when I first started this campaign, everybody said, there's no way, you know, it's just never going to happen. You know, hell will freeze over before this happens. It's just not going to happen. You know, there's no political will. It's never been done before, et cetera, et cetera.

21:26And I kept on hammering away and hammering away. And eventually it happened in the United States after about two years of advocacy. And then it took another five years after that. And I got it done in Canada. And then the next year in the UK and then so on and so forth. And then pretty soon we have 35 countries that have the Magnitsky Act. Everyone said it was impossible. When the war started, I immediately went out after the$300 billion of central bank reserves were frozen. I immediately went out and started talking to governments about confiscating that money. And the reaction that I got was exactly the same as when I first started doing the Magnitsky Act.

22:00People said, that's impossible. I would upset the capital markets. It's lawless, et cetera, et cetera. And then when they realized that the war was not going to last three months, but it was going to last a lot longer, then people started to become more amenable to the idea. And it's a very elegant argument that Putin caused all this damage. Putin should pay for this damage. And it's an extremely sort of attractive thing that anybody who I tell, any normal person I tell, you know, who should pay for the Ukraine's defense? They say, well, if we have some of Putin's money, he should pay for it. And so if anything, the appetite for this is stronger and better and more welcoming than it ever was when I first started in the same way as the Magnitsky Act went from being a total left field idea to being one that was passed in law in 35 countries.

22:46And just talk me through, because I know that when you see members of Congress or members of the British government, senior European figures, I'm assuming that one of the things they say to you is, we believe in the rules-based international order. It is what differentiates us from Putin and his ilk. And I imagine many of them just say, the problem is what you are proposing is that we ignore those rules when they no longer suit us. And at that point, the sort of game is up. Well, so that absolutely was the first argument they made. And so immediately after they made that argument, various of the best legal minds in the world got together and said, okay, let's look at this very objectively.

23:35And they said, on one hand, there's the rule that protects the money, which is the rule is called sovereign immunity. Sovereign immunity means that anything that belongs to the government is like the Russian embassy in London. You can't take their embassy because it's Russian territory. And that applies to their reserves and so on and so forth. And that's a sort of sacrosanct argument and not an unreasonable argument. However, there's another legal argument, which is that if a country invades another country and causes enormous damage, there's something called the law and countermeasures. Countermeasures are what the damaged country can legally demand under international law of the damaging country in order to pay for the damage.

24:14And so we have this situation where there's a conflict of laws. So on one hand, there's a law that says that Russia should pay. and then on the other hand there's a law that says russia's reserves are are absolutely sacrosanct and so we have a conflict of laws and and by the way it's not the first time we've had conflict of laws so as journalists i'm sure that you come across the you know the law on libel and then there's the right to know information long public interest and those two laws come face to face all the time and people show up in court and argue about whether something's in the public interest or whether someone has been liable.

24:49Well, we have the same thing, the exact same thing going on here in international law as it relates to reserves. And so a number of extremely well-placed international legal experts, the top of the field, have come to a legal analysis which says that, no, it's not lawless to do this. The law of countermeasures, in this case, trumps the law on sovereign immunity. And so the only people that would have to worry about something like this going forward is not everybody in the world. is just countries that may be thinking about invading other countries. And there's not that many of them out there, but China is one of them for sure.

25:24But most people don't invade their neighbors and therefore their money is safe and will continue to be safe. So what do you think is going to happen next then? Well, I mean, let me take you through the scenario that I think is going to play out, but I'm sure that maybe I'll be wrong and people will pay back this episode after I'm wrong, but let me lay it out anyway. So Trump has come in as the president-elect of United States. And he's made very strong representations that he wants this war to end in 24 hours. That's his big thing. And so he's made this representation. And he says very publicly, if you don't show up at the negotiating table, I'm going to cut off military aid.

26:00So guess what the Ukrainians have done, what Vladimir Zelensky has done? He has proactively gone to Trump and said, I'm at the negotiating table. I'm ready to negotiate. So Trump has now got Zelensky at the negotiating table. But the real answer is, what does Putin want to do? Because it's not as if Zelensky was the one who started this war or is causing this war. Zelensky is just defending Ukraine from a mass of Russian murderers. And so the question is, what's Putin going to do? And then, and this is where the story gets very interesting, is that Putin is not in Ukraine because he wants a bit of Ukrainian territory.

26:39That's not why he went in in the first place. He's not in Ukraine even because of NATO, even though he says that. The reason Putin is in Ukraine is because he's been in power for 22 years. When the war started, he'd been in power for 22 years, now 24 years. And he understood that if he ever loses power, then he ends up going to jail, losing his money, and probably dying. And so the reason Putin is at war is that he needed to create a foreign enemy. He needed to create a distraction so that the Russian people were mad at Ukraine, not mad at Vladimir Putin. That's why he's at war. And by the way, if you were to ask Alexei Navalny, who you can't ask anymore because Putin killed him in prison, or if you asked Mikhail Hordakovsky, the owner of Yukos, spent 10 years in prison, or Garry Kasparov, the chess champion who's a Russian dissident, they would all explain to you exactly the same thing that I've just explained to you.