The DealBook newsletter delves into a single topic or theme each weekend, providing reporting and analysis that provides a deeper understanding of an important topic in business. If you do not yet receive the daily newsletter, Register here†
International sanctions against President Vladimir V. Putin of Russia have frozen his personal belongings. Or at least the possessions he seems to own.
The sanctions against the Russian oligarchs in the vicinity of Putin may be more effective. That’s not necessarily because these well-connected, global billionaires could pressure the president to change course in the war in Ukraine. According to William F. Browder, that is because much of their extensive wealth is in Mr Putin’s possession.
Once a major investor in Russia, Mr Browder has become one of the Kremlin’s worst enemies. Russia has tried several times to get Interpol to issue arrest warrants against him. And he’s such a thorn in Mr. Putin’s side that the Russian president mentioned him by name during his first official summit with President Donald J. Trump.
What did he do to arouse such anger? Mr. Browder ran one of the largest hedge funds in Russia in the late 1990s and early 2000s. But his public fight against corporate corruption eventually led to his expulsion from Russia in 2005 as a “threat to national security”.
In 2009, his tax attorney Sergei Magnitsky, who was investigating government money laundering, was arrested and later died almost a year later, at the age of 37, in a Moscow prison. In 2012, Congress passed the Magnitsky Act, which sanctions Russians involved in the lawyer’s death. At the urging of Mr. Browder, similar laws have been passed around the world.
That makes Mr. Browder very knowledgeable about the effects sanctions have on Russia’s political and business elite, not least on Mr. Putin. As world leaders impose round after round of sanctions on Russia for its invasion of Ukraine, he is bringing a unique perspective on how these actions could influence Mr Putin’s calculations.
Prior to the release of his new book, “Freezing Order,” DealBook spoke with Mr. Browder on how to end the war in Ukraine, the influence oligarchs exert and what really motivates Mr Putin. The conversation has been edited and shortened.
What do you think Mr Putin’s endgame is right now?
Putin is a dictator. One of the great advantages of a dictatorship is that he can steal as much money as he wants. And he chooses to steal a lot.
After a while, in a country where people think they live in a democracy, they start to see that they are hungry and not being cared for in hospitals and that their children are not getting an education. They start to get mad, and they get mad at the man in charge. And so the person responsible has to do something every now and then to make people less angry with him.
The purpose of these wars is that he was afraid of being overthrown. And so the best way to do that is to have everyone rally around the leader. And so when you talk about an endgame, there is no endgame. This is just him who stays in power.
What do you think he is thinking as an old target of Mr Putin – and someone I believe has tried to better understand what motivates him?
The problem is, there are some psychological traits that fuel this whole thing, making it a particularly toxic concoction. The world he lives in is like a prison yard. This is a world where everyone is aggressively watching each other, and everyone has to empower each other. You know, the most powerful person in a garden has to be the most cruel person to maintain his power.
And so his idea was to just destroy Ukraine and then bang on his chest and show everyone how powerful he is. But his misjudgment of how effectively the Ukrainians are fighting back made him seem stupid. And for someone of the prison type, that’s the worst thing that could ever happen.
Do you think he understands that?
Do you think everyone around him is a yes man?
It’s not just the people around him. It is also the people of the West. The Ukrainians have shown him a huge disrespect by successfully fighting back. And so, for example, the war crimes that have been committed are not accidental. This is part of his thing.
He needs to show that he and his people and everyone around him are so mean. They will just keep escalating and raising the bar, and they don’t care what people think of them. In fact, they want people to think these bad things about them because it makes them look bolder.
Given what you’re saying, what’s a reasonable way to think about the endgame?
There is no reasonable way to end this. There is only an unreasonable way.
It’s either he eventually takes over Ukraine and then makes his way to the Baltic countries to challenge us at NATO – or whether he is defeated by Ukraine and then overthrown by the Russian people for being the weak man who could beat Ukraine.
How do you make those two options a handicap?
I think each of those options has a 15 percent chance.
What is the remaining probability of 70 percent?
That he and the Ukrainians and all of us are stuck in this low simmer. It won’t be at the same level of horror as it is now, but at this low-simmering conflict that goes on and on and on for years.
Do you think oligarchs really influence him? Do you think that punishing them has been effective?
The war between Russia and Ukraine and the world economy
It’s like a drug for a certain type of disease. The medicine may be more effective depending on when you give the medicine. So if we had empowered the oligarchs’ pre-invasion and we’d done so with our arms enclosed with our allies, it would have had a much greater effect on his actions than doing it now.
It doesn’t mean we shouldn’t do it now, but he bet there wouldn’t be any serious sanctions because he’s done a lot of terrible things over the past 20 years and there hasn’t been any serious sanctions before.
But does Mr Putin care what the oligarchs think?
From him? New.
But it is extremely important that we punish all oligarchs for any reason other than hoping that the oligarchs will overthrow him. The oligarchs are holding his money. So if you see an oligarch worth $20 billion, there’s $10 billion from Putin. He cannot hold any money in his own name.
So he has to give it to someone who actually has the financial means to trade – to hold these funds. When we say we want to punish Putin, the only effective way to do that is to punish the oligarchs. And the reason is not to make him change his mind or get the oligarchs to overthrow him – in fact it is to prevent him from using this money to carry out this war in the future.
So it’s not like these oligarchs call him and say, “You need to get this out”?
The oligarchs couldn’t. Any oligarch who did so would be immediately arrested, impoverished and murdered.
What do you think US companies should do? What do you think of those who worry that if they leave, they will never come back?
First, continuing to do business in Russia after this invasion is the equivalent of continuing to do business in Nazi Germany when Hitler began persecuting the Jews. It is the same.
Every company has a moral obligation to leave Russia, whatever the cost. I don’t think anyone even needs to worry about returning, as everyone will be welcomed into a post-Putin regime. And in a Putin regime, I don’t think anyone should want to go back.
What about China? What impact does it have at the moment?
The only loophole in this whole thing is China, right? China has been very clear that it will not join the rest of the world in challenging or punishing Putin for what he is doing. I think China should be careful.
Why? Doesn’t China still influence the West?
Well, the answer is that the US will probably be less inclined to impose sanctions on China before consumers impose sanctions on China themselves.
So, do you think consumers will step in to punish China for supporting Russia?
I could envision a movement where every American consumer is looking at the label. Ultimately, whether organized by government or not, consumers have just as much power as governments – or more.
Do you think Mr Putin still has people following you?
The way Russia works is I don’t think he spends much time on me, but he ordered his government 10 years ago to go after Bill Browder by any means necessary. Until the warrant is revoked, there are people whose job it is to come after me, no matter what happens in the world. And they keep chasing me.
What do you think? Will sanctions on oligarchs pressure Putin to end the war? Let us know: dealbook..