Unprecedented Sanctions Send the Russian Ruble Tumbling

CHRISTIANE AMANPOUR: Now, unprecedented sanctions have sent the Russian ruble tumbling. The United States has cut Russia’s Central Bank off from its $630 billion so- called sanctions-proof war chest. Dubbed Putin’s number one enemy, Bill Browder is the CEO of Hermitage Capital and the architect behind the Magnitsky Act, which President Biden has used to sanction Vladimir Putin and his oligarch cronies. Browder sat down with Walter Isaacson to discuss the effect of cutting him off from his own wealth.

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WALTER ISAACSON: Thank you, Christiane. And, Bill Browder, welcome to the show.

BILL BROWDER, CEO, HERMITAGE CAPITAL MANAGEMENT: Great to be here.

ISAACSON: You were the largest, at one point, financial investor, foreign financial investor in Russia. What will these sanctions mean to the Russian economy? And what things can we expect?

BROWDER: Well, there’s a whole range of sanctions, from sanctioning the Central Bank, to the — to a number of state enterprises, right up to the oligarchs. So, the — in terms of what affects Putin the most, it’s not necessarily the ones that do the most damage to the economy. What affects Putin the most is the ones that does damage to the oligarchs, these multibillionaire individuals that we see on the “Forbes” list and the ones sailing around in their yachts. And the reason that Putin cares about that most is because they hold his money for him. And so if we’re trying to make a direct statement to Vladimir Putin, and go after his own personal interests, that’s the one that really stings him.

ISAACSON: Can we seize their yachts or their apartments where you are in London?

BROWDER: Absolutely. And now, after what Putin has done with Ukraine, that is the plan. I’m actually calling in from the British Parliament right now, where I have spent the morning discussing specifics on how to go about doing that. And there’s now appetite to do that for the first time in 20 years. The British are going to seize oligarch assets. And I think the Europeans will and the Americans will, and this is a total game-changer when it comes to affecting Vladimir Putin’s calculations.

ISAACSON: Well, you’re coming to us from right in the heart of the Parliament. Tell me what you have done this morning, who you have met with and what ideas you’re pushing?

BROWDER: Well, so the most important one is that the list of oligarchs needs to be long, and it needs to be coordinated. So, for example, there are oligarchs who have already been sanctioned by the United States, even four years ago, that aren’t on the British sanctions list. That makes no sense. Second, the list of oligarchs by all the countries is still fairly short. There’s a number of people who are supporters of the regime, who are trustees of Putin’s money, who are enormously wealthy who we can go after, and those names need to be added to the list. And then the last thing which I have been discussing — and this is really important — is that the governments can’t go after the assets if they don’t know where they are. And there’s a lot of people working in the city of London and working in banks in New York and other places that had been involved in hiding the assets for the oligarchs. And so there should be amendments to the sanctions law which requires all of the Western enablers to come forward with information about the Russian oligarchs who they’re looking after. And that should be put into the law. There should be penalties, including prison for those people, if they don’t come forward with that information to the government.

ISAACSON: The Central Bank of Russia has stopped trading on the ruble today, but it seems like it’s now down to being worth about one U.S. penny. What affect will that have? Is that something good and we should keep pushing?

BROWDER: Well, you know, it’s one of these things where we wouldn’t have had to do that if we had been tougher leading up to the invasion. We could have stopped this invasion by all work together, all going after on a narrow basis, Putin’s interests, but we’re now in a situation where Vladimir Putin has declared major war in Europe and everything has to be thrown at him, everything. And we have sanctioned SWIFT., in other words, unplugged a number of Russian financial institutions from the main information connecting network, but we have only done it for 70 percent of Russian banks. And so, what’s going to happen very quickly is that the Russians will modify all their payments to go through the other 30 percent of the banks. And so, that needs to be fixed. That needs to be upgraded so all Russian financial institutions can no longer transfer money in and out of the country. I mean, it’s painful for their average Russian. Vladimir Putin is not eating less well because of that.

ISAACSON: Explain to me why we’ve cut off 70 percent of Russian banks from the International Banking System and its messaging system but we’ve left 30 percent there? Was there a reason and why don’t we just say 100 percent?

BROWDER: Well, I would like to be able to explain it to you because I can’t because I wasn’t in these smoke-filled back rooms where dirty deals were being done and people were making compromises on behalf of interests that we don’t know about. But I can guarantee there were people out there from different countries saying, this will affect my economic interests, don’t do it. And in doing so, they’re effectively trading their economic interests for the national security of the world, national security of Europe, the United States and the U.K.

ISAACSON: What should we be doing with gas from the Russian energy company that’s mainly (INAUDIBLE)?

BROWDER: Well, basically for every European household that’s heating their house with Russian gas, we’re paying money to the Russians for their war machine to invade neighboring countries. And so, we shouldn’t be doing that. And unfortunately, it’s not something that you can just change overnight. This should have been dealt with a long time ago. It perplexes me why Germany has become more dependent on Russian gas over the last 10 years then less dependent. Russia has been using gas as a weapon for a long time. And certainly, gas is the main way in which they fund their illegitimate activities. And so, going forward, I think there needs to be a major rethink of how Europe gets their gas and they need to find ways, including ways of having to pay more so that they’re not dependent and not funding Russia.

ISAACSON: Does that mean we should be exporting and producing more gas and oil and that sort of goes against the climate plans of President Biden? But should we temporarily open our strategic reserves, allow more production of oil and gas, ask the Saudis to do the same?

BROWDER: Well, I think we’re in an emergency situation. It’s — I, you know, fully support all the initiatives to reduce carbon emissions. But at the same time, if Vladimir Putin starts a nuclear war, we’re not going to be around on the planet to enjoy a cleaner planet. And so, we have to make compromises, at least, in the short-term. And that would require building LNG terminals in Europe. That would require U.S. assisting Europe in becoming less dependent on Russian gas. It would require Qatar and Saudi Arabia and other countries who aren’t causing these problems to cooperate as well. There needs to be a major rethink. And Germany just announced that in the last couple days that they’re going to do that. It’s an extremely important part of not funding Vladimir Putin and not being dependent on Vladimir Putin.

ISAACSON: You just off handedly said if Russia starts a nuclear war, was that just a figure of speech or do you worry that him bringing the troops up to a new nuclear alert means that this could possibly escalate to being a nuclear attack by the Russians?

BROWDER: Well, sadly and scarily, I know Vladimir Putin very well. I’ve been involved in a conflict with him, a very heated conflict over the last decade. And what I learned about Vladimir Putin is that he never backs down. He can never show weakness. He always escalates. And he’s not interested in the national interest of Russia. He’s only interested in staying in power. And he’ll pretty much do anything if he can stay in power. And so, I don’t think anything is off the table with Vladimir Putin as we saw in the last 24 hours when he, all of a sudden, because of financial sanctions he’s now ratcheting up and using nuclear jargon.

ISAACSON: Your decade-long dispute with Vladimir Putin involved when you were the largest foreign investor in Russia, trying to expose corruption, and you did. You showed the corruption both of Putin and the oligarchs and that meant that not only did you have to leave the country, but your lawyer was tortured and killed. What did you learn about the corruption and what did you learn about Vladimir Putin?

BROWDER: So, we were exposing corruption in gas prom and other companies that I was invested in. I was expelled and declared a threat to national security for exposing corruption in state companies which they should have been happy to try to get rid of that corruption. After I was expelled, my lawyer, Sergei Magnitsky, discovered major $230 million government corruption scheme. He reported it, testified against the officials involved and in retaliation, when he was arrested, tortured for 358 days in Russian custody and killed 12 years ago. And what one could have — he should have been declared a hero for exposing the corruption, instead, Vladimir Putin put him on trial three years after killing him in the first in the first — and convicted him in the first-ever post hue mouse trial in the history of Russia, first time the Russia ever has convicted a dead man. And what it shows is that Vladimir Putin is a criminal. He’s a guy who is interested in protecting the ill-gotten gains of himself and the people around him. He will kill to protect those ill-gotten gains and everything about his narrative that he’s a patriot and that he’s looking after the interest of Russia are exposed as being false and a lie just based on the story of me and my lawyer, Sergei Magnitsky.

ISAACSON: So, tell me about the root causes of what he has just done by invading Ukraine. To what extent is it that he wants to keep NATO off of his border, as he said, to what extent does he just hate liberal, western- style democracies flourishing and to what extent is it simply to protect his place in power and the money that he’s stolen?

BROWDER: Well, from my detailed knowledge of this man, it’s all about him staying in power. So, Vladimir Putin has been there for 22 years. In his 22 years, he’s stolen an enormous amount of money, I would guess $200 billion. Maybe more at this point. He’s stolen that money by killing people, taking people hostage, doing all sorts of terrible things. And that money should have gone to paying for roads, hospitals and other public services. So, after 20 years, people are tired of him. And he sees the writing on the wall. In Belarus, 18 months ago, the people rose up against Lukashenko and wanted to replace him after fraudulent election and it was only because Putin sent troops in that they ended up getting — that Lukashenko is still in power. Is Kazakhstan, just at the beginning of this year, there was a major effective coup where they got rid of Nazarbayev family. And so, Putin saw this and he thought, this is coming for me. This is going to happen to me if I don’t do something dramatic. And so, what do you do if you’re a dictator, you need to stay in power in order to stay alive and you believe your time is almost up, you start a war. You deflect whatever anger people might have towards you towards a foreign enemy. And so, I don’t believe any of the rhetoric that Vladimir Putin has said about NATO, about the Ukrainians about the Nazis, it’s all made up. It’s all made up for the purpose of justifying a war and he needs the war to stay in power.

ISAACSON: To what extent do you think he’s vulnerable? What is it that could topple him? The oligarchs, rising up in the streets or nothing?

BROWDER: Well, I think that his biggest vulnerability is that he’s stolen all this money over the last 20 years. He keeps the money with oligarchs in the West. And that’s his Achilles heel because we have access to freeze that money. And I’ve been screaming from the rooftops for the last month that we should go after the oligarchs’ money because that’s what Putin cares about. It’s his money. And he values money more than human life. And it’s very interesting because the moment we started talking seriously about going after oligarchs, he’s threatening nuclear war, not that he’s going to follow through on that today, but it shows you how much he values that, how upset he is by that. And that’s our one bit of leverage. I don’t think that at this point freezing those assets is going to stop him in Ukraine. But what I do think is that all of a sudden, the calculus changes. On one hand he has the reward of staying in power. On the other hand, all his money is effectively inaccessible. And we’re now in the game of trying to make it as costly as possible for him to do these terrible things that he’s doing. And we should absolutely go after the thing that he values most, which is his money and by doing that going after the oligarchs.

ISAACSON: But hasn’t Putin already factored sanctions into his plans?

BROWDER: There’s no way that he can factor the sanctions of his own money and the oligarchs because they’re so fully entrenched, they’re so fully invested in the West. Now, you have to understand, as an oligarch, looking after Putin’s money and looking after their own money, they don’t want to keep that money in China or Saudi Arabia or Nigeria, they want to keep it in a rule of law country. They want to keep it in New York, in London, in the South of France. And so, sure, there probably have been some preventive measures that they have taken knowing that sanctions are coming down the road, but, you know, I can point out, you know, 15 houses in London that are worth a lot of money that they can’t move that are owned by Russian oligarchs that could be frozen today.

ISAACSON: So, you’re in parliament right now discussing possible things. Have you pointed out the homes in London that the oligarchs own? And is there something that the British government could do?

BROWDER: I have. But more importantly, I asked them — there’s a piece of legislation coming through called the Economic Crimes Bill, which is happening imminently. And I told the government and members of parliament that there needs to be a provision in the Economic Crimes Bill that also includes the Western enablers of the oligarchs, all the bankers, accountants, lawyers, trustees so that they are required to come forward with information on where the oligarch’s assets are. Because some of these things are obvious and some of them are hidden. And all this stuff should be available to the government so that those assets can be frozen and seized.

ISAACSON: Today, the United States announced it was cutting off Russia’s central bank. What impact does that have?

BROWDER: Well, that has a very dramatic impact. If you cut off the central bank, then effectively, they have no access to whatever dollars they have on their reserves and the European Union has done the same thing. And what this means is that even though Vladimir Putin has accumulated $640 billion of central bank reserves, that money is effectively inaccessible. So, they can’t use it to fund their war effort and they can’t use it to support the ruble as it goes into a free fall as a result of the SWIFT sanctions. And so, it’s a very powerful tool. Very blunt instrument, but a very required tool based on the fact that what Putin has done by invading Ukraine.

ISAACSON: And in response, a Russian central bank has raised its basic interest rate from about 9.5 percent to 20 percent. What does that do to the oligarchs? What does that do to the average Russians? And for that matter, for people trying to take the money and flee the country?

BROWDER: Well, when a government raises interest rates like that, what they’re trying to do is prevent people from converting their currency to a foreign currency by saying, it’s more attractive to keep your money in rubles. I don’t think it’s going to work. I don’t think that there’s any exchange rate at which people want to keep their money in rubles. They just want to get out as quickly as they can. So, in addition to raising the rates, they’ve also limited the amount of foreign currency you can buy with your rubles. Effectively putting in place pretty harsh exchange controls. And they do that because they’re running out of money. Even though they have all this money in the bank, they can’t access it. And so, you know, we’ve — you know, these are tough measures that have been imposed for sure. They will have a big effect on the average Russian. And I guess the logic behind it is that a lot of average Russians don’t want a war in the first place. And they particularly don’t want a war when it’s costing them so much personally. And although, Russia is not a democracy, Putin can’t help but see that people are pretty angry about the situation.

ISAACSON: Bill Browder, thank you so much for joining us.

BROWDER: Thank you.