Bill Browder: A Scared Putin Will Only Escalate the Conflict
Exclusive: Hermitage Capital CEO talks about Russia, Ukraine, and his new book.
Ollie Smith: Now, you may know him as the U.S. financier who made an enemy of Vladimir Putin in the early 2000s with investments in Gazprom. Bill Browder wowed the audience at Morningstar's Investment Conference last year, and a few months later, he is back in the U.K. studio to talk to me about the situation on the ground in Ukraine, Vladimir Putin himself, and his new book.
Bill, I'm really excited to meet you. Thank you very much for making the time to come in. Would you agree, first and foremost, that the military situation in Ukraine has been a disaster for Vladimir Putin?
Bill Browder: Total disaster. Putin thought he was going to roll in, within two days the Ukrainians would capitulate, Zelensky would flee, and that they would raise the Russian flag in Kyiv. He had no anticipation of what he and his military had in store. The Ukrainians have had eight years of training for this.
Everyone says this war started on Feb. 24, but this war didn't start on Feb. 24. This war started in 2014. In 2014, Russia illegally annexed Crimea. And then Russia sent in mercenaries to fight in Eastern Ukraine. And one of the big sins that we have played in the West is to somehow put that situation in Eastern Ukraine in some weird little box, that we call them "Russian-backed separatists," and somehow it's not a war. It's not a Russian invasion of Ukraine. It has been a Russian invasion of Ukraine. And for the Ukrainians, they have spent the last eight years getting up to snuff when it comes to fighting Russians. And so, they might have been terrible. Their military was a disaster in 2014 when they had faced the first Russian invasion.
Smith: But not anymore.
Browder: Now, they are fully war-weary hardcore soldiers, and they know how to fight, and they're fighting for a much better cause than the Russians are fighting for. They're fighting for their home, their freedom, their children, whereas the Russians don't even know what they're fighting for.
Smith: OK. We'll come on to Vladimir Putin in just a second. But do you attribute that military failure to an intelligence failure specifically or a cult of personality failure? What's gone wrong specifically there?
Browder: Well, what's gone wrong is that Russia is the most corrupt country in the world. Every government agency, every ministry, every department, 80% of the money is stolen by the person in charge of that department. And it's no different for the military as it is for the Ministry of Finance or the Ministry of Fuel and Energy. And so, you have this situation where it's like this mafia fiefdom and all the money was stolen from the military. I've heard these incredible stories where Russian soldiers have gone into Ukraine with their tanks, and without even fighting, the Ukrainians have offered them $25,000 personally for the tank, which costs $2 million, and they take the money.
Smith: Almost like the privatization of Russia in the first place. It was a bargain!
Browder: Exactly. And why are they taking the money? Because the soldiers haven't been paid. And those are the guys making the big money. The little money comes from selling the gas out of the gas tank of the tanks. So, they run out of gas before they even make it into Ukraine or on the highway.
Smith: There are all sorts of micro-conflicts going on underneath the military.
Browder: Well, it just doesn't work. The whole thing doesn't work. And so, you've got a bunch of people who are not motivated, where the situation is totally corrupt, where the planes can't fly because they've sold all the spare parts on the MiGs to the Indian military, who also use the MiGs, who have a very effective Air Force. And so, Putin with all of his chest thumping and grandiosity had sent in a totally hollowed-out military to fight a war against people who are absolutely trained up, ready to die for their country, and it's been a total disaster for Russia.
Smith: Coming on to the topic of Vladimir Putin, you'll be aware of the rumors circulating around his state of mind and indeed his physical health, the sense that perhaps something has gone dreadfully awry for him personally. What's your understanding of Vladimir Putin, the person here, his isolation perhaps, his mindset?
Browder: Well, so, on the one hand, his behavior is totally different than his previous behavior. Before, he always kept one foot in the civilized world, with Gerhard Schröder as his friend and Silvio Berlusconi, and hosting the World Cup and all those kind of stuff, going to Davos.
On the other hand, he was murdering, invading countries, bombing civilians, and he was able to keep these two things in balance. The main thing that's different now is him taking entirely the foot out of the civilized world and going fully into the criminal world. Having said that, he has always had a history of being a mass murderer, a terrible criminal, and somebody where this is not inconsistent with his behavior. I mean, just how did Vladimir Putin come to power?
Smith: Via the KGB and his ...
Browder: Well, he came to power very specifically by setting up a number of domestic terrorist incidents where a bunch of apartment buildings were bombed in Moscow. And it turned out that one of the apartment buildings didn't get bombed, and they caught FSB agents, his secret police agents, planting the bomb. What was the purpose of these bombs? To blame it on the Chechens and to start a war in Chechnya so that his approval ratings could go up as being a tough wartime president. And so, the original sin of his presidency was a domestic terrorist attack, killing hundreds of Russians to justify a war to kill tens of thousands of Chechens.
Smith: And here we are again.
Browder: Exactly. And so, is it abnormal? Has he changed? Has he gone insane? No. This is Vladimir Putin from the very beginning.
Smith: Do you think he is ill, personally?
Browder: Yes, he was mentally ill from the very beginning. He's a psychopath.
Smith: And physically? Do you think he is looking for some kind of final last hurrah before the inevitable end?
Browder: No. I think he has been a mentally ill man from the very beginning. He is a psychopath. He doesn't have any capacity for empathy. His heart doesn't start beating faster if someone was being tortured to death in front of him. His closest comparable is Hannibal Lecter. The only difference is he was a cannibal and Putin doesn't enjoy human flesh, but otherwise the same character. And that's what Putin is.
Is he sicker now than he was before? No. He is just more scared now. What motivated him to go into Ukraine, I believe, is fear that something will come along, and some fire would get started, and it would engulf him and his administration, and he would end up losing power. I think that's what he was worried about.
Browder: He watched the same thing happen in January in Kazakhstan. A dictator who had been there longer than him was engulfed in a weekend because they raised gas prices. And Putin saw that. He saw Lukashenko, who fabricated an election in Belarus, almost lose power. And Putin said "I need a war"—like he started his presidency—to stay in power, and that's what Ukraine is all about.
Smith: So, just finally on Putin specifically, is there any way back here? I mean, can he somehow stick his foot back in the civilized camp?
Browder: No. The President of the United States has declared him to be a butcher, a war criminal, and a mass murderer.
Smith: Where does that end then? With his head on a stick or ...?
Browder: Well, it ends one of two ways. There is the Kim Jong-un scenario where he carries on with a pariah state, making life worse and worse for the average Russian, and flexing his muscles and intimidating the West until the end of his natural life. Or the alternative is that the Ukrainians win this war. The Russians won't tolerate a loser as president, and they will take care of him. We don't have to do anything.