Bill Browder: Stop Western banks funding Russia’s war machine | DW Business

Western banks are raking in the profits from their businesses in Russia and contributing hundreds of millions to the country's coffers in the process joining me to discuss this is Bill Browder a financier with many years of experience working in Russia and speaking out against the government there so Bill thank you very much for joining us I just want to start by getting your initial reaction to this story are you surprised or is this simply on brand for European Banks well first of all let's just look at what's going on uh Putin started a war in February 2022 an illegal invasion of Ukraine he's killed hundreds of thousands of people Ukrainian soldiers Ukrainian civilians um caused hundreds of billions of dollars of damage to the country and the Western world has reacted by saying this is unacceptable sanctions have been imposed assets have been frozen across the board and in the midst of all this um there are these European Banks um that are earning billions of dollars in the midst of this and then paying hundreds of millions of dollars of taxes to the Russian government that's just highly immoral totally inappropriate it goes against the Geo uh geostrategic security interests of Europe it goes against morality and it's got a stop okay let's zoom in on this a bit so according to data collected by the financial times Banks such as raath Eisen unicredit Deutsche Bank Commerce Bank and others reported3 billion Eur in profit in their Russian operations and paid 800 million EUR in taxes to Russia and that's up from2 200 million from before the war now the banks would say that they can't move their assets out of the country due to Russian rules so they keep controlling them as responsible custodians or else they would have to abandon them and in process give them up to Putin's government do you agree with that perspective with that argument well so what we've seen is the war started um there was tremendous pressure on many companies Banks other other businesses to um uh withdraw from Russia hundreds if not thousands of businesses did withdraw from Russia so um that argument didn't work for most people and then a few remained and they came up with all sorts of what I would describe as mey mouth um explanations for continuing to earn these profits and let's just look at the bottom line here $800 million of taxes paid to the Russian government was used that money was used to purchase weapons to kill ukrainians it's effectively enabling war crimes to be committed and um uh I think they shouldn't shouldn't be there in the first place and I think that any profits that are generated um from from Russia money that they've that they've withdrawn from Russia should be used to fund the Ukrainian defense effort um this is totally inappropriate totally immoral and and uh and outrageous insult um to all the people uh of of Europe United Kingdom United States who taxpayers who are paying money um to fund Ukraine to fight back well we contacted the European bank with the most invested in Russia RF Eisen bank and they had this to say they say RBI has not yet succeeded in withdrawing from Russia this is due to the special framework conditions which make a sale very difficult and while RBI is working on a deconsolidation it is reducing its business activity in Russia since the beginning of the war the loan volume has decreased by 58% now back to you Bill you were talking about mey mouthed responses what's your response to that specific statement well based on on the numbers reported in the Ft the the aggregate um profits I should say the aggregate taxes of of um these Banks paid to the Russian government is increased 400% so I don't buy it um it just sounds like nonsense produced by in-house PR people and lawyers to try to cover up effectively the um uh uh a a situation where where they're they're in collusion with a with a Criminal dictatorship to commit crimes because I I I I do not buy the fact that that they couldn't withdraw other people have other people have taken their money out other people have taken huge losses on their money on their investments in Russia it just sounds completely inappropriate um insincere and um and I think that there should be some policy response to this so um what action do you think should be taken then so if the companies themselves aren't willing to give up their Russian businesses what should be done I think that there should be some type of effective windfall tax on any any company operating in Russia where that money where that windfall tax is specially allocated um to the defense of Ukraine and is there the political will to take that kind of action because we've seen for example in the EU it's taken a long time to find agreement on action to either take against Russia some early on it went quickly but since then there's been a Slowdown in the eu's response so is there even the political will to take that action and if not then what options are left on the table well part of the problem is that that within the EU um so let's take risen which is the biggest beneficiary of all this blood money from Russia um Rison is supported by their government and and with within the EU in order to take a policy decision it requires uh unanimity when it comes to foreign policy and so I can imagine a situation where the Austrian government would intervene on behalf of their Bank um and veto any decision and so it becomes very complex very difficult um and and I think that there are some some some argument to be made um that the US Treasury should get involved and the US Treasury should should think about imposing sanctions if these people continue to profit from Russian blood Money okay so absolutely taking a tough line on them but then what's your message to the boards of these Banks what would you tell them directly if you were in those boardrooms right now well what I would tell them directly is that there are a lot of people that are very upset about what they're doing and are going to be looking for policy actions and punishments for what they're doing and the punishments should not just apply to the banks but it should apply to the decision makers within those Banks and those individuals should understand that people like me and other many others are very upset and are looking going to look for consequences okay now speaking of of consequences but looking more to the Past in your book freezing order you mention the Russian laundromat Scandal where banks are found in Europe European banks are found to be aiding in Russian money laundering and how you facilitated a journalistic investigation into Dana Bank specifically um since this entire War has has broken out since Russia invaded Ukraine um has that changed the Dynam the Dynamics on that have the investigations move the needle on that is the era of funneling illicit funds via Europe now over well it's very interesting because it's it's a it's a mixed picture um on one hand you had for example as you mentioned danky bank which was one of the huge huge launderers of dirty Russian money in years past via their Estonian branch and that's completely stopped I think we've also seen ltia and Lithuania which which had banks that were doing money laundering that stopped and I think we've also seen Cyprus stop but strangely um uh uh Austria as you mentioned in the beginning of your report hasn't stopped that risen bank is deepen deepened up to their in this stuff and so it's a mixed picture um it's definitely harder for Russians to move dirty money around um they have a few uh European banks that they can collude with they also you work with banks in Dubai banks in Turkey banks in Armenia Kazakhstan um and of course they work with cryptocurrency um I would hope that that um all of these opportunities um eventually get shut down because the only way that we're going to stop this war is to starve Putin of his financial resources and the Putin and his uh KGB colleagues are out there always um looking for alternative paths for their money because this is at the end of the day a war of resources and the resources that Russia has are oil and gas and metals and then they generate cash and then the cash needs to be used to buy things and if we can cut that off then they won't have the the ability to wage this war but that requires a lot of effort and it requires um a a very consistent approach by Western governments to stop these funneling to stop these uh flows of money yeah though I should say though I'm sure Raph Eisen would dispute any involvement in Russian money laundering specifically as separate from its activities in Russia just to make that clear because that's what I focus the question on um but your point notwithstanding of course something that you mentioned one of the reasons that the banks are doing so well is the buoyant Russian economy but much of the growth in GDP is government spending on the military so you could call it a sugar rush in the economy that there's nothing behind it is the state of the Russian economy at the moment sustainable well so first of all we we have to understand that um where do we get the information that the Russian economy is growing we get it from Russia Russia lies in every other area um of of activity there's no reason to believe that the economic statistics being generated by the Russian state statistics committee though it is it is believable that the government is pouring massive amounts of money into the military so that of course would boost GDP but it doesn't say that the economy the underlying economy is healthy um we've seen um for example an an increase in in exports in certain areas you can't necessarily just directly trust the Russian export data but you can look at imports from other countries so there are there are ways of determining that more or less um that the Russian economy at the moment just based purely on the figures is doing reasonably well certainly better than people thought it would but perhaps underneath the surface there's a completely different story what's your thought well it's it's a totally different story under the surface so first of all one of the main uh exports of Russia um was the export of natural gas to Europe now Russia made their own decision to cut off the natural gas to Europe and specifically Germany but many other countries as well and and the natural gas sales to Europe accounted for a huge proportion of Russian government uh revenues of tax revenues and that's been cut off uh we also have uh more than $300 billion do of Russian Central Bank Reserves which are frozen and there's now lots of talk about confiscating that money there's hundreds of billions of dollars of Russian oligarch money which has been frozen in the west Russian banks are cut off from the Swift payment system Russian uh all Russian companies and Russian government no longer has access to the international Capital markets um with the exception of these Banks and some other businesses most western businesses have fled Russia a million um able-bodied um smart Russian men have fled the country to avoid the draft um this is not an economy in good shape this is an economy that's that's really sort of uh stilted in all sorts of ways and as you say um to the extent that it hasn't there hasn't been a catastrophe um is because they've taken whatever money they can generate from the sale of oil which which they've been selling in large quantities to India and China and various places like that and then they take that money and they spend it um either on weapons in North Korea and Iran or they spend it domestically on on Military production and on soldiers and so on and so whatever numbers and I would argue that the econom is not growing I think that they're making those numbers up but to the extent that it's not catastro catastrophic Ally shrinking is because of this military spending okay and so you think that for example the replacement of essential Parts through Imports to third party countries so for example Germany exporting to Kazakhstan which then gets sent to Russia so this supply of essential needs for its economy and also like you mentioned sales of Energy Products to India to uh China as well all of this is not able to mask the problems that are happening underneath surface this goes nowhere near it's also of course still sending um some fossil fuels to to to Europe still it's not entirely cut off if we look at oil for example so this doesn't make up for it is what you're saying that and that actually the the core of the economy is rotten it's it's totally rotten I mean the uh the economy wasn't in great shape before all this started the economy was very very heavily weighted towards resource exports they didn't have that small and mediumsized Enterprises in any kind of meaningful way um and now a lot of that export um economy is getting stifled you have we've we've successfully cut off their ability to sell diamonds for example that's one area that we're not that sensitive about the O the oil price cap is a is a joke that that that price cap doesn't really work um but their own self-inflicted wound of not being able to sell gas based on their own decision um has been terrible for for the Russian economy and so it's it's hard to look at the Russian econom and come up with any kind of um reasonable um prognosis other than it started out as a stilted economy and now it's in a much worse position they're never going to be able to re reestablish their market for gas in Europe which is a hugely important part of the economy Europe is done with Russia Europe is going to diversify from Russia has Diversified Germany in particular has Diversified and so I think that they're U it really in not a good good place and we could make them in a in a much worse place if we had the wherewithal to stop all of this uh sanctions evasion or you know in this particular case um Western companies enabling uh Putin and and his economy okay um I want to kind of look at things from the the other side of the equation now so how has Russia's war in Ukraine changed the shape of the European uh economy over the past couple of years you touched on a few points there so be interesting to hear your thoughts on that well it's it's very interesting because um uh I've I've been involved in in advocating for sanctions uh since 2009 when Sergey magnitsky my lawyer was murdered by the Russian State and I tried to get consequences imposed on Russia through the through what's now called the magnitsky Act and the US passed the magnitsky act in 2012 um and uh UK did in two Canada did 2017 UK in 2018 but it took it took until 2020 for Europe to do it because Europe is very slow on the uptake on all this stuff but what's interesting is that since the War has started when the first wave of sanctions started to come out against oligarchs and Russian companies and so on Europe was actually in a certain way more um robust than the United States and more robust than the UK Europe had the a better uh list of oligarchs to sanction um a better overall sanctions program I would argue and then Germany for example you know went from being a a total Russian enabler you know building the northstream pipeline even after Russia took Crimea um to being a country that that switched almost immediately from buying Russian gas I think 42% of German's gas came from Russia to zero% buying gas from qataris in America Etc Germany also went from being a country that didn't do any any defense uh exports uh to uh exporting a lot of weapons to Ukraine um and so it's it's changed it's changed the nature of of Europe completely now it hasn't changed it in a way where um it's fully F functional you still see a lot of a lot of dysfunction but um Europe is on the front line if if Putin succeeds in in Ukraine then he's going to make a move on on the baltics which are NATO members and if he succeeds on the baltics which he which he may very well do if NATO doesn't uphold its treaty obligations if America steps aside which could happen if Trump is President um then the next stop is Poland and then's Germany and so this is a real uh a real war that real impact on on Europeans and so Europe has has woken up now not has it woken up enough uh in my opinion no I think there's a lot more waking up to do but it's it's a lot different than it was uh you know three three and a half years ago um I think everyone understands that that Russia uh has has malign intent and that intent goes well beyond Ukraine that that brings me to my final question we're seeing among certain political leaders certain commentators um I don't know even if if War fatigue is the right way to put it because that kind of um I mean for for these countries that have had all of these economic issues in Europe in the past few years there's been grumblings about the billions and billions of support pledged to Ukraine of bolstering their own security as well spending on on the military can Europe afford to give more well there's two questions um can because Europe will be it will cost Europe literally hundred times more if if Europe is at war with Russia than than the cost right now and so it's a question of paying now or paying a lot lot more later and some people may not realize that others do but that's the reality all right Bill Browder from Hermitage capital thank you very much for that very insightful interview thanks so much thank you

Channel: DW News

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Length: 18min 33sec (1113 seconds)

Published: Fri May 03 2024