A recent article in the Daily Beast does a good job of connecting the dots between America’s policy toward Russia and the story of how investment manager Bill Browder ended up on Putin’s list of enemies. The article, which is in part a review of Browder’s new book, describes what happened when Browder’s firm, Hermitage Capital Management, went from Kremlin favorite to public enemy:
[When Browder went to Russia, he] found that shares in Gazprom and other companies were astonishingly cheap. Investors assumed managers were ransacking their companies’ assets. Browder bought shares for peanuts, and then his researchers exposed the corruption. As the authorities made their arrests, Browder’s shares shot up in value. He turned $25 million in seed capital into $1 billion. The financial press rated his firm, Hermitage, the best performing investment fund in the world in 1997.Contemporary culture does not cast brash fund managers as heroes. But although Browder does not make a big deal about it, his defiance was heroic, and remains so. Browder and Hermitage’s staff had to show physical courage, as critics of the kleptocracy ended up dead. Early on, Browder realized Russian business was like a prison yard. “When someone is coming for you, you have to kill him before he kills you. That’s the calculus that every oligarch and every Russian politician goes through every day.”So it is, but Hermitage’s success also depended on Putin’s blessing. When he took power in 2000, the oligarchs were his rivals. Every time Hermitage exposed a fraud, Putin’s officials intervened. Until, that is, October 2003, when Putin arrested Mikhail Khodorkovsky, Russia’s richest man and Putin’s most dangerous competitor.
After the Yukos/Khodorkovsky affair, Putin really strengthened his control over the oligarchs, and the kleptocracy hit its stride. The regime went after Browder; officials pretending to represent Hermitage committed “the biggest tax fraud in Russian history.” Sergei Magnitsky, Browder’s lawyer, was investigating the fraud when the Kremlin had him imprisoned and killed. The U.S. law enacted in Magnitsky’s name is the result of Browder’s long search for justice.At the same time (Magnitsky was killed in 2009; the Magnitsky Act passed in 2012), a new Administration in Washington was pushing a policy of “resetting” its relationship with Russia, an ambition that now seems not just misguided but downright irresponsible. The Daily Beast article reserves some choice words for this Obama policy:
To anyone who harbors illusions about Obama’s foreign policy, Browder’s account of the struggle to get sanctions passed into US law will be a salutary lesson. He received staunch support in Congress. But the Obama presidency and the Clinton State Department opposed him until the last minute. Their resistance was a bleak tribute to their greatest foreign policy misjudgment. They imagined they could “reset” relations with Russia. If they were nice to Putin, Putin would be nice to them.The Obama administration was participating in the immortal turn the “progressive” West took after Iraq. It reasoned the Bush presidency had been a disaster, and that was true. Apparently hostile forces, it continued, were a rational reaction to western provocation, which was at best a quarter truth. And if we removed the “root cause” of our aggression, our enemies would vanish, which was pure fantasy.
Future historians will discuss the naiveté of the Obama Administration’s approach to Russia for decades to come, marveling over the fatuous reset and the willful blindness to not only the dictatorial character of the regime but also its bitter hostility to the values that liberal American democrats care most about. As the Daily Beast article, which we encourage you to read in full, says of Russia under Putin, “in Russia…there is no state above the crime gangs. They are all one.”[This post has been edited.]