Putin’s Progress

Cliff May
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Posted: Sep 30, 2015 10:48 AM
Putin’s Progress

Not long after the implosion of the Soviet Union, I attended a conference in Moscow. The topic: how Russia would evolve in the post-communist era about to begin. Most participants were confident and optimistic. A few of us Americans — not so much. I pointed out that in libraries around the world are hundreds of books on the transition from capitalism to socialism. But a treatise on how to move in the other direction? That would be like finding a cookbook instructing how to make eggs out of omelets.

You know happened after that: A small group of former Soviet officials and their cronies appropriated the bulk of the nation’s resources. But that doesn’t begin to describe the brutality and moral degradation of the kleptocracy that is Russia today.

What does: A book by Bill Browder, published this year, titled, “Red Notice: A True Story of High Finance, Murder, and One Man’s Fight for Justice.” Barack Obama should have it on his nightstand as he considers whatever proposals — or threats — may have been made to him by Russian President Vladimir Putin during their private meeting on the sidelines of the United Nations General Assembly on Monday.

Mr. Browder is a uniquely fascinating character. He is the grandson of Earl Browder, who led the Communist Party USA during the 1930s, when it was at its zenith. Perversely, Bill Browder determined to become a capitalist in post-Soviet Russia. Armed with a Stanford MBA, limited experience and barely enough Russian to order a bowl of borscht, he arrived in Moscow in 1996. Within two years he had become the largest foreign investor in the country, running the best-performing emerging-market fund in the world.

The opportunities he took advantage of were not based on Russian ingenuity and productivity. On the contrary, he recognized that “communism had destroyed the work ethic of an entire nation. Millions of Russians had been sent to the gulags for showing the slightest hint of personal initiative.” As for Russia’s robber barons, the oligarchs, they “engaged in asset stripping, dilutions, transfer pricing, and embezzlement, to name but a few of their tricks.”

But Mr. Browder was a “numbers guy,” adept at analyzing data that Russia’s bureaucratic ministries, vestigial organs of Soviet central planning, continued to collect. For example: Gazprom, Russia’s oil and gas giant, had given to various cronies “reserves equivalent to the size of Kuwait’s.” He calculated, however, that “more than 90 percent of Gazprom’s reserves had not been stolen. No other investor understood this. What should an investor do in a situation like this? I’ll tell you what: You buy the [expletive] out of that stock.”

He then went on to expose the corruption at Gazprom. In response, Mr. Putin fired Gazprom’s CEO. Before long, “Gazprom was up a hundred times from the price” at which Mr. Browder had purchased his first shares. “Not 100 percent — one hundred times.”

Mr. Browder determined to research and reveal corruption in other big companies in which he was investing. He found that “once the campaigns reached a fever pitch, the government would generally step in to flex its muscles.”

What he didn’t understand — at least not at first — was that Mr. Putin’s goal was not reform but wresting wealth and power from “oligarchs, regional governors, and organized crime groups” so he could take it “into his own hands” instead.

Once that was achieved, Mr. Putin’s interests no longer aligned with those of Mr. Browder. Before long, Mr. Browder was expelled from Russia and government officials began attempting to steal his companies. He hired lawyers, including Sergei Magnitsky, who began to unravel the schemes. Mr. Magnitsky took the evidence to the authorities, expecting they would end such blatant corruption

He was wrong. They threw him into prison where he was tortured and eventually murdered. Shocked and outraged, Mr. Browder embarked on a long and arduous campaign that in 2012 resulted in the Magnitsky Act, banning a list of Russian officials complicit in the murder from entering the United States or using America’s banking system.

Mr. Browder makes a convincing argument that the only thing exceptional about the Magnitsky case is that we have the details. In fact, “there are thousands upon thousands of other cases just like this.”

So now we know: The system of government in post-communist Russia is not a variant of democratic capitalism. In place of the rule of law, Russia has adopted rule by the lawless, many of them government officials, not least in law enforcement. Journalists who report on the situation risk their lives. Over the past 15 years, more than a hundred reporters have been killed in what might be called mysterious circumstances.

If you understand this, you also know that Mr. Obama’s “reset” with Mr. Putin’s Russia was misguided from the start. Mr. Putin has grand ambitions — for himself and for Russia. Clear-eyed Kremlinologists should not expect him to be satisfied with the slices he’s taken from Ukraine and Georgia.

And what a travesty that, because Russia sits on the U.N. Security Council, Mr. Putin got to cast a vote on the nuclear agreement with Iran — following which Democrats in the U.S. Senate decided they’d rather not vote at all lest the results displease Mr. Obama.

Mr. Putin is now in the process of re-establishing Russia’s military presence and power in the Middle East, shoring up the blood-soaked Assad regime, partnering with Iran’s self-proclaimed jihadis and their foreign legion, the terrorists of Hezbollah.

Memo to Mr. Obama: At one point in Mr. Browder’s riveting and revealing book, it appears he has outsmarted Mr. Putin. Mr. Magnitsky tells him not to celebrate yet. “Russian stories,” he says prophetically, “never have happy endings.”