Surveillance: Ukraine Talks with Browder

and of course on the Bloomberg Termament. We continue our discussion, folks, John Farrell, Lisa bramwa to myself and now is a conversation that could be two hours long, because there is no one with a family more qualified on Russia and

the fears of Mr Putin than William Browder. Yes, he is founder, chief executive officer of Hermitage Capital Management, But what you don't know is his family's heritage back to the height of mathematics in America and before that, courage on continental Europe, Central Europe and the bravery of fighting off Tyranny. Bill Browder honored to have you with Bloomberg Surveillance today. What would Earl Browders say? What would he

say long ago to standing up to Vladimir Putin? Well, so, just just to make it clear, so my grandfather was the General secretary of the American Communist Party, and at a time when when Russia and America were at war with the Nazis the moment that the war ended, um Uh Stalin kicked my grandfather out of the Communist Party for being too much of a capitalist and then started murdering his followers all over all over Eastern Europe and other places. And and there's a famous car we are

we returned. I don't mean to interrupt, Bill, but this is so so important with your perspective. Are we returning to that tyranny? Um There's there's no question that we're returning to that year. And Vladimir Putin um is is a nineteen thirties style European dictator who is doing exactly I wouldn't compare him so much to Stalin as I

would compare him to Hitler. Um what we have going on right in this minute, as we as we speak um is is the equivalent of when Adolf Hitler was taking a chunk of of Czechoslovakia and everybody was trying to figure out what to do, and first they tried to appease him and it didn't work, and then we ended up with with the World War two. Glandimer Putin is starting with Ukraine. And make no no mistake about it, this is not the end goal. He he has gotten

bigger things in his sight. He wants, he wants to dominate the European continent, and he will move further. Bill, are you surprised that the US hasn't joined the reporting, at least from the Financial Times saying the EU is preparing to freeze the assets of Putin and Lavrov Um. Well, first of all, i should say that I'm surprised that

europe has taken such a step. I mean, I've spent the last ten years in a conflict with Gladom Reputin trying to get the Europeans to do the bare minimum things in terms of human rights abuse so on in Russia, and the European Union has always been on the back foot, never doing the right thing in the in the US has always been the the country taking the lead on this, and so I'm very surprised that the European unions done this. I'm very happy that the European Union has done this.

If it's for real, um and uh, and I'm sure that the US will will will quickly uh come into conformity with it. I don't think that it's uh, it's just if you were to look around. Uh, you know, two weeks ago, the Germans were not even ready to supply any military equipment to the Ukrainians other than five thousand helmets, and now they're saying Vladimir Putin it's a

pretty big staff bill. Given your intimate experience with the financial system of Russia and the subsequent problems that can emerge there, what's your view on how effective some of these sanctions, some of these asset phreezes could be at a time when so far it seems like they have not caused Vladimir Putin are retreat in any way. Well,

so far they haven't sanctioned Vladimir Putin. I mean, so, first of all, it's very important that that when they say they're sanctioning Gladim Reputin, they're sanctioning also his trustees. Because Gladim Reputin, it's it's very symbolic to say we're sanctioned Vladim Reputin. He doesn't have He's an extremely rich man. He's worth i would say more than two billion dollars, but none of that money is held in his own name, is held in the name of people he trusts on

handshake agreements. I called him all the Garth trustees. And so unless you're to sanction the top fifty aligars at the same time, you're not. I'm actually going to get his money. However, if you do, if you were to sanction those people, um, you're you're hitting him exactly where it counts. Putin, he doesn't care if you sanction a Russian bank or if you do something to the oil industry.

He cares about his own money. And if you actually get his money, then then then he's he's going to stop and pay attention, because what you know, he's he's spent. He's worked very hard for the last twenty years, torturing, killing, hospit taking hostage people and to try to get all their money, um, and to have all the money taken a way. That's twenty years of hard work for a dictator. And so that would work, that would have a real

and serious and dramatic effect. Bill. I want to get to headlines with John Ferrell and I want you to stay with us. But very importantly, your hermatage Capital is based off St. Petersburg and one of the glorious museums of the world. That's two hundred and fifty miles from Estonia. At what risks are the Baltic states based on your experience of Russia, UM, well so in my estimation. So after Putin is done with Ukraine, UM, assuming he gets

done with Ukraine, and that's not a given. The Ukrainians are fighting like Allen and and actually having some success at the moment. But assuming he's done with Ukraine, UM, then his next goal is going to be to test the resolve of the United States and many countries in the EU to defend the Baltics. We we have that we're all members of NATO. It's NATO is a one for all, all for one military defense organization and and gladi Reprutin in his mind doesn't believe that we will

all come and defend Estonia or Lithuania. He doesn't believe that America want to go to war with Russia to defend the country most people have never heard of. But I would love your reaction to these headlines in real time, so allow me to bring them to you. As you know, a little bit earlier this morning, there were talks between the Russian leader and the Chinese leader. According to State TV, the Chinese urged Russia and Ukraine to negotiate to address problems.

We just had a headline moments ago. Let me read that out for you and then I'd love your reaction. Russia is ready to send a delegation to Minsk for Ukraine talks. This according to Winter Facts. They're ready to send their defense minister, foreign minister for delegation for talks. This according to inter Facts. But just as you react to that, what is your first reaction? What does that mean? How would you interpret that kind of report? The Chinese

were spoken to the Russians. We're getting a headline now from Into Facts they're ready for talks. I'm thinking about what their objectives are at the moment, how the Ukrainians might receive a statement like what are you thinking about? Well? On one hand, we could say, wow, good news, Okay, there's talks now, um, But but the reality is, and I've been involved in all sorts of ugly conflicts and negotiations with the Russians. They stick this stuff out there

to try to give a little bit of hope. You remember a couple of weeks ago they said we're we're we're withdrawing our troops in the border. And remember that that bunch of pictures of a few tanks going back, and everyone that the markets went up. Everyone reads the side of relief and it meant nothing. The Russians can do talks. They should have been doing talks all along.

Um I I wouldn't. I would put like a two percent probability that this leads to the end of the conflict in any It's it's pure theater in my mind, but you know maybe I I'd love to be proven wrong. Well, this market is responding to that theater. Not a big move, sir, But Tom, we've seen in a move of about a third of one percent, a quarter of one percent into

positive territory on the SMP looking at Tenure Bundo. It's now with the high set a session up five faces points to about positive and t two off the back of the headline from into facts Tom that Russia is ready to send a delegation to Minsk for Ukraine silks. Some of the haven ratio is doing well as well. Swiss Frank a little bit weaker. Bill Brodder and the

markets be a tool against Vladimir Putin. The markets in a broader sense, the actions of London, the City, the actions of Wall Street, the actions of corporate managers, boards of directors exiting Russian companies. Does any of it have power over his decisions? I think it all has power.

I mean, Vladimer Putin has spent twenty years recruiting all of these uh Gerhard Schroeder's and the town former Italian prime minister and Austrian foreign minister, you know, and and all of a sudden, after twenty years building up his credibility, they've all in one fell swoop designed from their from their positions. Um, markets have have an enormous effect on Vladimir Putin. He's got to have enough money to do all this stuff, and and so we we got it.

So everyone says Russia has got six hundred billion of hard currency reserves. Well let me tell you something, UM, if if he's totally isolated from that, they can burn through that real quick. The words that's been used by some of our guests has been pria. If he's a prior, how will we know he's separated? And what will that mean? With all your knowledge? Bill Browder of Moscow in St. Petersburg, how will the domestic Russian elite and the less elite,

react to Vladimir Putin as prior as removed. Well, I mean they're they're not happy at all. The Russians love to, you know, travel to Paris and Italy and all these places and spend their money and live it up and pop the champagne and buy properties and doing all this

kind of stuff. And now all of a sudden, you know that they're they're not going to be welcome and their their bank accounts will be closed and and it's gonna be you know, it's it's not a lot of fun for the Russian elite to be in in this position. But I should point out that Putin doesn't really care about what his people think about him. He doesn't he

doesn't want to be overthrown by his people. But he's running a dictatorship, and anybody who says a bad word about him on the telephone and in private, um, we'll get into trouble. And so it's not like these people are gonna if they're unhappy because they can't go to skiing in course of all France, Um, there they have any impact on him. But they're they're definitely not happy. And there's been demonstrations all over Russia over the last

twenty four hours byular people saying this is not good. Bill, you were talking about the theater that you are basically interpreting this as that, basically he's putting out a neugget of hope. Who is the hope for? Is it for the US, Is it for Europe? Or is it for China? Now it's not for China. China, China has got nothing to do with this. Um. The purpose of this is that he's seen how really as super angry everybody has

become around the world. And I think he's surprised that the Europeans have stepped up and done all these dramatic things like put his name on a sanctions list and and uh. The best way of of trying to like create some divisions among allies is to hang out a tiny little fig leaf of hope so that everyone says, wait a second, maybe we shouldn't be so tough, Maybe we shouldn't follow through on that, Maybe we shouldn't do the next terrible thing, Maybe we shouldn't cut them off

from swift, let's negotiate that. That's how he that's how he plays this game. And then he hopes that in two weeks time, we've all you know, all of our uh you know, outrage has subsided to it to to a point that he just carries on doing what he's doing. But but he doesn't have us all aligned together trying

to cause him trouble. But we're lucking to have you with the Sismonic Thank you very much for your situation of what we've tried to do the last number of days with our wonderful team is bringing you authorities like General Hodges, infantry on the ground for the U. S Army, a U S Army putting seven thousand more troops into Europe.

I believe this morning or last night, we just showed you Bill Browder with all of his family's heritage of Eastern Europe, the difficulties of Stalin and Ford, and now we do the same thing from Ukrainian village in Chicago, Illinois. If you are Ukraine or from Eastern Europe, there is a huge position in Chicago, Illinois of people watching this crisis. One of those is a daughter of Chicago, Natalie Drusco,

joins us in Puerto Rico at a swarming. She's a former Ukraine Minister of Finance and of course her service to Puerto Rico with their financial issues as well. Natalie, thank you so much for joining us. You are one of the lead members of Ukraine. There's no question about that one. Have you learned in your phone calls to Kiev and all of Ukraine in the recent hours, It has been a horrible night and morning in Kiev. Uh.

The bombing has taken everyone by surprise with its intensity. Um. Most people are in bunkers, in bomb shelters, spent the night in those bomb shelters right now being advised to stay there. Uh. And as you probably know, I think, Uh, it's fair to share with you that there is an incredible disappointment with the strength and with the urgency of the Western response to what is in essence and unprovoked genocide of the Ukrainian people. What does the Ukrainian community

of America need from President Biden. Well, this is what the Ukrainian community in Ukraine needs. The Ukrainian Community of America supports that. But what we need from President Biden from all of the Western democracies is much more urgent, much deeper, much broader financial sanctions, sanctions against energy companies, sanctions to end the disinformation in the media, world, and on top of that, much more massive support for the

Ukrainian military that is defending its self. No one is asking for US boots on the ground, but yes, we need more ammunition, we need more javelins, we need more stingers, and they need to be trucked in from our eastern flank in in NATO, so that the Ukrainian military can do its job, and not only defending Ukrainians, but frankly all of Europe, because if it doesn't end in Ukraine, and if it doesn't end with democracy in Ukraine, everyone else will be will be involved later anyway, Not only

can you talk a little bit about the defense attempts and the defense efforts in Kiev, in the broader Ukrainian region, Given the fact that there is a conscription among all men I believe the age eighteen to sixty, how forceful is it, How quickly is it assembling? First of all, it's important to note that people were lining up yesterday, even before that to volunteer their services. Ukrainians are extraordinarily

committed to defending their peace and freedom. This is not the first time in thirty years, but this is certainly worse than anything we experienced in two thousands fourteen or prior to that. I will tell you that um men are not being allowed to leave. I have heard the stories and spoken to people who are trying to leave with their families. Men are taken out of the buses and told to go serve, and frankly, it's only fair.

Everyone needs to serve. At this point, the only hope we have is that the Ukrainian military continues what has been an extraordinarily um successful defense thus far in in terms of what's happening on the ground. Natalie, you are arguably in the Western world, the definitive expert on small business in Ukraine up to Belarus with your Horizon Capital as well. Please your opinion of how Mr Putin if he takes Ukraine and if we assume he's taken Belarus,

what is his threat to the Baltic States. There's no question that President Putin has explained to the world very clearly that he believes the collapse of the Civiet Union was a mistake. It is also very clear that he has absolutely no problem attacking unprovoked peaceful countries, as he's doing right now in Ukraine. So obviously the Baltics should be very concerned that their next extraordinarily concerned Natalie. One more question, I may and an arduous warning for you

and the news flow as well. We have sanctions. I don't mean to be trite, but from where you sit and with your experience, to sanctions work, Sanctions that are weak end or are doled out too slowly will not work because this is not about the effort. Cannot be about, you know, seeing what happens in a month or two in the Russian economy. What we need to do our sanctions that create such a dire response to what they're doing that it causes the elites in Russia to think twice.

If it doesn't cause President Putin to do so, at least it causes the elites. Therefore, all of the banking system swift. It has to be eliminating the sanctioning all the state owned energy companies, and it has to be done immediately. It cannot be done in ranches. Hundreds of people are dying every hour. We do not have time for tranches. It also needs to be more than money. It needs to be kicking out and ending our diplomatic

relationships with Russia. There should not be a diplomat of Russia enjoying peace and democracy in our western countries if they will not allow Ukrainians to joy peace and democracy. So there are a variety of things, and it needs to be massive, urgent, meaningful, and it will have an effect. But dolling it out in tranches over a period of weeks absolutely not not. I remember first talking to you about eight years ago and it's saddening that we're having

this conversation still into it again eight years later. Natalie, Thank you, Natalie Jarresco that the former Ukraine Finance Minister John on the liquidity of the financial system of Europe. We have the right guests. Let's get to Tony Chris Sensei, market strategist and portfolio manager at PIMCO. Tell you what I'd love straight off the bat is just your observations in the last twenty four hours, how the market has

been functioning, what you've been seeing. It does seem investors are doing what they often do, which is take a leap of faith. In fact, all of the debt that exists in the world exists in part because of that leap of faith. Investors have to have confidence in cash flows, whether it be to bond investors, to equity investors being dividends, buyback, etcetera. Seems they're retaining that. Uh, and we we know that over time human beings, generally speaking, sure remarkable ability to adapt.

That's the phrase keep calm and carry on is a phrase you of course attributed to England in the World War Two. And Winston Churchill is if there's a feeling that investors tend to have. And so it's not a shock that the echoes from recent inflation data at the FED at least are louder than the rumblings in Ukraine.

It's said state of affairs. But this finance and the way things are tony just right now and the here and now, there is an issue that things are moving so quickly that sometimes parts of the marks markets actually do break, and people are looking for potential nodes of a contagion, particularly in money markets with the Russian sanctions on particular oligarchs, particularly with a flight to cash amid all the uncertainty. Have you seen any signs of that?

Are you looking for that? As we do see all of these developments really evolving in real time, there remains ample financial liquidity in in the global financial system, clearly in Europe, also Asia, and of course the United States. So the the easiest cage to look at is the repo overnight transactions. The exchange that occurs betwe swen uh two parties between securities in cash that's still extraordinarily low, reflecting the surfeit of money that exists in the system.

And even if there were some tightening of conditions in that realm, we would expect the central banks to do what they always do is, which is read up printing presses, and they've certainly shown a remarkable ability to do that in the last decade or so, so perhaps liquidity is consistent or at least ample. However, there has been a huge divergence right now going between the US and Europe with respect to what the impact from the Ukrainian conflict

could be. We just get this headline at the ECB s Lane sees the Ukrainian war shaving up to zero point four percent from the g d P. This is according to Reuter's how much have you shifted your view on how quickly the e c B could move versus the Federal reserve on the On the margin, we think that the stress reduced, of course, increases the downside risk

to global economic both. PIMCO will hold a quarterly meeting in about a week and a half in Newport Beach and around the world be a video with its investment professionals to discuss the matter. But we currently have penciled in the growth rate of in the mid threes or so for the US this year and close to four

somewhere in high threes for Europe. The downside risk, of course emerges from a drop in confidence in Europe more than it would be in the United States, and the impact of energy costs, which is greater in Europe than it will be in the United States, and so there is some impact there, but it's probably too soon to

say that the numbers will calm down. And importantly, looking at the two years story, one should remain sanguine right now with a high degree of caution about the the the predictability of that though with respect to the global album and that's what markets scene three reflecting with the current information it has, things could change very rapidly, and so we'd say about the outlook, there's a degree of uncertainty, and so one wants to have portfolios at a liquid,

resilient and agile on this climate. Does that mean more cash, Tony, a little more cash, not to say, uh, sell everything, of course, we think right now, just simply maintaining flexibility. This might mean choosing more liquid assets, staying in, staying invested,

but simply choosing or liquid assets. For example, on the credit markets, an institutional investor could choose a credit index rather than cash instruments because the amount of money on the bid and offer, so called quote depth, tends to be rather large in comparison. Sony always wantedful to catch up with you important moments, Johns, thank you, sir of Pimcoake C. Michan joins us. Now for principal global Investors, Seeming. Let's start there, the difficulty to stay level headed in

a moment like this one. Yeah, you see the bullets and to you see the headlines, and of course the knee jeck reaction is going to be to go straight into cash. But when we look at previous geo political crisis in the way that the market is reacted, it's really down to the macro backdrop. So if you are to see its significant deterioration in the macro backdrop because of the surgeonal prices, then yes, you know we should

be fleeing for St. Favan's. However, if you're not going to see a very significant move inflation and you're not going to see the FED moving from its path, then I think the macro back droop actually still stays pretty solid and this is probably a good time to keep your head and stay in the game. Seema, how will the centerbying some particularly Chairman Powell, are just yield in

the next six months. I understand there's massive uncertainty, but what will you be listening for from the Chairman, the President's and the governors. Look, they've clearly got very This is they're all already facing a dilever and this is just simply increase that dilever. We need to be hearing out for what they're going to say about financial conditions.

But really, given the uncertainty and the fact that they have said that they're very much data dependent, it's very difficult to see that this conflict is going to push the Fed office path within the near future. Once you get into the second half of the year, then it gives in time to redien analyze to see what the repercussions are if it is still continuing, and at that point, that's when you could see maybe a pause and the fat if you are having consumer start to really react

to a rise in all prices. But until then, actually we don't see much of a change. And what the phot was planning to do for weeks, that divergence between the u US and the European Union, it has been caused for some people to shift their assets into European equities.

How much does the development with Russia invading Ukraine change that equation for you Well, you know, when we came into attribution to I know, the consensus view as they looked at valuations, Europe look looking a lot cheaper technicals and fundamentals. Maybe the growth story was looking that much stronger, But actually we maintained and overweight to US versus you're because of the concerns around the conflict and also because of concerns around natural gas prices. Now we know that

Europe is more vulnerable to any kind of move. So if anything, this is just confirmed our our concerns about Europe and actually increases our conviction that the US is probably the safest place to be sitting and seem with just a word on the banks trade if you can as well because that's come up so many times in the European story over the last few weeks. Bank of America put out a note this morning. Don't like them. Obviously the upside is limited now for yields on buns.

The dollars set to get stronger, growth set to decelerate in Europe. Any words of advice for people who are sitting there in European banks still seema, Look, I think you need to have some some exposure to value, and I think really it's could be quality value. If you're going to be in banks, look at like quality, what are the bound shoots, what have the cash the cash prior of these places. Overall, though we don't think that that's the best place to be. We don't see considerable

upside to yield from him. Maybe a little bit, but not too much. So we think there are all the sect two whould be preferable and art energy. If you have any concerns about your political shocks or inflation, probably energies, you've got a place to be sitting of Principal Global Investors. Sama. Thank you. This is the Bloomberg Surveillance Podcast. Thanks for listening.

Join us live weekdays from seven to ten am Eastern on Bloomberg Radio and on Bloomberg Television each day from six to nine am for insight from the best in economics, finance, investment, and international relations. And subscribe to the Surveillance podcast on Apple podcast, SoundCloud, Bloomberg dot com, and of course, on the terminal. I'm Tom Keene, and this is Bloomberg