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Don't believe Putin or invest on his words: Browder

Russian President Vladimir Putin's annexation of Crimea from Ukraine and other disruptive moves there are aimed at reviving his popularity at home and keeping his grip on power in Moscow, said American-born hedge fund boss and human rights activist William Browder—in reaction to a wide-ranging CNBC-led Q&A with Putin on Friday.

"In terms of the Russian population, the support is real. He's stirred up a nationalist frenzy by taking Crimea and ... by going into Ukraine. He's done it on purpose," Browder said in a "Squawk Box" interview. "He did it by creating a foreign enemy, which is the West."

Read MorePutin slams sanctions, seeks Eastern tie-up

On stage at the St. Petersburg International Economic Forum, Putin told CNBC that sanctions imposed by the U.S. and Europe are "illegal." He also said he'd respect the outcome of this weekend's Ukrainian elections.

"You can't believe a word he says," said Browder, co-founder and CEO of London-based Hermitage Capital—once a huge investor in Russia. "He has a very long history of saying one thing and doing exactly another. I won't invest too much money on the back of Putin's statements today."

The Russian leader seemed defensive in the CNBC interview, said Browder, who was expelled from the country in 2005. "This is the first, sort of, unscripted public appearance since this thing started. It was quite interesting to watch."

Read MoreRussia is' unpredictable': Ukraine's presidential frontrunner

Putin's remarks come as Russia's economy struggles.

"These sanctions are just starting to bite. And I think they'll bite further," said Browder, who predicted that Putin will have to double-down and "become more nationalistic and more aggressive."

Putin's pivot toward China is a "pipe dream," Browder said. "I think you're going to contine to see the [Russian] economy decline."

Browder has a history of agitating Russia. In 2008, Russian lawyer and whistleblower Sergei Magnitsky—while working for Hermitage Capital—alleged that organized criminals colluded with a Russian government official to claim a fraudulent $230 million tax rebate.

Magnitsky himself was then arrested on tax-evasion charges. He died in prison of untreated pancreatitis in 2009—sparking claims that he was beaten and denied medical treatment.

In response, Browder led an international campaign to impose sanctions.

On Tuesday, the Treasury Department sanctioned 12 Russians under the 2012 U.S. law named after Magnitsky, which called for financial penalties against those involved in the criminal conspiracy or those who benefited from the lawyer's detention, abuse or death.

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—By CNBC's Matthew J. Belvedere. The Associated Press contributed to this report.

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