Russia is on a path to greater nationalization of private business, and the country has become a "value trap," Hermitage Capital Management CEO William Browder told CNBC on Tuesday.
As a result, there is little value to be found in the country for investors, the outspoken critic of President Vladimir Putin said in a CNBC "Squawk Box" interview.
"It's a value trap right now. Low price-to-earnings ratio only helps you if you get those earnings in the end," Browder said. "None of that money is going to come to you. You're either going to lose it from capital controls, from expropriation, or from fraud."
Russia is facing its worst currency crisis since 1998, and manufacturing has fallen to the lowest level in 5½ years.
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In the near term, Browder expects Russia to impose currency and capital controls to stem the ruble's decline, a drawdown in foreign reserves and the flight of cash out of the country. "Every day that they say there's not going to be capital controls is one day closer to them imposing capital controls," he said.
Those capital controls will only spur Russians to send more money abroad, he added. This will in turn cause Putin, with no money left in the country, to find ways of expropriating and nationalizing more companies.
"Some investors say, 'Bill, you made your money in Russia when it was cheap,' and I'm saying now, 'It's cheap for a very good reason,'" he said.
Browder is the author of "Red Notice: A True Story of High Finance, Murder and One Man's Fight for Justice." The book recounts his experience doing business in Russia, his battles with Putin and the death of Browder's imprisoned colleague Sergei Magnitsky. He founded the Hermitage Fund in Moscow in 1996, and it grew to become the largest investment fund in the country.
Whether conditions continue to deteriorate in Russia depends largely on whether the price of oil remains low, he said. The Russian government relies heavily on oil exports from state-owned firms to underwrite spending.
The cost of crude has fallen as much as 60 percent in the last seven months, but bounced about 11 percent during the last two trading sessions.
Economic conditions are also tied to the situation in Ukraine, where Putin has backed rebels in eastern Ukraine. The United States and Europe have imposed escalating sanctions on Russia related to its role in the conflict.
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Brower also sees a risk of Russia pitting European Union members against one another at a time when the monetary union is facing disagreements over the terms of bailout packages and austerity measures dating to the financial crisis.
Russian Finance Minister Anton Siluanov told CNBC that Russia would consider giving financial help to debt-ridden Greece just days after the new anti-austerity Greek government questioned further European Union sanctions against Russia.
"Thankfully at least at this stage in the game, Greece has got enough sense not to go along with that plan," Brower said.
—CNBC's Maneet Ahuja and Geoff Cutmore contributed to this report.