1 RPTR MERTENS EDTR CRYSTAL PUTIN'S PLAYBOOK: THE KREMLIN'S USE OF OLIGARCHS, MONEY AND INTELLIGENCE IN 2016 AND BEYOND Thursday, March 28, 2019 U.S. House of Representatives, Permanent Select Committee on Intelligence, Washington, D.C. The committee met, pursuant to call, at 9:14 a.m., in Room 2175, Rayburn House Office Building, the Honorable Adam Schiff (chairman of the committee) presiding. Present: Representatives Schiff, Himes, Sewell, Carson, Speier, Quigley, Swalwell, Castro, Heck, Welch, Maloney, Demings, Krishnamoorthi, Nunes, Conaway, Turner, Wenstrup, Stewart, Crawford, Stefanik, Hurd, and Ratcliffe. 2 The Chairman. Thank you. We will come to order. Without objection, the chair is empowered to declare a recess at any time. Today, the House Permanent Select Committee on Intelligence will hold an open hearing to discuss how the Kremlin uses financial leverage and corruption as tools of intelligence operations and foreign policy. The hearing will explore the dynamics between the Kremlin and Russia's business elites and oligarchs; President Vladimir Putin's control over the economy, Republican banks, and the oligarchs; the use of financial entanglements as a means of compromise; and the derivation and importance of sanctions to the Russian economy, particularly Putin's inner circle. The goals of the hearing are, number one, to provide the American public with a foundational understanding of the Kremlin's use of financial leverage to influence foreign policy; and number two, the importance of counterintelligence operations and investigations as distinguished from criminal investigations. Almost exactly 2 years ago, James Comey disclosed publicly for the first time in testimony before this committee that the FBI had initiated a counterintelligence investigation into Russia's interference in the 2016 election. While that investigation would lead Special Counsel Mueller to initiate a great many criminal proceedings, resulting in numerous indictments and convictions, it began and has continued as a counterintelligence investigation. What does that mean? Counterintelligence investigations are designed, among other things, to determine whether any U.S. persons, and in particular, those in positions of influence in government or business, may be vulnerable to foreign influence, manipulation, coercion, or compromise by a hostile foreign power. 3 This notion of compromise, or Kompromat in Russian, can be subtle and discreet, it can be witting or unwitting, and it can take many forms. But it is at the heart of Russia's playbook to sow discord in democratic institutions, create leverage that can influence foreign and national security policy, both here and abroad, and encourage nations to act contrary to our security interests or theirs. We do not yet know the results of the counterintelligence investigation initiated by Comey and then continued by Mueller. It is not clear whether, or to what extent the Mueller report, which is focused on prosecutorial decisions, will even discuss counterintelligence findings. But the counterintelligence concerns that animated the investigation in the first place may ultimately have the more profound impact on security and policy, and we therefore await the publication of the Mueller report to find out. Today, we have an expert panel that will help us explore how Russia uses intelligence tools to influence foreign nations, both the United States and others, and we will have a particular focus on Russia's use of financial leverage to achieve their goals. Our esteemed panelists will address the interplay between business, government, and intelligence in Vladimir Putin's Russia, how Putin uses business and corruption to maintain control at home and influence foreign policy. And finally, we will delve into the issues of sanctions and why sanctions relief was so central to Russia's foreign policy or foreign influence campaign and remains a preoccupation of Putin's today. Let me now take a moment to introduce our panelists. Mike McFaul served as the U.S. Ambassador to Russia from 2012 to 2014 and is currently Director of the Freeman Spogli Institute for International Studies at Stanford University, where he is also a Senior Fellow at the Hoover Institution. 4 Steven Hall is the former CIA Chief of Russia Operations and enjoyed a 30-year career in the Agency. Heather Conley is a Senior Vice President for Europe, Eurasia, and the Arctic at the Center for Strategic and International Studies and is also the author of "The Kremlin Playbook." And Eric Lorber is a Senior Director at the Center on Economic and Financial Power. Thank you all for joining us today. I now yield to the ranking member for any opening remarks he would like to make. Mr. Nunes. Thank you, Mr. Chairman. Today, we will hear from a panel on Russian oligarchs. Challenges emanating from Russia have been an abiding topic of this committee for many years. In fact, under the Obama administration, committee Republicans repeatedly warned the administration, both privately and publicly, that more resources and better intelligence were needed to counter numerous threats to our national security from the Kremlin. Our advice, however, was not heeded. The Obama administration's approach to Russia was characterized by misspelled reset buttons, direct promises of more flexibility after Obama's reelection, the scrapping of our missile defense plans in Poland and the Czech Republic at Russia's behest, and the ridicule of then candidate Mitt Romney for identifying Russia as our primary geopolitical foe, all under an administration that watched helplessly while Russia marched into Ukraine and annexed Crimea. This committee should be focused on intelligence oversight and making sure the IC has resources and authorities needed to protect the United States. We should not be used as a platform to spread false information and bizarre conspiracies. We have 5 unique capabilities and authorities to do crucial oversight work, and now, frankly speaking, that is not being done. This committee was created to oversee the Intelligence Community, not serve as a tribunal, launching frivolous accusations and investigations of one party's political opponents. Mr. Conaway. Will the gentleman yield? Mr. Nunes. I yield to Mr. Conaway. Mr. Conaway. Mr. Chairman, since prior to the inauguration of President Trump in January of 2017, you have been at the center of a well-orchestrated media campaign claiming, among other things, the Trump campaign colluded with the Russian Government. Indeed, before the appointment of Robert Mueller as special counsel, you alleged in one of your frequent television interviews that there was, quote, "more than circumstantial evidence," quote, of collusion, but that you could, quote, "not go into the particulars," close quote. Your repeated public statements, which implied knowledge of classified facts supporting the collusion allegations, occurred at the same time anonymous leaks of alleged intelligence and law enforcement information were appearing in the media. These leaks were often sourced to current or former administration or intelligence officials, appeared to support the collusion allegations and were purported to be related to ongoing investigations of President Trump and his associates. As you know, the committee has long been aware of and actively engaged in intelligence oversight activities related to Russia's malign activities. As part of our duty to oversee the actions of the Intelligence Community, we conducted a thorough investigation related to the 2016 Russian efforts to interfere in our elections. This investigation included a review of the allegations that the Trump campaign colluded with 6 Russia. The committee found no evidence that President Trump or anyone associated with the Trump campaign colluded, coordinated, or conspired with the Russian Government. The minority views, which you submitted, were attached to our committee's findings, and yet your views did not provide any evidence to support the claim of collusion. On March 24, 2019, the special counsel delivered his findings to the government. The special counsel's investigation did not find that the Trump campaign or anyone associated with it conspired or coordinated with Russia in its efforts to influence the 2016 Presidential election. Special Counsel Mueller's findings are consistent with those of this committee as well as the public statements of various Senators on the Senate Select Committee on Intelligence. Despite these findings, you continue to proclaim to the media that there is significant evidence of collusion. You further have stated you will continue to investigate the counterintelligence issues; that is, is the President or people around him compromised in any way by a hostile foreign power? Your willingness to continue to promote a demonstrably false narrative is alarming. The findings of the special counsel conclusively refute your past and present assertions and have exposed you as having abused your position to knowingly promote false information, having damaged the integrity of this committee and undermined the faith in the United States Government and its institutions. Your actions, both past and present, are incompatible with your duty as chairman of this committee, which alone in the House of Representatives has the obligation and authority to provide effective oversight of the U.S. Intelligence Community. As such, we have no faith in your ability to discharge your duties in a manner consistent with your 7 constitutional responsibility and