Been bombed twice. For the complete schedule, go to cspan. Org. Next, the release of a report on russias economic and political influence in europe. From the strategic and international studies, this is an hour. Good morning, everyone. Welcome to the international studies. My name is heather connelly, senior vicepresident here at ciss, that looks under europe and the arctic. And we could not be more pleased that you have joined us today. We are going to tell you about a report that we here at the center have been working on for the last, over a year and a half in close cooperation and partnership with the center for the study of democracy in sofia, bulgaria. So before we begin, and well ask you to sort of bear with us, were going to walk you through a little bit of this report. Not the full 63 pages, i promise. And once we finish that conversation about the report, then we will have a conversation about it. But before i begin, let me introduce to you the authors of this report. I would like them to stand and be acknowledged. First let me begin with my colleague, james mina, former Research Associate with the center for Strategic International studies and now with the office of secretary of defense. I would like to also recognize martin vladimira, another fabulous colleague for this report, an let me acknowledge and you will be hearing from him soon, the director of the Economics Program at the center for the center for democracy. Thank you, my colleagues. This report could not be produced without. We wanted to make this report truly transatlantic, and thats why we were so thrilled to partner with the center for the study of democracy. Before we tell you about the kremlin playbook, let me warmly welcome the chairman of the senate for the study of democracy, who will say a few words of welcome and get to the reports. Please join me in welcoming dr. Sheltoff. Thank you, heather, and thank you for coming today. This has been really quite in the almost couple of years, when we have been focusing on russian economic footprint in europe. Let me just say briefly in a nutshell that assess to modify this footprint, which is still largely unknown and ignored. And then the analysis through different optics, the governments deficits, government gap, even ill say governments failures in europe, both in European Union level and government level, this exactly deficits and goops, including the state is central in east european countries, provide ample opportunities for aggressive russian economic and political behavior. I would like to thanks once again the core team of the project, led by heather and ruslan for their leadership and persistence, and of course, my colleagues, martin and jameson. Thank you for coming today. Thank you so much. Well, lets begin, and tell you a little bit about the kremlin playbook. First, i want to begin with the inspiration behind what we were studying. We were struck by a letter that was written in 2009 by a very Significant Group of central and Eastern European leaders to the obama administration. It was an open letter. While the letter had other issues regarding the u. S. Relationship with Central Europe, the relationship with russia, within this letter, it had a very interesting observation, i will say. It is ascribing that russia uses covert means of economic warfare, and what we found so interesting about that, the use of the word economic warfare, but it was an attempt to challenge the transatlantic orientation of these countries. We thought, well, thats an interesting statement. I wonder if that is true. Could we determine whether that was true. And then there was another, several years later, hungarian Prime Minister, gave us additional food for thought, in a speech he gave in july of 2014, he mentioned that the wind is blowing from the east. It is possible to construct a new state built on illiberal and national foundations. We thought perhaps the economic dimension was having an impact on governance standards, democratic institutions. On and in fact, the democratic orientation of these two countries. And we thought, that would be an interesting study, if we could measure. If we could create a methodology, if key could prove in fact there is a correlation between economic in ffluence an democratic institutions. And then, of course, friday happened. And then we had a pretty significant statement. I would argue that historians will reflect on this statement. Im going to reflect on this statement for quite sometime where jeh johnson and general clapper issued, i think, a fairly extraordinary statement, which among things, mentioned about attributing particular activity to russia, and consistent with the methods and motivations of russia, such activity is not new to moscow, the russians have used similar techniques across asia and europe. We get really good timing. So we felt that this report perhaps could illuminate what secretary johnson and general clapper were perhaps suggesting, what are the tactics and techniques that perhaps have been used in europe today. So that was some of the, what i call the inspiration. Now let me introduce you to the perspiration of this report. We wanted to do the Study Questions again. Was there a direct correlation, could we make a correlation between russias economic footprint in a country, and a deterioration of their governance standards. If we could or could not, and we will tell you how successful we were, what is the impact, what is the amplification. What is the overall impact on the Public Confidence in democracies, in the institutions themselves. We wanted to get very specific. We wanted to drill down into five countries to understand how this worked. We can make broad general trend lines, but to understand, as we will argue, the playbook, you have to understand how it works individually in each country. We selected five countries. Latvia, serbia, slovakia, and four out of the five are nato and European Union countries. So the nato country, certainly the United States, has an ee mo enormous amount, and for syria, we want serbia, yet holds gre culture ties with russia. We would see any difference. So that was, and of course, we he wanted broad gee owe graphic, and then to see the countries in in between. So we wanted to focus, and this is why well spend time on the methodology and measurement. We wanted to be rigorous. We wanted to see if we could quantify economic, the dimension of russias investment, not an easy task, and thankfully, the center for center of democrat see has taken this great burden on. Let me introduce ruslan up to the podium. Ruslan. Thank you all very much for coming. What we were faced with is not just presenting the simple economic presence of russia in the region, but also, trying to capture the amplifiers, those instruments that actually allowed russia to amplify their economic presence. So what we have done here is weve combined four indicators that would think historically display to the largest extent, the instruments that russia has used to intimidate and influence political decisions with those five countries. And then we have combined them to show that this is not just pure economics, but that they are using other instruments to amplify that economic presence. As you can see, weve ranked these five countries using this combined metrics, which includes answer energy imports, the most often used economic weapon in the kremlin playbook. Weve put in there the fdi stock, we have added to that the corporate presence, and the Corporate Networks which has taken us the most of time, probably six months, to undercover the Beneficial Owners and Intricate Networks that theyve created, and last but not least, the other instrument that has been used, the exports through russia. As you can see, these countries show Different Levels of economic footprint. But they all show similar trend, and we think there is a distinct, we find a distinct pattern, similar between 200708, when there was a change from the using the Economic Opportunities towards intentionally trying to steer or to use the economic presence in terms of influencing the political decisions. And that we think we see in all the patterns in the countries. Now, let me just go to the most widely used economic instrument and that has been wide knowledge, energy imports, as we can see in the case of bulgaria and slovakia all Different Levels, but in all of them, two of the instruments have a high vulnerability to russian influence, and these can be, these are energy and corporate presence. In serbia, corporate presence, hungary, but then we have undercovered, all different other amplifiers, patterns that have used or amplified the impact of those ffour core on t country. There have been ways, and weve listed a few of them, concentrating on monopolizing sectors, critical sectors like energy, finance, and transportations like in the case of lo latvia, and expanded in a different directions. Also, using large scale, and this weve seen in particularly in bulgaria and hungary, large scale, in serbia, large scale products to lure key economic players that can then be used to actually amplify the russian economic footprint in those countries. Now, let me give the one example that weve seen, but it provides a very good view of how all these mingle together. Thats the gasprong case. Im going to finish up on the cost of the economieeconomies. They usually act through a local network of subsidiaries that corner the national incumbents and press them into basically playing along the lines that gazprom wants to use. Let me finish up by showing you that you cant help but notice that the highest prices, the highest price of gas is put on the countries where russia has had the highest economic presence, the highest economic footprint. These are bulgaria and serbia. The more youre captured economically, the more you actually pay in this case to gazprom. These amount to tens of billions of dollars over the ten year period that we are looking in 20042014. That, i would like to turn it back to heather on explaining how the economic footprint and the political footprint inter mingle. Thank you. So ruslan had the hard part. We had the easier part on the democratic standards, because we have incredible resource called freedom house, and they pro dues an annual report in nations in transit, my microphone goes, they annually provide us with an enormous amount of information on the Democratic Health and standards of countries in Central Europe. So what we did was using the freedom houses annual analysis, we looked at three specific indicators. Perceived levels of corruption. Independence of the judiciary, and media independence. That for us was in some ways the Health Indicator of a democracy. And what we found was a little counter intuitive. Particularly, for those countries that joined nato and the European Union at least by 2004, because we made an assumption that those countries would in fact only increase in Democratic Health. They were in major institutions. They were developing economically, and democratically. There was actually a decline in governance standards. This, we were seeing over a trend line, again, from 2004 to 2014. Latvia was the outlier. Stable in the indicators. Well talk about latvia as sorts of on example. Sebby yeah again was fairly stable. The numbers that you see on the graph and in the report, we chart country by country, and we chart the democratic standards and economic footprint. It is a little hard to read when youre looking at it for the first time and youre not sure what the squigly lines are. What we saw are the democratic standards were declining as the economic influence was growing. So let me sort of get to the answer to the first study question. Is there a direct correlation between russias economic presence and its democratic standards, if you will. We could not find a direct correlation. In fact, the findings were quite inconclusive. But i think the most important thing about this, and now im going to get really, too, the ahha of the report, was that we really observed a relationship between the economics and the politics. So as we mesh those two findings together, this is what weve observed. If russias economic footprint in a country is above 12 of that countrys gdp, there is a pretty strong likelihood, but not absolutely, that you will see where democratic standards will decline political influence plays an enormous role. Heres the catch. If the country had below 12 of gdp of russian influence, so the economics werent the strong part, but we found, again, this gets in the case of hungary and others, the political influence seemed more powerful than the economics. Finally, we had some different results, varied results. This is why we wanted to make sure. Our conclusions were not extremely airtight. In some cases, for instance, latvia, which has over 12 gdp that is russian economic influence, they had more resistance to russian political influence. And some of that has to do, quite frankly, with their anticorruption efforts, their transparency and some of the strength of their institutions. And then, of course, we had serbia, which again, below had High Economic footprint, but yet, we found the political influence to be that much stronger. So that was sort of that 12 line was something that we watched with great interest. So here is really the secret of the playbook. And before i begin, i want to sort of define a little bit when we talk about corruption. We do this in the report, and i just want to emphasize, for us corruption does have a definition. We do cite examples in the report. And we define corruption for the purposes of the report as the alleged or reported exercise of ones power, position, resources, in order to exploit or ex certificaploit overstate questionable means. These actions could be deliberate or unlawful, but may not be so. We cite or observations. But these observations do not suggest or accuse any specific individuals of wrongdoing. Just want to make that perfectly clear before we begin. Because corruption is in fact the key. So let me tell you a little bit about the unvirtous circle. This gets back to the flow problem, where russian economic influence can come through the economics, strategic sectors like energy, finance, like the media. And then it can create through the political influence, it can then in some ways metastisize. Reducing media freedoms, purchasing Media Companies to eliminate independent journalism. It can be financing of Political Parties that want to prevent diversification of energy, or to ensure that particularly protected sectors remain particularly protected. And the transition mechanism for this unvirtous, work its way with businessmen and with sometimes parliament, and it can become and grow so large that the country now is unable to take independent policy action. So decisions that you would think would be in the countrys national interest, diversification of key sectors, encouraging the highest standards, they are eliminated or individuals that have been placed in specific positions prevent that from happening. So it becomes a very corrosive element. What we have found, and some of this was brought to us by revelations in the Panama Papers and elsewhere, sometimes that good Investigative Journalism and openness can open researchers eyes as well. But we saw that some of these local affiliates had and through their intermediate years there was some direct connections to some of the west known kremlins inner circle. So we did see this was a very purposeful approach. Again, just some of the key highlights. The corruption end of it is a transmission. It can create those dependencies, and once that feedback loop becomes so strong between the economics influences the politics, sometimes the politics influences the economics, and it grows that cycle. Thats what leads us to what weve argued is state capture. It becomes so overwhelming, independent action is proven difficult. So what is the point here . Why is it working so effectively. And i think this is where we come to the point of the were getting close to the ahha after what we found in the report. The political influence is really about weakening the internal cohesion of these countries, and of these societies. Its sometimes about obstructing reform. So they cannot improve themselves. Sometimes it is making sure that the inherent fragility where you have free elections, a bit of volatili volatility, this is something continued to sort of overemphasize the dysfunction of democracy. Utilizing individuals that will be a challenge to the democratic system, and this is where the use of Political Party financing can sometimes weigh in. And what weve found is increasingly as the economic and political influence began to grow, that actually debates about issues very important to the kremlin, sanctions policy, Energy Diversification policy. Those started to become very difficult for the countries to maintain. You started to hear leaders changing their views. Changing their policies. And this is where we see some of the broader objectives. There is in fact a systemic war on information, and as we saw the economic influence grow, it was entering the media and telecommunications sector. That reduces independent voices. The other war on information part that i think is particularly challenging for United States and for europe is the fact that we dont know what fact is. When you have media stations and reports that obscure the truth or you dont know what the truth is, or various stories to tell you, the people dont know what to believe. What happens, what we found in instances where governments were spending a lot of time batting down stories patently false, but that was what the media was generating for them to respond to. It can be extremely dis orienting, and paralyze government institutions. Again, the media environment is quite restricted. Again, the other part of the unvirtous circle, public and private interests. Dr. Shekoff said in the beginning, a son goes to his father and he wants to be involved