Two US officials said yesterday evening that the heads of four US intelligence agencies had last week presented Trump with classified documents which included unverified claims that Russian intelligence operatives had compromising information about him.
Addressing reporters on a conference call, Kremlin spokesman Dmitry Peskov said the dossier containing the claims was a hoax which had been dreamt up to further harm US-Russia relations, which are already at their lowest level since the Cold War.
"It is an attempt to damage our bilateral relations. It is pulp fiction," said Peskov, who also roundly dismissed as false assertions in the dossier that he himself was heavily involved in running a Russian campaign to undermine defeated presidential candidate Hillary Clinton.
"You have to react to this with a certain humour, but there's also a sad side to this. Hysteria is being whipped up to maintain a political witch hunt."
Peskov said the Kremlin did not engage in compiling compromising dossiers on anyone and was focused on building relations with Russia's foreign partners instead.
On Tuesday evening, Trump dismissed the reports that Russia had compromising information on him. "FAKE NEWS - A TOTAL POLITICAL WITCH HUNT!" he wrote in a Twitter post.
Asked to respond to the prospect of new U.S. sanctions affecting Russia's oil and gas sector, Peskov said such measures, if they happened, would damage Russia, bilateral ties, and the global economy.
The Russian energy sector would definitely get compensation if such sanctions were imposed, he added.
Peskov said the Kremlin was unfazed by reports that Trump's pick for secretary of state, Rex Tillerson, would say at his confirmation hearing on Wednesday that Russia posed a danger.
It has previously praised Tillerson, who has experience of working with top Russian officials in the oil sector.
Peskov said the Kremlin stood by its assessment of Tillerson as someone who was willing to listen and was constructive, but was aware he was likely to be a tough operator too.
"We understand that Tillerson will continue to be quite tough in pursuing his line," said Peskov, saying the Kremlin was not wearing rose-tinted glasses when it came to the former U.S. oilman.