OPERATOR: Ladies and gentlemen, thank you for your patience in holding. We now have your presenters in conference. Please be aware that each of your lines is in a listen-only mode. At the conclusion of today’s presentation, we will open the floor for questions. At that time, instructions will be given as to the procedure to follow if you would like to ask an audio question.

It is now my pleasure to introduce today’s first presenter, Mr. John Herbst, Atlantic Council director of the Dinu Patriciu Eurasia Center.

JOHN HERBST: Good afternoon. It’s wonderful to have you here with us today. Today’s call is part of our members conference call series, which provides our members from around the world the exclusive opportunity to dialogue directly with experts and policymakers. It’s all part of the Ukraine and Europe Initiative of the Atlantic Council, the Dinu Patriciu Center – Eurasia Center of the Atlantic Council. This also fits into the large amount of work that the Council is doing on Ukraine and its crisis. We are happy to have you on the call today.

We have with us today Andrea Montanino, who’s the director of the Global Business and Economics Program at the Atlantic Council. And Andrea will introduce our featured speaker, Anders Aslund, who’s maybe the leading expert outside of Ukraine on the Ukrainian economy.

Andrea.

ANDREA MONTANINO: Thank you very much, John.

So let me say that I spent last two years in the IMF at the – (inaudible) – as an executive director, so I remember the discussion we had on the first program on Ukraine.

Let me start from two months ago. In September 2014, with the first review under the IMF done by agreement, the IMF produced a so-called adverse scenario where GDP would have fallen by 7 percent in 2014 and public debt would have been close to 70 percent of GDP, again in 2014. And in that adverse scenario, the IMF said that the materialization of that would have required additional financing of 9, 10 billion U.S. dollars.

So as you – as you clearly understand, this adverse scenario materialized – and probably, indeed, worse. The latest estimation for GDP growth in 2014 – I mean, those released by the IMF in their latest statements, they expect a drop in GDP by 7, 7 ½ percent. So what was expected in this so-called adverse scenario a few months ago. And the debt to GDP probably close to 100 percent.

So the situation is very difficult. You know the answer has been the program – the new program by the IMF for 17.5 billion (dollars), which basically takes the place of the previous program of 17 billion (dollars). So the difference – the amount is not big. And maybe Mr. Aslund will give us the detail on that. There is some promises to get additional finance up to 40 billion (dollars) some – from some international donors. But it’s not clear where it’s coming from.

So I see basically a short-term issue and a long-term issue on Ukraine. On the short term, I think the question is how we get sufficient finance, or there will be a need for a sort of debt relief. My feeling – and I speak on my personal basis; I don’t have information – but my feeling is that after the first review of the program, there will be a case for so-called debt reprofiling, that is the proposal the IMF put on the table a few months ago on how to handle with countries with sustainability risk.

So maybe we will see some debt reprofiling for Ukraine, but over the long time I think the issue is how the Ukrainian government can push the needed reform and whether it has enough, say, political capital, technical ability and, I would say, time – enough time to deliver.

So I will stop here and just give the floor to Mr. Aslund.

ANDERS ASLUND: Thank you very much. It’s a great pleasure to talk to you today. Indeed, I’ve been dealing with the Ukraine and economy for 30 years or so. And I have a book coming out next month, “Ukraine: What Went Wrong and How to Fix It.”

So this is very much my focus right now. And I should say that I was last in Kiev a month ago. And met among other things – among other people, the minister – Prime Minister Yatsenyuk, Minister of Finance Jaresko, Minister of Economy Abromavicius, the minister of agriculture, minister of infrastructure and also a lot of senior people.

So the first thing you see now in Ukraine is this is a new group. The Ukrainian government has been taken over by 38-year old investment bankers who want to make a change. Some of them know how to do it. Others don’t. We will figure that out in due time. But it’s a new atmosphere. This is like Eastern Europe in the early ’90s, a new atmosphere.

Another thing that is quite important is that Ukraine has come together. In the opinion polls now, 85 percent of Ukrainians stand up for Ukraine. You see the Ukrainian colors everywhere while 10 years ago during the Orange Revolution, people used orange because the Ukrainian national colors were considered divisive. So these are big changes.

And Ukraine probably has the most lively civil society in the world. Whatever happens, there are always people who stand up and protest – which is, of course, problematic if you’re in government because it’s not easy to get things done.

So I essentially want to give you today are two messages. One is that the economic situation is in a financial meltdown. And the second is that thanks to the very substantial legal changes that took place last night in the Ukrainian parliament, Ukraine will now get IMF money on the 11th of March. And they will be dispersed the next day, the 12th of March. So there’s a good chance that Ukraine can now turn to the better.

So let me start with the terrible thing first. And Andrea already mentioned that GDP probably fell by 7, 7 ½ percent last year. Industrial production in general, it fell by 21 percent year over year. It’s particularly coal production that has fallen into a depression. And one of the particular problems is that Ukraine has been running out of reserves. Reserves at the end of January were down by $6.4 billion, and probably just below $6 billion now.

You can’t manage an economy with such small reserves, which amount to about one month of input. This means that the exchange rate in Ukraine has been jumping up and down. What does the Central Bank do in such a situation? First, it lets the exchange rate float because it can’t waste reserves. Then it stops because the exchange rate has fallen too much. That was for two months in the fall. Then they realized they were losing too large reserves again, and let it fall.

And back and forth like this. It’s not a good monetary exchange rate policy, but you have to understand the people who are in the midst of it. It’s very difficult because what is happening when the exchange rate falls? The exchange rate has fallen from 8 hryvnia for a dollar in November 2013 to currently 27 hryvnia for a dollar. In between, it touched 35 hryvnia per dollar. So the exchange rate has appreciated clearly in the expectation of what happened last night in parliament.

But this means that the hryvnia is down by two-thirds. It means that most of the banks in Ukraine are bankrupt. Today, the Central Bank closed the fourth-biggest bank in Ukraine, Delta Bank, a privately owned Ukrainian bank. And the banking problem will be big and this will hold back growth.

So everything will be worse than last year in terms of growth because there won’t be any credit in Ukraine this year. For example, the seeds are less, fertilizers are less in agriculture, which has been the boom in industry. But what is really down is the coal and steel industry of Donbass because of the war.

Of the 7 percent decline last year, I would argue that 5 percentage points counts because of the war damage to coal and steel and some machine building in the east. So it’s mainly the Russian aggression that is destabilizing their – the Ukrainian economy. But when we were going to the exchange rate falling, this means that inflation is rising. Inflation now year over year is 28 percent. In such a situation, you are in a danger of getting into really high inflation.

So fortunately, as I mentioned, the exchange rate is now rising. And what is vital is that Ukraine get their IMF funding. And I could mention some other figures – real wages in general were down by 17 percent. So what we’re seeing in Ukraine now is a real financial meltdown and massive depression and poverty. In view of this, it’s very important that the IMF concluded with the agreement on – on the 12th of February of what they call $40 billion of credit for Ukraine.

Of this, the IMF puts up $17 ½ billion itself. And there’s a lot of money that is promised. You can say that $8 billion is already out there and reasonably ready, $2.3 billion from the European Union for this year, $2 billion in loan guarantees from the United States for this year, $2 billion from the World Bank, about the same amount from bilateral donors and $3 ½ billion from EIB and EBRD money is ready to go with the IMF funding. And, surprise, surprise, the Chinese have a loan – a credit swap that can materialize of $2.4 billion that can be provided already this month.

So what you need to do to get all this money? You need to get a certain number of prior actions adopted by the parliament. And this was the big event last night. It has been completely unclear whether the government would be able to push it through. This is a five-party coalition government. Officially, they have 302 seats in parliament and they need 226 to get the majority to get the legislation through. And now they vote it all through. And the least they had for any vote was 238 votes and 273, for the most important.

What went through parliament was eight laws. And these are important laws. The first one was supplementary, by just changing everything and making it a bit more realistic. The budget deficit is supposed to be 4.1 percent of GDP, but this does not include the bank rehabilitation and recapitalization of NAFTAGAS and a few other items. So the real budget deficit should be 8.8 percent of GDP, while it was 13.5 percent of GDP last year. Much of this is because of the banking crisis. But the budget did go through.

The most sensitive was changes in the pension system. And I’m not quite calculated, but I think that they will actually cut the pension cost very substantially, by several percent – probably 4 percent of GDP. It’s 16 percent of GDP at present. So this is a big change. And two of the parties – two of the five parties in the coalition opposed this Batkivshchyna and the Self Reliance Party that is Yulia Tymoshenko and the civil activists who did not accept it.

And a third change was to increase the – all the energy prices, gas prices, electricity prices, in a rather complicated scheme, adopting it for two years. And I would have preferred to see it going up faster, but it’s all done there. And you have other changes also with regard to the tax system, et cetera. But this was a very substantial change. I should also mention that there are changes to the bank system, which means that the real owners of banks will finally have to show themselves.

And they are not allowed to give themselves a loan. There’s a Ukrainian habit that you buy a bank with borrowed money, you give 80 percent of loan to yourself so that you can buy another bank and another bank. So the former first deputy prime minister under Yanukovych, Sergei Arbuzov, owned no less than four banks. You know, these are the things that you do when you’re head of the Central Bank in the – in Ukraine under Yanukovych. And several of Yanukovych top people had two, three banks that they had acquired in this fashion.

Last year the Central Bank closed down 32 out of 180 banks. And they are now pursing a very tough attitude. I mentioned that Delta Bank, the fourth-biggest bank, was closed today. Two other banks were also taken over by the Central Bank. So I would say that last night or today is really the best time for the Ukrainian economy that we have seen for a very long time. But this happened really in the midst of a financial meltdown. What we have seen an improvement of so far is the exchange rate, but otherwise it’s quite difficult.

So what will happen next? What was decided yesterday is enough for the IMF to, on March 11th at the executive board meeting, adopt the Ukrainian program. Ukraine – Russia cannot stop it. So there’s no way it will not go through. And the IMF is a very effective organization in terms of dispersements. The next day Ukraine will see a dispersement – a first dispersement, which will probably be in the order of $5 billion.

And according to Prime Minister Yatsenyuk, 3 ½ billion would be coming forth already in the course of March because these – this is money that has been committed and the agreements have been reached. There is only one thing that is missing, the IMF agreement. And for a country like Ukraine, you need at least $10 billion in reserves.

If everything goes well now, Ukraine could have reserves by the end of March of $14 billion. That should stabilize the exchange rate – I dare not say at what level. The IMF program has an exchange rate of slightly more than 21 hryvnia per dollar. Might be unrealistically high, but it’s in that direction. It’s moving. So we are seeing that the big problems are now being approached. And we only have to wait nine days – or eight days to get it all through and done. And clearly, the market understands the expectation, as one can see that the market has calmed down right now, while being very small indeed.

So my sense is that a few days ago we had the bottom of the market and now we are seeing Ukraine slowly climbing out of a big hole. I should add here that we are seeing a broad front of reforms. The most important is the gradual unification of the energy prices, that I think really will happen now because it has been legislated.

Another thing is far-reaching, the regulation, in the – in the economy. A lot of public officials are being sacked. And the biggest factor right now is about sacking judges who have a lot of legal rights, but are pervasively corrupt. And it helps that you have a five-party coalition government because you have corrupt interests on all sides, or vested interests, as we might call them. And – (inaudible) – are defending their interests and they are getting at it.

What about the oligarchs? The oligarchs by and large are down and out. The biggest oligarch in Ukraine, Rinat Akhmetov, has lost two-thirds of his wealth in the last one-and-a-half years and he’s likely to lose more. The biggest oligarch today is Ihor Kolomoisky, who still is governor in Dnipropetrovsk. I think that President Poroshenko has to take him out if he is – if he is to be president. Kolomoisky’s currently still manipulating the oil market, but he’s under big attack in that area. So this is a big fight to watch. But I would bet on Kolomoisky losing out, not least because he’s far too arrogant.

There is a rivalry between Yatsenyuk and Poroshenko, the president and the prime minister. I think that’s good, because otherwise they would too easily fall to bad interests within their own camp. Now they have to stand up and defend themselves and watch the house.

So while Ukraine is in a terrible situation, they – it’s not hopeless. There is substantial hope thanks to the IMF, and I must say that the IMF has worked very strong and positively. I have very few positive words to say about the European Union, while I think that the United States government has done more than it usually does with regard to the economy.

And – (inaudible) – I stay out of the war. And the best one can hope for that is that the front doesn’t move. We have now a big question if there will be a battle over Mariupol. And if that happens, that would be disastrous. But in any case, I don’t think that will change anything with regard to the IMF agreement.

I should also mention what Andrea touched upon, debt reprofiling. The understanding is that the Ukrainian government, with the acceptance of the IMF, wants to reduce the debt payment for these four years of Extended Fund Facility program by delaying the payments and – (inaudible). The discussion is that the (nominative ?) interest rate will be cut from 7 ½ percent to 2 ½ percent or so during the four year of the fund program and perhaps go up to the regional level.

Before Lazard – (inaudible) – is in charge of advising the Ukrainian government. They have not approached the bondholders as yet. That should be done immediately after the IMF decision on the 11th of March. And what I mentioned here in terms of – (inaudible) – is just the speculation of the investment bankers. So the general view is that the Ukrainian government is likely to try to get the voluntary agreement and therefore not do a straightforward (nominative ?) haircut, but prolong maturities and cut the nominal gained on the bonds. And given how much the bonds have fallen, the market seems to be pretty ready.

So in short, after having been pessimistic for a long time, last night I’m happy to tell you that I turned optimistic – somewhat optimistic. And that is a big change. Thank you.

MR. HERBST: OK. Anders, that was a terrific discussion and you’ve given us a lot to think about. And let me describe now how the question and answer process will work for our callers, and then I’ll just get us started with a question or two.

(Gives queuing instructions.)

Anders, again, that was a terrific discussion. But you and I are long veterans of the reform process in Ukraine. Do you foresee any possible problems in the implementation of this legislation, which was just passed?

MR. ASLUND: Well, you have one obviously problem. And that is that the laws are very easily changed. They adopted eight laws last night. And two parliamentarians can propose a law in the parliament and have it adopted instantly. So there’s always a danger that the laws they’ve just adopted will be changed.

And another worry that there’s now a clear discussion about changing staff. Prime Minister Yatsenyuk wants to sack Valeria Gontareva, the chairwoman of the National Bank, who is Poroshenko’s former investment banker. And Poroshenko’s people went all, OK, we can discuss that, but then there will also be changes in the financial and economic bloc of the government.

So we could – and now they have decided that this will happen after the IMF agreement. So we could see a deterioration of staff. It could also be an improvement. But there is a risk that it can go in a negative direction. And you always have a risk that after they have adopted all this wonderful legislation that they relax and do not fully implement it.

MR. HERBST: OK. Thank you for that.

You mentioned, of course, the possible impact on the economy of further Russian aggression in Ukraine. If in fact the – there was an effort to seize Mariupol, what would be the economic impact? And what – how would you characterize right now the cost of the war for Ukraine’s economy?

MR. ASLUND: Well, if you take that cost – I mentioned here that 5 percent decline in GDP is essentially coal and steel production that did not take place because of an active aggression. Ukraine’s exports to Russia fell by half last year, that is 12 percent of GDP – sorry, 12 percent of exports that just disappeared.

And if you move to Mariupol, Mariupol is of enormous importance because Mariupol is the second-biggest export port of Ukraine. And what Ukraine now most of all exports is grain – 30 percent of Ukraine’s export is grain, and – or agriculture products, dominated by grain. And after Odessa, Mariupol is the most important port. Not only that, but it’s the only big port in the east.

So if Mariupol falls, Ukraine cannot export its grain from the eastern part. So I would mean that 40 percent of the grain produced in Ukraine is not available for the world market because infrastructure is built like that, that the railroads go to Mariupol. And you cannot take it from there easily to Odessa. Simply the transportation costs become excessive or you don’t have transport available.

Also, Mariupol has two of the three biggest steel companies – steel works, that belong to the Rinat Akhmetov. And when I last checked, they’ve – these companies in December, they were working on 57 and 60 percent capacity because the terrorists, as they call them, had bombed the bridges. And when the Metinvest, the steel company tried to rebuild the bridges, the terrorists shot at the workers who were trying to rebuild the bridges.

So iron ore and coal, which is produced nearby, cannot reach the steel works. And these two giant factories could easily be put still in Mariupol. It’s a city of half-a-million people. So if you compare with Debaltseve, that had 27,000 people, there’s no comparison. Debaltseve was only a railway and road junction. Mariupol is a major industrial city and it’s even more important as an export port.

I should add also that the military expenditure for this year is supposed to be 5.2 percent of GDP. Ukraine used to have 1 percent of GDP in military expenditure. Last year it went up to 1.6 (percent). So we’ll see an increase in military expenditure of 3.6 percent of GDP.

MR. HERBST: Thank you. (Gives queuing instructions.)

Andrea.

MR. MONTANINO: Yeah, this is Andrea. Related with what John just said about Russia, I would like to listen what you think about the loan that the – that the Russian and the Ukrainian have – the 3 billion loan to Ukraine that will expire, I think, in December. Do you think that the Russians will support the program because they say this is a way to have their loan back? Or they are going to support the program in a way that basically postpone the payback of this loan? So what do you think will be the attitude of the Russians?

And also, what is to you – I mean, the – what is preferable for Ukraine? I mean, they are ready to accept – I mean, to get money basically from Russia. Under this situation, they would prefer just to pay back the debt?

MR. ASLUND: You’re perfectly right. This is a big issue. Right today the National Bank of Ukraine published how large of a public – sorry – how large the public debt was in relation to GDP at the end of last year – 17 ½ percent. And the Russian Eurobond has lots of comments they made.

And one is that if Ukrainian public debt goes over 60 percent of GDP, then Russia has the right to be paid back – demand to be paid back. And I can’t understand why the National Bank published this. They could have waited until late in the summer to publish this. It’s completely foolhardy to publish that information that can only be used by the Russians against them.

And Russia has two attitudes to Ukraine. The most important is what I look upon as President Putin saying, with Ukraine, destabilize Ukraine and maximize the cost so that Russians at home see that democracy in a Slavic country is a bad idea and should not be tried in Russia. I don’t think that it’s an imperial idea, per se. What we’re seeing in Donbass is a massive destruction. It’s not what you would expect from a country that wants to take over the responsibility.

And also, in the Minsk II agreement on the 12th of February, there is a clause saying that Ukraine will have to provide social payments, that is mainly pensions, to the occupied territories in Donbass. And so Russia wants to let Ukraine bleed economically. After having done that, the people who deal with international finance in Russia are decent same people and do not pursue these aims.

So the Russian government is really quite divided. And the people that have dealt with the IMF and the World Bank and the Ministry of Finance in the Russian government have been very decent and good people. So therefore, we should expect contradictory attitudes. And of course, the Russian formal attitude is that we really want to stabilize Ukraine, and describing it as a domestic problem.

And when you talk to these Russian officials and tell them, well, it would be very helpful if you stopped your military aggression against Ukraine, they, in English, say, but there is no Russian military aggression against Ukraine, which of course is when you don’t know in what the world you are living.

But coming back to your last point, the Ukrainian strategy is quite clear, unlike the Russian strategy. That is leave the Russian money out until the last and pay as little as possible. So the worst that can happen here is that the West in one way or the other forces Ukraine to pay, as the European Union forced, at the end of October last year, Ukraine to pay $3.1 billion in disputed areas to Gazprom. And this is what really caused the financial meltdown in Ukraine, because the reserves became too small.

So if the Ukrainians are left on their own, you can trust them not to pay the Russians unnecessarily early. It would only be because the IMF, out of a general dislike or arrears, or the European Union because of its general devious attitude towards Russia, would force Ukraine to pay. So what I would expect is that the debt reprofiling will take place and then everybody will say to the Russians, OK, you can this or you can have nothing.

Q: Mr. Aslund, this is Svitlana Orekhova, the program assistant at the Dinu Patriciu Eurasia Center. I have a question.

So you said that the IMF – one of the requirements of the IMF was to cut the expenditure on the pensions from 16 percent to 4 percent. So I’m just wondering –

MR. ASLUND: Sixteen to 12 percent of GDP. That’s what I understand. It’s quite complicated, but it’s a lot of small measures. And my assessment is that it cuts one-quarter of the total pension expenditure. I can say that in this country 5 percent of GDP is being spent on pensions. Ukraine has the highest number in the world at 16 percent of GDP. It should get down at least to 8 percent of GDP. So this might be taking itself half the way in one go.

Q: Do you see it having an effect on the support of the federal government among the elderly people, like among this constituency that receives pensions?

MR. ASLUND: Oh, sure. The old people have had time to give supporters of the pension – of the communists and that has been generally the experience in post-communist countries. Now, admittedly, the Ukrainian Communist Party is basically dead – 3.9 percent in the last election. But this is a statistical problem, but it has to be handled.

MR. HERBST: All right, Anders, one last question.

You spoke about the impact if in fact the Russians were to seize Mariupol. How can you claim to implement this reform and proceed with – towards a more prosperous future if the war continues?

MR. ASLUND: Well, as I said, John, the war costs in the military expenditure just over 5 percent of GDP.

MR. HERBST: Right.

MR. ASLUND: According to the new budget, which is slightly more than the U.S. spends on defense – not all that much. Under Reagan, the U.S. spent 6 percent of GDP on defense regularly. And so the big problem is the – when Ukraine pays, as it did until November, the full social expenditure pensions, et cetera, in occupied territories but it does not receive any revenues from it. So if you don’t receive any revenues from a territory, then you should also stop giving money. That’s the central thing. And then, of course, now Ukraine has 1 million people of displaced person. I think that there should be humanitarian ground aid from the West that should be called for.

MR. HERBST: We now have a question from Jan Lodal. Jan.

Q: Anders, could you speak just a little bit about the impact of oil revenues, and ultimately that will change the prices of some gas contracts and so forth, and how significant this might be, and the overall economic prospects for Ukraine? And you might even say a word or two about the impact it has on Russia, and whether that might change their policy a bit.

MR. ASLUND: So, for Russia, I’m forecasting that the Russian GDP will fall by 10 percent this year. There are general forecasts of 5 percent and the IMF and the World Bank will predict a 3 percent decline. And the general assumption now is that the oil price is likely to be around $50 per barrel this year, so that is half of what it was last year. For Russia, since two-thirds of Russia’s exports are oil and gas, which is tied to the oil price, if the oil price this year is half of what it was last year that means that one-third of Russia’s exports will disappear. And that in turn means that Russia will have to cut its imports by half because Russia, for many reasons, needs a large, steady trade surplus.

So this will hit the Russian economy very hard. And one easy way of looking up on it is that a year ago we – (inaudible) – or the IMF – (inaudible) – that Russia’s GDP in current dollars was $2.1 trillion. Right now, it’s $1.2 trillion. This means that Russia has gone from more than 3 percent of the global economy, current dollars, to 1 ½ percent. So Russia is now much less powerful.

And what do you do in such a situation? Well, if you have less resources in the future than you have now, you attack. So I think this is why Russia has been so aggressive in Ukraine. And I would also put the murder of my dear old friend, Boris Nemtsov, in this connection. If you want to reinforce repression path, kill top politicians. And this is all too obvious that Putin is responsible for the murder of Nemtsov. So I think that we should expect more aggression from Russia because it is weaker and realizes that it can’t go ahead like this later on.

For Ukraine, it means that the oil and gas bill, which is quite large, will fall substantially. And it also means that it’s easier to increase the gas price. So if you take the gas price that late last year was $380 per 1,000 cubic meters, now it’s expected to be just over $200 per 1,000 cubic meters in the third quarter – it’s a two quarters delay in these gas price adjustments. They are all linked. So this will greatly improve the financial situation of Ukraine.

In the next – in this context I could also say that Ukraine can easily cut its consumption with higher energy prices. And then Ukraine already today produces half its gas itself. And it can take the rest from Europe. Ukraine does not need Russian gas. The best way of Ukraine to deal with Gazprom is not to deal with it. Forget Gazprom, that’s what Ukraine should do. And here, it’s very unfortunate that the European Union insists on trilateral talks, as we have seen the last couple of days in Brussels, so that the European Union can get gas to southeast. And Europe, there are so many other ways to solve that today, all in a rather short time period. So the European Union really needs to rethink its gas policy. Fortunately, it is doing it, but perhaps not fast enough.

MR. HERBST: Anders, I couldn’t agree more with you about European Union gas policy. And in fact, Ukraine seems to have gotten through this winter despite the Russian gas problem.

OK, we have another question here, Professor Tymofiy Mylovanov from the University of Pittsburgh. Professor.

Q: My question – first, I’m concerned about populist pressure in the parliament, and I’m worried that it might play out in the way that it will indeed roll back the reforms. And I wonder what you – if you have an assessment of how much of a threat that is.

The second question is about –

MR. ASLUND: Yeah.

Q: Go ahead.

MR. ASLUND: Yeah, take your second question.

Q: The second question is about Orbol Gas (ph), the local gas companies which are not very transparent and very aggressive when it comes to demand for their transparency, both legally and informally, and whether that is going to play out well. Thank you.

MR. ASLUND: Yeah. I’ll start with Orbol Gas (ph). They belong now – I think all of them – to Mr. Dmytro Firtash, who sits out on jail – on bail in Vienna for now almost a year. And he took them over in 2012 in a highly dubious privatization. Essentially, he was given them by Yanukovych, and for his assistance in his election, campaign financing, I understand. And right now – today it was Naftogaz has been suing to get these back.

And my suspicion is that Firtash in one way or the other will simply see that they are being confiscated. And Naftogaz, whose 34-year-old investment banker chief, Andriy Kobolyev, is one of the more impressive reformers, he is pushing hard to clean this out. And there I think that we are likely to see some improvement.

And, sorry, your first question was? Help me, what was the first question?

Q: About the populist pressure in the parliament and that it will – the risk of rolling back all the positive reforms and how hard – how what are the risks?

MR. ASLUND: Yes. I would say the problem was yesterday, last night. And what happened was that – you can say that there are three populist parties – Batkivshchyna, Yulia Tymoshenko’s Fatherland, which is officially part of the coalition, but as far as I understand almost always votes against the coalition. Then you have – and they have 19 deputies. And then you have Self Reliance that has 39 deputies, which in effect consists of three fractions, which vote rather independently – about equally large, about 10 each. And they were all against it yesterday. And even so, it went through.

The Radical Party – which has 20 deputies, approximately – of Oleh Lyashko actually supported the legislation. And I presume that there was some deal made with Lyashko, who’s very much a wheeler-dealer. And the two big government parties, Arseniy Yatsenyuk’s National Front with 82 deputies voted quite consistently for the legislation. And Yatsenyuk maintains a pretty strict party discipline, even when he does not have very good ideas. But this legislation was driven essentially by two people, Yatsenyuk and the Minister of Finance, Natalie Jaresko.

And the other big parties, of course, the Poroshenko bloc, which has about 150 deputies, which has very little party discipline, normally about 120 votes for and 30 do not really anything. And – but now they managed to take a relatively firm stance. But they by and large supported the legislation. So, yes, last night was the big danger of populism, which was why I was not also secure before the vote. But it turned out better than I had feared.

MR. HERBST: That’s a terrific, terrific way to stop, Anders. I’d like to thank you very much for your – for your time and for your analysis. And I thank everyone for calling in. We’ll probably do another one of these calls within a few weeks, so please stay tuned. And it’s finally good to have some good news out of Ukraine.

MR. ASLUND: Thank you.

(END)