Pollution Reveals What Russian Statistics Obscure: Industrial Decline
By Josh Zumbrun, May 5, 2023, WSJ

Ever since Russia’s invasion of Ukraine, questions have multiplied about the reliability of Russia’s economic data. Official Russian government reports have often suggested the economy is surviving Western sanctions better than Western govts had
hoped. Yet with Moscow’s penchant for wartime propaganda, to what extent should anyone trust Russia’s economic information?

So here is a data point that is hard for Russia to fake: pollution emitted by its factories and detectable by satellites in outer space.

Rather than showing an economy that suffered an initial shock and has since stabilized, this data reveals an industrial sector that, for the most part, has declined even further as the war has continued.

This unusual bird’s-eye view of Russia’s economy comes courtesy of the European Space Agency’s Sentinel-5P satellite, launched in 2017. To monitor the release of pollutants into the atmosphere, the satellite has a cutting-edge Tropospheric
Monitoring Instrument, known as Tropomi, which can detect gases such as nitrogen dioxide, ozone, formaldehyde, methane and others.

In a partnership with the ESA, these images are collected by QuantCube Technology, a Paris-based provider of novel data sets, largely for institutional investors such as hedge funds, banks and corporations. In particular, QuantCube tracks the amount of
nitrogen dioxide, produced by the burning of coal, gas and diesel, as is common in factories.

“Right now the trend is quite bearish on most of Russia,” said Benoit Bellone, the head of research and senior research data scientist at QuantCube.

That interpretation has a strong logic to it: if Russian factories’ output is expanding, their pollution ought to be rising. For example, said Mr. Bellone, “To double your steel production, the pollution must rise proportionally.” Short of building
new factories or power plants, there is really no way around this.

So if pollution is instead dropping, it is a fairly strong indication that factories aren’t producing as much as they used to.

The Sentinel-5P satellite is relatively new and Russia is a challenging country to analyze, Mr. Bellone said, because of its enormous geographic scale and because pollution data must be adjusted for factors such as cloud cover, which obscures how much
satellites see on a given day.

But the techniques for studying economies with satellite data aren’t new. For over 20 years, researchers have honed techniques to use nighttime light as a proxy for economic growth, because growing economies add houses, neighborhoods, factories and
streetlights that emit light visible to satellites.

That data shows that governments led by dictators or autocrats systematically claim to have robust economic growth, even when nighttime light is growing modestly. This doesn’t tell you whether the dictator is demanding manipulation of the data, or
whether the ones in charge of the data don’t want to give the dictator bad news. Either way, some countries’ economic data probably can’t be trusted.

Russia’s data was once trustworthy. But since its invasion of Ukraine, it has attempted to impede international observers from knowing what is happening to its economy by limiting the release of official stats. This has divided analysts over even basic
questions, such as whether the economy is growing or shrinking.

The topic is a sensitive one in Russia: It was the subject of the most recent article written by Wall Street Journal reporter Evan Gershkovich (“Russia’s Economy Is Starting to Come Undone”), before he was detained by Russian authorities while on a
reporting trip and accused of espionage. The Journal vehemently denies the allegation against Mr. Gershkovich; the U.S. govt has determined he has been “wrongfully detained” and has said he isn’t a spy. The Journal and the U.S. have each demanded
Mr. Gershkovich’s immediate release.

The pollution data, though only a partial window into Russia, shows some of the areas where the country’s economy is starting to fray. Because the data is geographic, it can be broken down by region or industry, by identifying the sector of major
pollution-causing factories.

Over the past six months, urban pollution in Moscow and St. Petersburg has begun to increase (partially a reflection of traffic) but pollution in industrial regions has continued to drop, off 1.2% over the six months ended in April and down 6.2% over the
past year—more than during the worst of the pandemic. By contrast, Russia’s official measure showed industrial production rose 1.2% in March from a year earlier.

The data do show that some industries have recently turned a corner. Pollution emitted from metals factories and thermal power plants has increased over the past six months. Oil and gas pollution, however, is down slightly over the period.

After Western car companies curtailed operations in Russia immediately after the invasion, many factories tried to reopen under new Russian control. Those efforts appear to have fallen short, judging by the 7% drop in pollution in the past six months (
and 16% over the past year) from sites associated with Russia’s automobile industry.

Other polluting industries have dropped 1.2% over the past six months. Overall, every sector appears worse off than before the war began.

The data has drawn interest from the European Central Bank, where economists have incorporated the satellite pollution data into an alternative tracker of Russia’s economy. Adrian Schmith and Hanna Sakhno, economists at the ECB, in an overview of their
approach in February, said the “key criterion for selecting the indicators that comprise the tracker is their independence of Rosstat,” the Russian govt statistical agency.

“By providing a signal on activity that is independent of Rosstat, the tracker allows for a robustness check of information released officially by Russia,” they write.

They concluded that although Russia’s official economic indicators were showing signs of improvement, this “stands in contrast to our tracker which has gradually declined, signaling a loss of momentum in the Russian economy compared to official
statistics.”

https://www.wsj.com/articles/pollution-reveals-what-russian-statistics-obscure-industrial-decline-cdd7103e

--- SoupGate-Win32 v1.05
* Origin: fsxNet Usenet Gateway (21:1/5)