From: imbibe@mindspring.com   
      
   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.”   
      
      
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