satellite photos and the recovery of Russian industry -

satellite photos and the recovery of Russian industry -

With the end of the thirty golden years of market globalization, the economy has returned to where it perhaps should always have been: handmaid or at least on par with the other major areas of knowledge and human action, but certainly not above them. Therefore, in this last issue before the summer break, I try to put the tools of the economy at the service of perhaps the most important geostrategic question of 2023: until when will Russia be able to sustain the war in Ukraine?

That's why

The industrial recovery

There Russiaseen from space, sends smoke signals that reveal an industrial recovery underway. Through the use of satellite images, in fact, it is possible to measure industrial production throughout the country (see graph above). And the signs are unmistakable: impoverished Russia, reduced to war economy status, but appears to emerge from the recession that hit it last year; it did so thanks to the productive recovery of the military-industrial complex. If this stability is confirmed, Western governments in the coming months will probably have to prepare to support Kiev in a war that will continue for at least another year and a half. Vladimir Putin's regime is anything but strong: as revealed by Yevgeny Prighozin's abortive march for justice, Russian institutions are emptied of meaning and capacity and the whole country seems to be governed by the fragile agreements typical of a mafia state. Litigation support for the passive and unreliable dictator.

The resilience of the Russian economy

But the economic stability of Putin's system is by no means a last resort, as for example the Soviet Union could have been at the end of the Mikhail Gorbachev period. On the contrary, it is experiencing what my colleague and co-author Alexandra Prokopenko calls a phase of military Keynesianism. To understand why, a parenthesis on the method. Russia is photographed and filmed every day by the orbiting satellites of the Center national d'tudes spatiales, the French space agency. At 232 observation points in Russia, the Parisian company QuantCube Technology then carries out an analysis of the polluting emissions. starting from these, QuantCube's team of statisticians, mathematicians and computer vision engineers deduce the trend of industrial production, to provide updated data to its customers (among them, the European Central Bank, the World Bank and large private groups such as JP Morgan or Moody's). Analysts measure the activity of the factories on the basis of the intensity and quality of the gases released in the various territories of the federation.

How much does Moscow produce

Since each region corresponds to certain productive sectors - for example, defense and metal companies are concentrated in the St. Petersburg area - it is possible to get an idea of ​​the activity in the various sectors. And since each type of factory produces specific emissions, recognizable from space thanks to the concentration of gases - for example, metallurgical furnaces release nitrogen dioxide - analysts are able to distinguish the different activities even in regions such as Chelyabinsk, where the production of armaments, cement, electricity and metals overlaps. Thus QuantCube estimates that in Russia as a whole the defense industry on May 22 was producing two per cent more than six months earlier. In reality this is a slowdown compared to the pre-war phase: in May 2021, in view of the war, the manufacture of weapons in Russia grew by 18% on a six-monthly basis. But then there was an industry downturn for most of 2022.

The restart of the war industry

Now the impact of Western sanctions seems to have been partially overcome and the recovery of the military industry is becoming evident. It is no coincidence that the strongest growth in emissions is seen in regions where many or important factories for military production are located, such as Chelyabinsk, Kaluga or Samara. And not surprisingly, Alexandra Prokopenko informs in her newsletter for The Bell, spending on national defense and national security this year will reach 6.2% of gross domestic product and almost a third of all public expenditure in the state budget. In other words, Russia, like Hitler's Germany, is becoming a war economy that distributes benefits to those who are part of that supply chain: from the oligarchs to the workers employed in armaments factories.

Military Keynesianism

moreover, it is probable that military Keynesianism drags other sectors as well, judging by the data captured by QuantCube on satellite emissions. Electricity generation from non-nuclear sources in the middle of last month was more than 3% higher than six months earlier. Polluting emissions from the metallurgical industry, after a long fall in 2022, are 4% higher than six months ago. Even oil refining and the production of building materials have put the fall of 2022 behind them and show an acceleration between 2.5% and 3.5% (again on a six-monthly basis). We can't be super-precise and certainly Russian industrial production isn't shining, it's just recovering from a recession - says Benot Bellone, head of research at QuantCube -. But there is a certain hold. The economy has not been paralyzed by the sanctions. All this resistance is largely explained by trade with China and, among other factors, by Saudi Arabia's choice to multiply by two hundred the imports of refined petroleum products from Russia in April and May of this year, compared to the beginning of 2022. Whatever the reasons, Western governments now have to deal with a Putin-like system of power that is creaking, but not yielding.

Beijing's help

Crunches had been seen before and I had talked about it on Courier before the Prighozin uprising. To give another example on 7 June when Margarita Simonyan, a famous Putinian propagandist and director of Russia Today, proposed a cease-fire live on the first state channel to avoid new attacks on Russian territory (and was not punished). But the fact that the regime is holding on can be seen at least in the data on a war economy which, for now, appears to be sustainable largely because it is helped by China. At this point, however, I must add another variable, to assess the sustainability of Putin's regime: will public opinion get tired of the war dead and the hundreds of thousands of conscripts? The wave of young men on the run triggered by last September's mobilization suggests that a new call to arms could trigger even more open defections. And certainly the army will still need men to throw into the furnace of war. But Dmitri Alperovitch, an American analyst who has just returned from Kiev, refers to a recent conviction of Ukrainian military leaders: Russia is continuing to recruit 20,000 men a month, without big announcements and in a sneaky way to avoid public reactions.

The trauma of war and Putin's goal

Finally, the question of the dead and wounded in the war: how great a shock the losses are causing in Russian public opinion. A recent analysis by Meduza estimates the number of Russian dead in the war at around 50,000 and four seriously injured for each death, for a total of 250,000 families hard hit through a loved one. If one imagines that each of these 250,000 killed or seriously wounded soldiers has a social network of one hundred people – family, friends, colleagues, fellow students – then the trauma of war has directly rippled to 25 million Russians. A deep wound in society, certainly, but not enough to shake the other 120 million inhabitants from their historic political apathy. Putin at this moment is therefore thinking – I hope wrongly – that he can still go ahead in Ukraine. That he has no interest in negotiating anything, at least until he knows if Donald Trump will return to the White House in November 2024 and the Kremlin can hope for a decline in American support for Kiev. So Putin today does not want to negotiate. He wants neither peace nor a cease-fire. Who here in Italy makes him believe-unfortunately-doesn't know what he's talking about or not in good faith. Not a simple picture. But a framework in which those who care about a free world, who do not legitimize blind aggression and the violent oppression of peoples, must not give up an inch. The most dangerous phase, perhaps, is just beginning.

This article comes from Federico Fubini's newsletter Whatsever it takes. Click on this link to sign up.

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