Weekly 16 May 2022

Data blackout

Russia’s so-called “special military operation” in Ukraine has not just led to the international isolation of the Russian economy but to new levels of government secrecy. An unprecedented halt in the publication of official economic statistics since the start of the fighting means we now know much less about what’s going on inside the economy. This lack of data has serious consequences: bad forecasting means rising costs and rising prices.

What’s no longer being published?

The Russian authorities faced criticism over their transparency with economic statistics even before the “special military operation” began, but the suppression of data has now reached unprecedented levels. Here’s what is no longer being released:

  • The Federal Tax Service (FTS) in April ceased publishing monthly figures on imports and exports (the most recent figures cover January). FTS director Vladimir Bulavin said that this was necessary to avoid “inaccurate estimates, speculation and inconsistencies.” Previously, the service only classified information on Russia’s trade in military items, aircraft and nuclear material. Similarly, the Central Bank canceled its monthly reports on foreign goods trade based on the balance of payments (data for February was due to be published on April 11). Data on the volumes of trade within the Moscow-led Eurasian Economic Union has also “disappeared”. Kommersant newspaper described the actions of the FTS and Central Bank as “stupid” and called the Ministry of Energy’s ban on data about oil imports “ridiculous” – foreign states will still have access to key information and energy news services Argus, Platts, and Bloomberg do not rely on Ministry of Energy information to compile their data.
  • The Central Bank stopped publishing detailed information about its international reserves in March. Only general figures are now updated (no information has been provided on the assets in which the reserves have been invested). The likely reason for this is that, after Western sanctions were imposed on the Central Bank, Russia lost access to about $300 billion of its reserves. Only the Central Bank’s gold reserves and reserves of Chinese Yuan remain accessible. And these will only be used if absolutely necessary (for example, to finance critically needed imports).
  • In March, the Russian government allowed companies whose shares are traded on the stock exchange to decide what information to disclose. They have the option of declining to publish any data until the end of this year if there is a threat that it would bring sanctions against the issuer, or any person named in a report.
  • The Central Bank has also permitted banks to stop reporting under Russian Accounting Standards. And it has allowed all financial institutions (including insurance companies) to conceal data on controlling shareholders, and members of management bodies.
  • Finally, air travel regulator RosAviatsia this week formally ceased providing data on passenger numbers (there has been no information since February).

Why is this happening?

The official explanation for all this new secrecy is that it protects Russian companies from potential Western sanctions. Restrictions on data disclosure are as necessary as the introduction of currency controls, a source close to the Central Bank told The Bell.

But experts believe there are other reasons. Concealing customs data will help hide an all-but inevitable decline in Russia exports, according to one of The Bell’s sources. In his opinion, the authorities are reluctant to publish this data because it would expose the extent of Russia’s economic collapse.

Information about imports could also be risky for the government as it sheds light on the key problem facing Russian manufacturing: a structural deficit caused by the departure of foreign suppliers and components and disruption to production chains. This trend is clearly visible in March industrial production data released by the state statistics agency Rosstat: automobile production is down 72 percent compared with March 2021, washing machine production is down by 50 percent and fridge production dropped 52 percent.

Decisions about what data to suppress is dictated by politics – not only to conceal weak spots but also highlight strengths. One federal official did not dispute this in a conversation with The Bell. But he noted that there were never any universal instructions about publishing economic statistics. “There is no formal legal framework that would oblige state organs to publish all the statistical information they collect,” said the official. “There is a general, blurred framework… Nobody is required to publish everything in full.”

Indeed, the only document which regulates the publication of information – the Federal Plan of Statistical Work – clearly describes what data should be collected by this or that department. However, it says nothing about how this information should be disseminated.

Most of Russia’s major economic data is still being published by Rosstat, but in recent years there have been questions about reliability. Most of these questions arise when data is revised upward. Economist Kirill Tremasov (who currently works as director of the Central Bank’s monetary policy department) described in 2019 a recent revision as “trash from Rosstat” and “sketches in place of statistics”, entering into a public spat with Economic Development Minister Maxim Oreshkin (now an adviser to President Vladimir Putin). Later that year, as Putin’s popularity fell, Rosstat stopped publishing the most important indicator of social wellbeing in Russia: its monthly report on incomes.

After the start of the coronavirus pandemic in 2020, government officials even proposed stopping the publication of all statistics – but it was never implemented. Instead, the Economic Development Ministry began releasing data in the evening when it got less traction in the media. Particularly sensitive indicators, such demographic data including mortality rates, began to be released at inconvenient times like Friday evenings.

What’s so bad about this?

The most important loss for economists is the cross-border data (imports, exports, capital outflow, etc), according to Stanislav Murashov, chief macro-analyst at Raiffeisen Bank.

“This is a hole that cannot easily be plugged with other, indirect data,” Dmitry Belousov, a department head at the Center for Macroeconomic Analysis and Short-term Prognosis, told media outlet RBK. “The quality of assessments will inevitably get worse.”

The departure of foreign data providers has further complicated the situation: soon after the start of the “special military operation”, financial market data service Reinfinitiv left Russia and Bloomberg’s terminals were switched off for Russian users. “The departure of these providers is a blow to independent analysts,” said one energy policy expert.

Nevertheless, economists have other sources of information, such as data from other countries about their import-export relations with Russia, and media reports. Nobody has yet proposed halting the quarterly report on the structure of Russia’s GDP, Murashov noted.

“The state has all the information needed to make decisions. Businesses, experts and journalists now have less information,” one official summed up the situation.