Ukraine’s ‘lost’ cigarettes flood europe

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The hang glider pilot insisted it was a routine flight, and that strong winds had blown him over the border from Hungary into Ukraine. But the man arrested by Ukrainian authorities last July, with his flight suit and night vision gear, looked suspiciously like other hang gliding smugglers along the border smugglers who take off from Ukraine, fly into Hungary, and each drop as much as 100 cartons of contraband cigarettes.

Ukraine is home to some of the world s cheapest cigarettes at $1.05 per pack making the country a bonanza for smugglers, whether by glider or more mundane pathways on the ground. Cars and trucks filled with Ukrainian made Marlboros and Viceroys get waved through border checkpoints by customs guards who seem more than eager to accommodate, for a price. Loads also move by bus and train, bound for other European countries where high taxes make packs cost as much as $5 (Germany) or $10 (United Kingdom).

The backbone of this underground commerce the acquisition of the cigarettes themselves is by far the easiest part of the entire operation. The world s four leading multinational tobacco companies, Philip Morris International, Japan Tobacco International (JTI), Imperial Tobacco, and British American Tobacco (BAT), have produced billions of excess cigarettes in Ukraine, fueling a teeming black market that reaches across the European Union. Today, Ukraine is rivaled only by Russia as the top source of non counterfeit brand cigarettes smuggled to Europe, EU officials say.

The booming trade in tobacco smuggling has major consequences, say industry experts. The growing traffic pushes huge supplies of cheap, untaxed, and unregulated cigarettes into the rest of Europe, undercutting otherwise successful attempts to curtail smoking. Worse, officials say, the trade is boosting organized crime gangs, who find the soft penalties and big profits hard to resist.

The numbers tell the story. Each year, Ukraine s cigarette consumption and legal exports top 100 billion sticks, according to Ukraine s Ministry of Health. Yet in 2008, tobacco companies manufactured and imported nearly 130 billion cigarettes 30 percent in excess of what the local market can consume. These extra cigarettes disappear in the market, feeding an illicit trade that is worth, conservatively, $2.1 billion annually. Ukrainian cigarette production, meanwhile, has steadily risen since 2003, according to an analysis by ICIJ of data compiled by SOVAT, a tobacco and alcohol industry association, and Ukraine government statistics. In fact, cigarette production in Ukraine increased one third between 2003 and 2008 from 96.8 to 129.8 billion with JTI and Philip Morris leading that trend.

What happens to those 30 billion lost cigarettes ? The huge surplus has reached such proportions that it has become a parallel industry, experts say, with all sides benefiting from it, from manufacturers to organized crime gangs who control the black market. In addition, hundreds of thousands of Ukrainians, Romanians, Hungarians, and Poles along the border rely on the trafficking of cigarettes for their livelihood, buying the cheap smokes in Ukraine and unloading them tax free in European countries where prices are far higher.

Distribution of smuggled discount cigarettes with Ukrainian excise stamps is also flourishing on the Internet through numerous Moldova based online stores, which deliver them to customers worldwide.

Tobacco companies are benefiting from selling to smugglers, says Kostyantyn Krasovsky, head of the tobacco control unit of the Institute of Strategic Research at Ukraine s Ministry of Health. They sell it to them at the same prices they sell to legal wholesalers. Krasovsky adds that in dealing with smugglers, tobacco companies can potentially gain extra profits when a batch is confiscated by customs and destroyed. It s even better for them another smuggler will come and buy the same quantity.

Even after recent hikes, cigarette taxes in Ukraine remain among the lowest in Europe. The low price of Ukrainian cigarettes means high profits for smugglers, who have pushed the product all over Europe. Enforcement is lax at best most big seizures of smuggled Ukrainian smokes take place not in Ukraine but in neighboring Romania, Poland, and Hungary.

Blame Game

Attracted by high smoking rates and the potential for rapid returns on investments, multinational tobacco companies rushed to acquire the state run cigarette factories after the Soviet regime collapsed in 1991. Today, the big four tobacco companies Philip Morris, BAT, JTI, and Imperial control 99 percent of the Ukrainian cigarette market.

The former Soviet Union, particularly the most populous countries such as Russia and Ukraine, represented a massive opportunity for the tobacco companies. Men were already smoking in large numbers but the companies knew they could push many more women to smoke, and they did, said Dr. Anna Gilmore, a senior public health researcher at the University of Bath, in the UK, who has written extensively about the tobacco industry in the former Soviet Union. As a result, Eastern Europe is now one of only two regions in the world where both numbers of cigarettes sold and profits are increasing (the other region is Asia), and this makes it extremely important to the industry.

The Tobacco Atlas, published by the American Cancer Society and the World Lung Foundation, identifies Ukraine as one of the countries with the highest annual rates of cigarette consumption per person in the world 2,526 cigarettes.

The tobacco companies, for the most part, acknowledge that they are churning out more cigarettes than the local market can absorb, but they say they sell only to licensed distributors and periodically reduce the output of certain brands that are popular among smugglers. Beyond, that, they claim, it s up to law enforcement to prevent smuggling. Objectively, we know that our brands produced in Ukraine are found in Europe, said Dmytro Redko, JTI s director of corporate affairs in Ukraine. We do our best to prevent such shipments, although we can t halt them completely. That is the function of the Ukraine government.

JTI, which is owned in part by the Japanese government, manufactures some of the brands that smugglers cherish the most, including Ronson. Redko says his company is constantly decreasing production of Ronson, though he would not disclose the exact figures of this brand s output. In 2008, JTI manufactured roughly 37 billion cigarettes in Ukraine, roughly 30 percent of the nation s total production. According to Redko, when JTI bought British manufacturer Gallaher in 2007, it also inherited what he called Gallaher s outflow issue smuggled cigarettes and the company has since tried to correct it.

BAT also has had its share of troubles in Ukraine despite the fact that the company s output in Ukraine has declined 30 percent since 2003. In a 2007 corporate report the company acknowledged that it had to cease production of its Pall Mall brand in the country after an audit showed that local production was not proportionate to local demand, and cigarettes were widely being smuggled to Germany. BAT stated in the report that the company s actions helped reduce the smuggling of its products from Ukraine by 3 billion cigarettes in 2005 and 2006. It is our belief that if all manufacturers took this approach, outflows from Ukraine could be significantly reduced, BAT s chief of anti illicit trade, Pat Heneghan, told ICIJ in an e mail.

Philip Morris, maker of Marlboro, is the top producer of cigarettes in the Ukraine, with 44 billion sticks manufactured in 2008 an increase in production of more than 85 percent since 2003. Marlboro, EU officials say, remains the number one brand seized in Europe. Ukrainian law enforcement officials say that Philip Morris brand L&M is routinely seized at the border. Philip Morris International s director of brand integrity, Andrew Robinson, told ICIJ that the country does indeed have an ongoing problem of diversion of genuine products from Ukraine i
nto the EU, but, he stressed, the company s production is commensurate with demand. Robinson added that Philip Morris has implemented a sophisticated system of product tracking and tracing in Ukraine, and that it actively cooperates with law enforcement to prevent smuggling.

Imperial Tobacco officials declined to comment for this story. In 2008, Imperial manufactured more than 30 billion cigarettes in Ukraine, according to industry and government statistics, the third largest production after that of Philip Morris and JTI.

Everyone s Windfall

The big tobacco multinationals in Ukraine are not strangers to the smuggling business in the 1990s the firms colluded with criminal networks to smuggle cigarettes and gain market share around the world. Since 2004, Philip Morris and JTI have settled lawsuits brought by the EU and publicly committed to fight smuggling. The agreements require both companies to make substantial payments to the member states every time their brands are seized.

Experts say, however, that only a tiny portion of all contraband cigarettes are caught by Ukrainian customs. In 2008, customs officials seized about 66 million cigarettes less than one percent of what they believe was smuggled out of the country.

Then there s the problem of corruption. Several of the more than 120 criminal smuggling cases prosecuted in 2008 in the picturesque region of Chernivtsi, on the border with Romania, involve customs agents who aided the smugglers, Ukrainian police say. In just the first two months of this year, three cases have been prosecuted in Chernivtsi in which customs officials overlooked the smuggling of 10.3 million cigarettes more than half of them JTI s Ronsons.

Tobacco companies say they monitor their wholesalers for suspiciously large sales of cigarettes. Smugglers, in turn, have started to split large purchases into many smaller purchases to avoid detection. We don t know really who is buying from the wholesalers, as these are small batches said JTI s Redko.

Krasovsky, of the Ministry of Health, says tobacco companies are doing little to stop smuggling. By checking the seized packs production dates, he said, manufacturers could monitor where cigarettes have been bought and cut off wholesalers who deal regularly with smugglers. Instead, he adds, tobacco companies supply cigarettes to a wholesaler that has a huge warehouse in the border with Poland it s obvious where those cigarettes are going to go.

Internet merchants are also making a windfall from Ukraine made cigarettes. A Web search for cheap Ukrainian cigarettes yields about two dozen online stores, most of them located in neighboring Moldova. The sites offer all the well known brands, from Marlboro to Winston, with Ukrainian tax stamps and health warnings. The price is $22 for a carton (10 packs) of Marlboro about three times cheaper than prices in the EU. The sellers claim that they will skip customs inspections at the destination country. If customs does try to charge a duty tax, customers are advised to reject the package and ask for their money back. Also plentiful on Ukrainian Internet sites are classified ads offering Ukrainian cigarettes delivered to the EU in large quantities, on constant basis and without any paperwork.

One such ad, posted on January 9, 2009, offered delivery of cigarettes from Ukraine to Europe. In response to an online inquiry, a person who introduced himself as Oleh Dmytruk responded by saying that delivery of red Marlboro can be made to Germany at 18 Euros (about US$25) per carton. The minimum purchase 1,000 cartons.

In Krasovsky s view, the only way to halt smuggling is to make the trade unprofitable for manufacturers. He and other tobacco control advocates propose that, much like in the Philip Morris EU agreement, tobacco companies in Ukraine be forced to buy back their seized cigarettes at market prices.

But the economics of smuggling may be too sweet for at least some tobacco companies to stop. Asked whether the tobacco industry loses money to the illicit trade in Ukraine, JTI s Redko responded candidly What do you mean by loss? From the point of view of a company operating on the market, production of extra goods means extra profits.

Why is smoking cigarettes so popular in europe? (people, expensive, taxes) — city-data forum

03 09 2013, 09 59 PM Phil P Location Colorado Springs 1,101 posts, read 378,727 times Reputation 450 Why is smoking cigarettes so popular in Europe?


As an American from Colorado, the few people I see smoking cigarettes tend to be older folks. Younger people in high school or college by and large do not smoke cigarettes (marijuana is a different story). I think the younger generations don’t see smoking cigarettes as cool anymore. Yet in Europe, especially Eastern Europe, it seems that smoking cigarettes is much more prevalent. Does anybody know why?
03 09 2013, 10 03 PM Tom9 1,490 posts, read 937,389 times Reputation 876 It just custom and has nothing to do with looking cool. However anti smoking movements are gaining popularity in Europe as people develop more awareness about their health. 03 10 2013, 04 32 AM BigSwede Location Sweden 12,512 posts, read 38,108,847 times Reputation 8283 Quote Originally Posted by Phil P As an American from Colorado, the few people I see smoking cigarettes tend to be older folks. Younger people in high school or college by and large do not smoke cigarettes (marijuana is a different story). I think the younger generations don’t see smoking cigarettes as cool anymore. Yet in Europe, especially Eastern Europe, it seems that smoking cigarettes is much more prevalent. Does anybody know why? Why is smoking marijuana so popular in America? 03 10 2013, 04 34 AM Gargamel10 233 posts, read 29,272 times Reputation 77 Not in Spain, not many smokers left.
Weed in on the rise among youngsters. 03 10 2013, 05 03 AM Catbelle Location Europe 1,041 posts, read 656,462 times Reputation 572 I think it was more trendy around 10 years ago, nowadays with the smoking laws and the taxes on tobacco less people usually smoke specially at young ages, I can say that only 10% of my friends smoke. 03 10 2013, 06 19 AM irish bob 4,633 posts, read 2,254,456 times Reputation 2469 Quote Originally Posted by Phil P As an American from Colorado, the few people I see smoking cigarettes tend to be older folks. Younger people in high school or college by and large do not smoke cigarettes (marijuana is a different story). I think the younger generations don’t see smoking cigarettes as cool anymore. Yet in Europe, especially Eastern Europe, it seems that smoking cigarettes is much more prevalent. Does anybody know why?
its much more common in eastern europe where every second young woman seems to smoke

then again hair metal is seen as current over there 03 10 2013, 06 25 AM LindavG Location The Netherlands 2,643 posts, read 1,516,459 times Reputation 3057 Quote Originally Posted by Catbelle I think it was more trendy around 10 years ago, nowadays with the smoking laws and the taxes on tobacco less people usually smoke specially at young ages, I can say that only 10% of my friends smoke. Same here. Most young people I know have never smoked and many older people (including my parents) have quit or are planning on quitting. Smoking is definitely not considered a popular or cool thing to do, more like an expensive and harmful addiction.

It’s another one of those sweeping generalizations that are remnants of the 1970s or so. 03 10 2013, 06 41 AM dunno what to put here Location Leeds, UK 13,026 posts, read 6,186,692 times Reputation 4621 I think pot has replaced cigarettes as far as the under 25s in Britain are concerned. 03 10 2013, 09 20 AM Poncho NM Location New Mexico USA 15,876 posts, read 14,907,863 times Reputation 15917 Quote Originally Posted by BigSwede Why is smoking marijuana so popular in America? I don’t know how popular it really is… I do not, nor do most members of my family smoke marijuana. 03 10 2013, 02 44 PM BigSwede Location Sweden 12,512 posts, read 38,108,847 times Reputation 8283 Quote Originally Posted by Poncho NM I don’t know how popular it really is… I do not, nor do most members of my family smoke marijuana. I think it is generalizing to say it is popular in Europe.
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2 комментария to “Ukraine’s ‘lost’ cigarettes flood europe”

  1. acco at the same rate as RYO since tobacco companies are doing an end run on the RYO tax by calling tobacco for RYO "pipe tobacco" in some cases. The last known figure for pipe smokers was less that 2 million in the U.S. so we are unimportant in the grand scheme of things. 04 11 2010, 12 11 PM Strat

  2. cigarettes in the past month. Although unacceptably high numbers of youth continue to smoke, these numbers represent a significant decrease from peak smoking rates (21 percent in 8th graders, 30 percent in 10th graders, and 37 percent in 12th graders) that were reached in the late 1990s. The use of

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