Tobacco.org

• Revealed: £2bn cost to UK from cigarette smuggling  

At the Ukrainian-Polish border town of Przemysl, the seizure of 4,500 cigarettes hardly solicits a reaction. The border guards know the discovery will barely impact on one of Europe's fastest-growing forms of organised crime.

For criminal gangs from the Mafia to the Triads, cigarette smuggling is the new cash cow, and governments, companies and taxpayers are suffering the consequences.

Europe's growing addiction to cigarette smuggling is burning a £7bn hole in the pockets of governments in western Europe through lost tax revenues, and leaving companies including UK-listed British American Tobacco (BAT) and Imperial Tobacco nursing some £600m in lost sales each year.

While the problem starts in many of the former Soviet-bloc countries and other parts of the developing world, the effects are being felt on streets across the UK.

The illegal import of cigarettes that are either produced in counterfeit factories or legally purchased in low tax jurisdictions and smuggled into Britain is growing by the day and tobacco industry insiders question how it will ever be stopped.

Criminal gangs are using increasingly creative means to flood Britain with smuggled packs of Marlboro, Superkings or Lambert & Butler, or eastern European brands such as Classics or Jin Ling.

This month it emerged that children in the north east of England are being recruited to act as mules on smuggling missions. Seduced by the offer of cut-price air tickets and spending money, teenagers are flying to low-duty countries to fill their suitcases with cigarettes, returning to Britain to pass them on to criminal gangs.

Four schoolgirls aged 15 and 16 who live near Durham narrowly avoided jail after being caught smuggling 200,000 cigarettes into Britain. . . .

As the recession rocks the UK, demand for low-cost cigarettes is growing, driven by the dominant view that this is a victimless crime. However, tobacco industry insiders and customs officials suggest it is anything but. . . .

Cigarette companies have received some of the blame, with critics arguing that the "Big 4" – Philip Morris, Japan Tobacco, BAT and Imperial – over-produce in Ukraine, knowing their products will be smuggled elsewhere. Philip Morris and Japan Tobacco agreed in 2004 to pay a combined $1.65bn (£1bn) to the European Union and member states amid allegations they were involved in smuggling. However, recent signs suggest the cigarette manufacturers are now taking a different approach.

Poland's smuggling problem dates back to 2004 when the country joined the EU, since when the government has been raising tobacco duty levels to meet EU targets – twice this year alone.

However, higher duties in Poland have only heightened the disparity with taxes and tobacco sale prices in neighbouring countries such as Ukraine and Russia. . . .

"Once the line opens, the situation will get worse. Then you will see not only cigarettes but counterfeit handbags, medical products and clothing," he warns.

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• Made to be smuggled: Russian contraband cigarettes 'flooding' European Union 

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Europe is being flooded by smuggled Russian-made cigarettes worth at least $1 billion a year, an international investigation has discovered.

A network of factories and routes has been put together across Europe since 2004, following large-scale smuggling routes previously supplied by major multinational tobacco companies. The new underground smoking trade involves only one brand, Jin Ling, which is turning up in more cities and countries across Europe every month.

Jin Ling, virtually unknown to the authorities three years ago, has grown so rapidly that law enforcement officials say it now rivals Marlboro as the top smuggled brand being seized in the European Union.

The organization behind this fast expanding black market, the Baltic Tobacco Factory (BTF) of Kaliningrad, Russia, has links to two of the world’s largest tobacco companies. Its factory network in Russia and Ukraine was previously owned and run by subsidiaries of Japan Tobacco International (JTI) Group, the world’s number three producer.

The investigation has identified a network of Russian and East European companies, including five factories believed to play roles in manufacturing the contraband cigarettes being smuggled to the West. . . .

Jin Ling cigarettes have no legal market in any European country, according to customs officials. The brand is never advertised and cannot be bought in shops. It is only sold illegally — smuggled by gangs who hope to pocket immense profits by selling unlicensed, untaxed cigarettes on black markets across Europe.

“Jin Ling is the most disturbing new development anywhere in the world in the illegal tobacco trade,” according to Luk Joossens, a World Health Organization expert in tobacco smuggling. “They are flooding into Europe.” . . .

ICIJ’s team has pieced together the unique story of the world’s first-ever cigarette brand designed and manufactured only for smuggling. . . .

Baltic Tobacco Factory’s headquarters is in Kaliningrad, a slice of Russian territory annexed by the Soviet Union after World War II and wedged between Poland and Lithuania. The freewheeling Russian exclave is known as a hotspot for smuggling and organized crime. . . .

Both RJR, Kazakov’s former supplier, and Gallaher, BTF’s former home, are now part of Japan Tobacco International (JTI). JTI acquired RJR’s non-U.S. tobacco operations in 1999 and bought Gallaher in 2007. In 2004, BTF joined JTI — as well as Philip Morris — in forming the Moscow-based Tobacco Industry Development Council. The industry group’s stated intent was to lobby for more favorable taxes on filtered cigarettes.

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Jin Ling
From the ICIJ story: "[T]the world’s first-ever cigarette brand designed and manufactured only for smuggling."

• Going undercover: Inside Baltic Tobacco’s smuggling empire 

ICIJ’s reporters went to Russia to uncover the truth about the billions of black market Jin Ling cigarettes turning up across Europe. They quickly learned that packets of Jin Ling could not be purchased even in the shops, markets, or street stalls of the Russian city where they are made, Kaliningrad. But Jin Ling was available to smugglers, in huge quantities, from its manufacturer, the Baltic Tobacco Factory.

Kaliningrad can be a dangerous place to ask questions about smuggling. The Russian territory, sandwiched between Poland and Lithuania, went into rapid and cataclysmic decline after the break up of the Soviet Union, but has since profited immensely from its close proximity and excellent transport to the European Union. It has also gained a reputation as a haven for smugglers and money launderers, and for a police force accommodating to smugglers’ interests. The city is home to a noisy night life and frontier atmosphere, with luxury limousines a frequent sight on the streets.

Russian journalists working in Kaliningrad know that to openly ask about the cigarette contraband trade is a risky business. In 2006, after criticizing the police — including the protection they give to smugglers — the local Novye Kolesa newspaper was raided and its newspapers confiscated. . . .

To investigate the Baltic Tobacco Factory company (BTF) in the high risk environment of Kaliningrad, ICIJ’s reporters went undercover in June 2008, with one posing as a Romanian smuggler setting up a new route to the EU. They carried concealed video and recording equipment to witness all that they saw and heard. (Their video report is available online.) . . .

From Kaliningrad, a team of ICIJ reporters followed the route of Jin Ling cigarettes and their containers on their journey to the west. Thirty kilometers south of Kaliningrad, at the Polish border crossing of Bagrationovsk, Jin Ling was widely available. Just outside the shabby town, parts of which have been left unrepaired since 1945, smuggling is big business. As at other border crossings between Russia and the EU nations of Poland, Latvia, and Lithuania, cigarettes are not only smuggled through in full container loads; they are also broken down into small quantities by armies of personal smugglers and their managers.

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• Swedish Match Hires Motorbike Champ Rickardsson for East Europe 

Swedish Match AB, the Swedish maker of smokeless tobacco, hired former world speedway champion Tony Rickardsson to head its eastern European operations, marrying two of Sweden’s favorite pastimes: snuff and motorcycle racing.

The 39-year-old Swede, who won six motorbike speedway world titles between 1994 and 2005, will join the Stockholm-based company in October after driving for his own team in the Porsche Carrera Cup car racing series, Swedish Match said today.

As area manager of the company’s eastern European region, Rickardsson will be responsible for selling Cricket lighters, Korona matches and Macanudo cigars in countries such as Russia and Ukraine. Swedish Match, which has sponsored his racing career since the start of 2002, is seeking to expand beyond Scandinavia, where it gets 42 percent of revenue.

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• Thai Tobacco sets sights on Eastern Europe  

Thailand Tobacco Monopoly (TTM) is looking to penetrate the Eastern European market as part of its drive to boost exports in light of declining cigarette consumption at home.

TTM has recently exported some cigarettes to Singapore, Taiwan, Brunei and the Middle East, the workplace of a number of Thai workers. To accommodate the overseas marketing, new brands will be launched for easy recognition. Eastern Europe, particularly Poland and Russia, has high purchasing power, while its economies are expanding and regulations are not as strict as those in Thailand. . . .

In the domestic market, TTM has no plan to launch new brands, in line with the government's anti-smoking campaign. Like private tobacco companies, it has witnessed declining demand in the Thai market. Though value has been rising through higher prices, sales volume has dropped continually.

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• LN: Austria takes tough stance on cigarette imports 

Austrian customs officials have started imposing tough fines on persons bringing Czech cigarettes to Austria and in addition they confiscate all the non-permitted cigarettes they find, the daily Lidove noviny wrote Tuesday.

Czechs taking out more than one carton of Czech cigarettes while travelling for holiday to Croatia via Austria could be severely punished because the Austrian customs officials have started imposing tough fines on all drivers who violate "the tobacco law" while crossing the Austrian border, the paper says.

Under the law, passed shortly before the Czech Republic joined the Schengen area without border checks last December, one person can only take out 200 pieces of cigarettes with the Czech-language health warning message while travelling from the Czech Republic to Austria.

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• BAT Splits European Business Into Western and Eastern Units 

British American Tobacco Plc, the maker of Lucky Strike cigarettes, said it's splitting its European business into western and eastern units.

Jean-Marc Levy will be responsible for western Europe and David Fell for eastern Europe, the London-based company said today in a Regulatory News Service statement. They are replacing Ben Stevens, who previously managed the entire European division and has become chief financial officer.

Eastern European consumers are increasingly switching to brands of companies such as BAT and Philip Morris International.

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• Cigarette smuggling costs exchequer €100m 

A big increase in cigarette smuggling from eastern Europe and former Soviet republics will cost the exchequer more than €100 million in lost taxes this year.

New figures obtained by The Sunday Business Post show that seizures of smuggled tobacco product have risen by more than 40 per cent since last year. More than 74 million cigarettes are expected to be seized by the end of the year, compared to 52.3 million last year.

A spokesman for the Revenue Commissioners said that cigarette smuggling was a ‘‘major contributory factor’’ to the anticipated loss to the exchequer.

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• East European immigrants with cancer 'could swamp the NHS'  

The Health Service could be "overwhelmed" by cancer sufferers from Eastern Europe, a leading doctor has warned.

There are almost twice as many smokers in Poland and neighbouring countries than the UK, which means they have far higher rates of lung and other cancers.

It comes as a new documents showd the bill for treating health 'tourists' amounts to at least £62 million a year.

It says NHS trusts are ignoring guidelines aimed at preventing foreign patients abusing the NHS, a document said. . . .

Recent data suggests up to half of all Polish men smoke. Lung cancer kills more men in Eastern Europe than any other form of the disease. In the UK, on the other hand, more men die of prostate cancer.

The NHS's Cancer Plan is based on needs identified in 2000.

Dr Collingridge said it may have to be drastically rewritten to take into account the different needs of Eastern European patients.

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• Cytisine for Smoking Cessation: A Literature Review and a Meta-analysis 

Cytisine is an agonist of nicotinic receptors; in particular, it binds strongly with 42 nicotinic receptors. Cytisine has been used to treat tobacco dependence for 40 years in Eastern Europe. The objective of this study was to review the literature on the effect of cytisine on smoking cessation. . . .

Research conducted during the past 40 years suggests that cytisine is effective for smoking cessation. Thus, an apparently effective smoking cessation drug that has been used for decades in Germany and Eastern European countries remained unnoticed in other countries. Most of the articles reviewed herein were never cited in the English-language literature. Despite the existence of 3 placebo-controlled trials, recent reviews of the efficacy of smoking cessation drugs omitted cytisine2, 14-15 and little research on cytisine has been conducted in recent years.

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• Smuggling 'will increase in Europe next year' 

The European Anti-fraud Office (OLAF) of the European Commission expects smuggling to increase next year as more countries join the European Union.

Speaking at a workshop in Dubai, Ian Walton, Director of the Customs Unit at the OLAF, said that tobacco represents 10 per cent of the smuggling in Europe.

"Since tobacco taxes in Ukraine are very low, there are huge tobacco smuggling operations to Poland, Germany and the UK."

Walton also expects smuggling and commercial fraud to increase when Romania and Bulgaria join the EU. He said that most complaints came from China.

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• Tobacco company considered funding a film to promote smoking in eastern Europe -- Dobson 332 

Previously secret documents show that British American Tobacco (BAT) considered investing in a £2.25m (€3.3m; $4.2m) action film, with a heroine who smoked, for distribution in eastern Europe, according to a new report (European Journal of Public Health 2006 Apr 5, doi:10.1093/eurpub/ckl041).

In return for providing money to make the film, the company would have cigarette marketing opportunities in Eastern Europe and the former Soviet Union, says a letter from the film’s producer cited in the report. British American Tobacco would have had the right to position its chosen brand in the film.

The report cites examples of other interest in using films to promote tobacco smoking in several eastern European countries, after the political collapse of the Eastern bloc, including an executive who suggested that films in Hungary could reach a young urban market.

“About the same time the company also considered using movies as the medium in Romania to launch its Lucky Strike brand in that market,” say the report.

According to the report, internal tobacco industry documents show that in the late 1990s, the company evaluated becoming an investor in a film which had the working title Aquarius, later called Indian Poker. . . .

The report says a change in strategy is required for tobacco control in movies. It says protocols should lay down what is permitted rather than what is prohibited. That, say the authors, will reduce opportunities for cigarette companies to devise new means to subvert regulatory intent.

A British American Tobacco spokesman said, “We didn’t do it [finance the film], and now under our international marketing standards we wouldn’t even contemplate it.”

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• Movie Moguls: British American Tobacco's covert strategy to promote cigarettes in Eastern Europe 

Results: A small collection of internal corporate documents from British American Tobacco show that in the late 1990s the company evaluated investing in a movie destined for Eastern Europe. By being an investor, BAT could influence the alteration of the movie script to promote BAT's brands, thus providing marketing opportunities without a clear violation of movie product placement restrictions.

Conclusion: Future protocols to the WHO Framework Convention on Tobacco Control should seek to curtail more than just payment for tobacco product placement. More restrictive provisions will be needed to hinder creative strategies by the tobacco industry to continue tobacco promotion and trademark diversification through movies.

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• Analysis: Smoker's bastion in S.E. Europe 

Southeastern Europe has become the last refuge of the smoker.

Immune from the whining of lobby groups and governed by leaders with greater concerns, the region has become a gold mine for multinationals facing increasing resistance in America and the European Union.

Over the past few months, companies like Philip Morris, British American Tobacco and Altadis have taken over government-owned tobacco interests in Serbia and Italy, while bidding closes on Oct. 24th for Tekel, the Turkish state-owned cigarette producer. Bulgaria also plans to privatize.

These sales have brought generous amounts of capital into government coffers.

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• Mafia chief links Balkan leader to tobacco scam 

In a high-security courtroom in the southern Italian port of Bari, Gerardo Cuomo is accused of being a member of a mafia-style organisation. The 57-year-old, extradited from Switzerland three years ago, is a veteran Neapolitan mobster and a linchpin of what for the past decade has been Europe's biggest cigarette smuggling racket, according to Italian prosecutors and the European Union's anti-fraud office. . . .

But if Cuomo has information on organised crime, it is his allegations against one man that are likely to have the biggest impact. He has testified that the great survivor of Balkan politics, Milo Djukanovic, prime minister of Montenegro, was operating hand in hand with the gangs who smuggle billions of cigarettes into the EU.

But if Cuomo has information on organised crime, it is his allegations against one man that are likely to have the biggest impact. He has testified that the great survivor of Balkan politics, Milo Djukanovic, prime minister of Montenegro, was operating hand in hand with the gangs who smuggle billions of cigarettes into the EU.

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