Since Russia’s invasion of Ukraine nearly a year ago, the EU has taken in nearly 5 million Ukrainian refugees, providing them with vital rights to work, health and education. But while refugee schemes have largely facilitated a dignified integration of Ukrainians, the picture is far from perfect. In late January, Spanish police raided three counterfeit cigarette factories operated by a gang exploiting Ukrainian refugees, whom authorities found to be working long hours and living on site in overcrowded facilities.
Although this shameful lawlessness aligns with conventional perceptions of criminal groups smuggling counterfeit tobacco products, genuine, industry-made cigarettes are in fact king on the black market, with Big Tobacco actively enabling this harmful shadow economy. The time is well past due for the industry to be held fully accountable for its societal damage, from its involvement in the illicit tobacco trade and environmental degradation to its widely known public health impact.
Fuelling the illicit trade
While Big Tobacco deftly positions itself as a victim of smuggling, evidence indicates that it continues to contribute to and benefit from the black market. Tellingly, over two-thirds of illicit cigarettes globally are manufactured by the tobacco industry, while counterfeits account for a relatively small share of the parallel market.
Tobacco companies have various methods and incentives for fueling smuggling. Perhaps the oldest tricks in the industry playbook are overproducing and oversupplying its products in low-price, low-tax markets and then turning a conveniently blind eye, knowing that surplus packs will find their way to the black market. Ukraine has historically been a hotspot for these tactics, with a 2009 investigation revealing that tobacco industry giants “produce and import 30 billion cigarettes in Ukraine beyond what the country can consume, fueling a $2 billion black market that reaches across the European Union.”
Given that tobacco companies receive the same payment from distributors regardless of the final sales price and location, tobacco companies have every reason to stoke the black market, where significantly cheaper cigarettes sell in higher volumes. What’s more, funnelling products through illicit channels allows the industry to swerve high excise taxes that repel smokers in many EU countries.
The damage inflicted by the cigarette black market is immense, providing a key funding source for organised crime gangs while burning a $40.5 billion-sized hole in government tax revenues globally and leading to roughly 164,000 preventable deaths annually.
Undermining tobacco control efforts
As the Organized Crime and Corruption Reporting Project (OCCRP) has rightly affirmed, “tobacco smuggling could be virtually wiped out as a wholesale business if tobacco companies were more serious about stopping it.” Yet the industry continues to shirk its responsibilities—and even actively undermine attempts to curb the illicit market—which is why the WHO’s Illicit Trade Protocol requires vital anti-smuggling initiatives such as track and trace systems to be completely independent from the industry in order to ensure their integrity and effectiveness.
The EU’s foray into track and trace is a case in point. Implemented in 2019, the EU system leaves a critical part of operations to Dentsu, a company with clear tobacco industry links. In 2017, Dentsu bought Blue Infinity, the firm that deployed the Codentify system, which was developed by tobacco giant Philip Morris and which has been disavowed as ineffective by the global tobacco control community. Worryingly, university researchers have stressed the EU system’s similarity to Codentify, positing that “the EU system isn’t independent.”
Furthermore, an OCCRP investigation found that Big Tobacco conducted a concerted, years-long effort to influence the design of the EU system, with one consultant on its development warning that the industry-connected solution would “become the Trojan horse” and “hide billion and billions of dollars of illicit trade,” if implemented globally. Moving forward, the tobacco industry must refrain from intervening and allow independent track and trace systems to effectively tackle the smuggling scourge.
Exacerbating environmental woes
In addition to fuelling smuggling which is exacerbating the public health crisis caused by its products, the tobacco industry inflicts significant environmental harm, an issue which, as the WHO has highlighted, does not receive nearly enough attention.
Dr Ruediger Krech, the organisation’s Director of Health Promotion, has said that “tobacco products are the most littered item on the planet,” adding that “roughly 4.5 trillion cigarette filters pollute our oceans, city sidewalks […] soil and beaches every year.” What’s more, cigarettes contain thousands of toxic chemicals that seep into natural ecosystems, while the plastic waste from filters can take decades to break down.
Historically, the billions of dollars in clean-up costs have fallen on taxpayers, but this is beginning to change. In Europe, countries including Spain and Ireland have passed “polluter pays” legislation requiring the tobacco industry to finance anti-littering operations, measures which the WHO has praised and recommended to other governments to hold the industry accountable for its environmental externalities.
At opposite end of cigarettes’ lifecycle, the tobacco industry fuels deforestation in developing countries – where the majority of the world’s tobacco is grown – to create more space for farmland. In fact, according to the WHO, tobacco farming is responsible for some five percent of global deforestation. Moreover, the industry lobbies governments in tobacco-export dependent countries in Africa to convince them of the trade’s economic importance and dissuade stronger tobacco control measures, such as excise tax hikes.
As with cigarette pollution, Big Tobacco must take responsibility for the environmental devastation created by tobacco farming and stop its cynical practices to keep low-income countries dependent on a toxic sector. Furthermore, governments should follow WHO guidance to impose strong environmental taxes on the industry to generate funds for helping tobacco farmers transition to sustainable crops, helping to support environmental, health and food security in surrounding communities.
If the tobacco industry paid its fair share to offset its societal harm while ceasing its manipulative methods, the wide-ranging impacts of tobacco could be drastically mitigated. Additional government revenue from legal cigarette and environmental taxes could be directed towards public health and cost-of-living support, as well as bolstered law enforcement to dismantle organised crime groups like the Spanish counterfeit cigarette gang that exploited Ukrainian refugees. To finally end the industry’s free ride, governments and civil society must continue fighting to build a future of greater accountability.
Image: By © 2005 by Tomasz Sienicki [user: tsca, mail: tomasz.sienicki at gmail.com] – Photograph by Tomasz Sienicki / Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=172810