Tobacco giants help fund Putin’s war machine with £7bn in taxes

Tobacco companies have paid almost £7bn in taxes to the Kremlin since the invasion of Ukraine, despite vowing to pull out of Russia.

Analysis by The Telegraph of Russian Treasury figures shows that the Kremlin has received 480bn roubles (£6.8bn) from the tobacco industry in the eight months since Putin launched his war.

London-based British American Tobacco, Philip Morris International and Japan Tobacco International hold more than 90pc market share in Russia, meaning the three companies alone have contributed at least £6.3bn.

The figures highlight how the world’s biggest tobacco firms are continuing to fund Putin’s war efforts, despite pledging to cut ties with Russia.

Center-Life, an anti-smoking lobbying group in Ukraine, estimates that 2020 taxes from PMI and JTI would fund 700 Mil Mi-24 helicopters, 1,970 T-72 tanks and 382 Sukhoi Su-25 fighter jets for the Russian army.
Bob Seely, a Conservative MP on the influential Foreign Affairs Committee, said: “It’s clearly completely wrong that these western firms continue to pay significant taxes into Russian coffers, because so much of Russian state expenditure now is to fund the war in Ukraine, which is killing people in large numbers.

“These companies said they would not support the Russian state and they would do the right thing, but they patently haven’t done that.”

The tax contributions to the Kremlin underline the gulf between the tobacco industry’s public proclamations and the reality of their continued trading in Russia.

BAT, which makes Camel and Pall Mall cigarettes, initially refused to cut ties with Russia following the invasion of Ukraine, before reversing its decision amid public pressure. It has not yet left Russia, however, blaming operational complexities.

In March, PMI, which owns the Marlboro brand, discontinued some of its cigarette products in Russia and halted marketing activities in the country, saying it intends to exit the country in an “orderly manner”.

But rival Imperial Brands is the only company so far that has actually sold its Russian operations.

JTI said it would suspend all new investments and marketing, but has made no commitment to leave the country.

Photographs shared with The Telegraph show PMI has started to include the Ukrainian flag on its adverts in the country and asked customers to donate to the armed forces.

Yet the US-based company has been steadily increasing the number of cigarettes it sells in Russia. Last week, PMI announced it had sold almost 14bn cigarettes in the third quarter, up from 10bn in the first three months of the year.

In 2020, Putin honoured PMI for donating food to the elderly and providing personal protective equipment for volunteers during the pandemic, with the company touting the “commemorative medal and a letter of thanks” it had received from the Russian leader.

Deborah Arnott, chief executive of Action on Smoking and Health, said: “Most transnational companies trading in Russia have pulled out, recognising their responsibility to do all they can to help end Russia’s devastating war on Ukraine.

“However, it’s hardly surprising Big Tobacco think they can carry on trading no matter what Russia does as this is an industry without a moral compass, whose products killed around 100m people in the twentieth century and are on track to kill a billion in the twenty-first.”

While much of the focus of sanctions has been on Russia’s huge energy exports, taxes from the tobacco industry remain an important source of income for the Kremlin.

In previous years, cigarette bosses have boasted about how much they contribute to the Russian economy – a total of roughly £10bn between them each year.

JTI said its tax payments in 2020 accounted for 1.4pc of Russia’s federal budget revenues, or around 262bn roubles.

Ms Arnott added: “Tobacco manufacturers have a particular responsibility as smoking rates have always been high in Russia and the government collects billions each year in tobacco taxes from the transnational tobacco manufacturers.”

The latest available Russian Treasury figures show tax revenues from the industry stood at 727bn roubles last year. Averaging 60bn roubles per month, this means the Kremlin is likely to have pocketed £6.8bn in the eight months since the invasion of Ukraine.
A spokesman for JTI said: “JTI operates in all its markets in full compliance with national legislation and tax requirements.”

A BAT spokesman said: “The complex process of transferring our Russian business in full compliance with international and local laws is ongoing. Upon completion, BAT will no longer have a presence in Russia.”

Labour MP Alex Cunningham said: “Tobacco firms put profits ahead of everything else so I’m not surprised they are happy to bolster their business by trading with whoever they like, warmongers included. That the Russian economy has benefitted from £6 billion from the industry at a time they’re funding an illegal war against Ukraine beggars belief.

“It is now time for the British Government to intervene and make it clear to tobacco companies that they are expected to follow the lead of responsible companies and stop trading with Russia now.”

PMI was contacted for comment.

Source: Telegraph