Tuesday, August 19, 2014

Tobacco Smuggling in Greece: an Overview, by Ioannis Michaletos

Over the past decade, contraband tobacco sales and facilitation of transnational tobacco smuggling in Greece have flourished, due to a combination of factors. Although not considered as a particularly ‘sexy’ sector of organized crime, compared to narcotics or arms dealing, tobacco smuggling still represents a threat to state security, in that it empowers organized crime rings engaged in multi-level activities, and drains the state coffers of considerable tax revenue.

Originally appeared on Balkanlysis, 11th of August 2014

Key Factors in the Increase of the Contraband Tobacco Trade

The substantial increase in taxation which made one of Greeks’ favorite pastime, smoking, an expensive hobby is the primary factor behind the increase of a contraband market. The economic downturn due to the ongoing crisis further fuels a willingness of locals to invest and work in contraband networks. Thirdly, the increase in tobacco smuggling relates with the overall merging of operational capabilities of regional Balkan criminal groups with Greek ones, and especially those of Bulgaria, along with more distant interests, such as Georgian outfits.

The trend all across the EU of increase in the demand for contraband (and cheaper) tobacco has further boosted the phenomenon and the use of Greece as a peripheral hub for that purpose. The multilayered threats in terms of organized crime and terrorism, which need to be combated by the local authorities, have however put confronting this kind of smuggling on a lower priority in the security agenda than other pressing responsibilities.

A final factor here is the decrease in profitability of the so-called ‘hard drugs,’ such as heroin, due to the tremendous current oversupply from Afghanistan. This situation has led narcotics dealers and traders to shift towards tobacco by using and facilitating their business through existing logistics infrastructure, such as vessels, trucks, warehouses and other facilities.

Throughout the European Union, it is estimated that national budgets lose at least 17 billion euros annually due to contraband tobacco products. In Greece alone, the number stands at 750 million euros minimum, and is still growing. There are several types of tobacco smuggling operations that must be outlined so as to get a clearer picture.

Major Operators; Buy Low, Sell High; Dangerous Knock-offs

First and foremost is the large-scale contraband traffic, which involves significant shipments. This is generally done via large vessels and involves high-profile criminals and mafias of various ethnicities. Corruption in customs, police and the coast guard is paramount for this kind of commodity trafficking.

Moreover, the use of auxiliary service professionals such as attorneys, accountants, transport company owners and front companies is also important. In most cases shipments are of a value above one million euros per shipment and involve many intermediates. In the case of Greece most shipments originate from Odessa, Ukraine and from East Asia, using the UAE as an intermediate stop and re-distribution center.

A second feature is the so called “ant smuggling” tactic, involving small groups of individuals buying cigarettes from a country of low taxation and selling them to another of a higher one, reaping a profit in between. In the case of Greece this is a method used mostly with Bulgarian groups.

The selling of fake tobacco products is another form of contraband and one with potentially disastrous health consequences for consumers, since it involves tobacco produced according to low industrial standards. In this case shipments mostly come via merchant vessels from ex-Soviet states, China and India. Greece is used both as a hub and a destination market.

Tobacco Smuggling Networks: Conditions for Success

In order for an organized crime network to be systematically involved in this kind of trade, there are five basic conditions that need to be met.

Firstly, the network should have the capacity for transporting the merchandise either via vessels or trucks. This requires having the necessary recruitment abilities for the personnel working in such transportation companies.

Secondly, the vast majority of cigarettes currently sought by consumers illegally are those of well-known brands such as Marlboro. Thus a top smuggling network should be able to obtain and supply the markets with such well-known brands, which enjoy consumer loyalty and can be easily resold.

Thirdly, the network should be able to have its fair share of interpersonal connections with law enforcement agencies and customs personnel, so as to be able to ship and move bulks of illegal tobacco cargo across borders without fearing confiscation. In contrast to the narcotics trade, tobacco needs to be sold in big quantities in order to offer a considerable return on investment, and thus also requires larger (and slower) infrastructure and transport to be profitable than does the drugs trade. 

Thus any international tobacco smuggling operation that manages to operate for long periods without being disbanded has assumedly retained its own people inside customs operations in order to evade detection.

Fourth, an international smuggling group should be able to operate within a range of local markets in which there may be high differences in taxation rates. Further, they must be flexible enough to adapt to market changes and price fluctuations. That means maintenance of a local network of representatives, and lots of intermediates.

Finally, the smugglers should have first-person contact with street vendors and small market stores that function dependably as the last chain of operations, before the cigarettes find their way to the consumer.

Read more: http://www.balkanalysis.com/greece/2014/08/11/tobacco-smuggling-in-greece-an-overview/