Flashy BMW cars, a pristine villa in downtown Geneva, United Nations diplomatic credentials, and close to 2.2 million EUR in profit: welcome to the lucrative life of a UN cigarette smuggler.
In August, two employees of the diplomatic mission of Iraq to the United Nations in Geneva, Switzerland were accused of abusing their diplomatic status to illegally funnel over 600,000 cigarettes into France over the course of 3 years in order to sell on the black market.
The plan involved using a German firm to acquire heaps of duty-free cigarettes, only to have them stored in a warehouse near the Geneva airport and eventually trucked to the Rennes region of France to have them sold on the street.
The accused were able to purchase duty-free cigarette due to their diplomatic status at the Iraqi mission, according to the Swiss Federal Customs Administration, which first gave news of the incident to the Sonntags Zeitung newspaper. It was later confirmed by the Iraqi Embassy in Bern in press release.
The two staff members of the Iraqi mission were fined 155,000 EUR and 110,000 EUR for cigarette smuggling, a fraction of the 2.2 million EUR in tax savings they were able to acquire.
Geneva, where the operation is said to have originated, is the seat of the World Health Organization, which has organized its own crusade of tobacco products.
The authorities say they were tipped off to the case by local diplomatic officials from Hong Kong, who noticed large shipments of cigarettes purchased with their credentials without their knowledge. The men are also accused of abusing the duty-free status of the embassies of Saudi Arabia, Oman, and Bahrain in order to order cigarettes to eventually sell, says the Zurich-based newspaper Tages Anzeiger.
The Iraqis were swift in condemning the employees accused of smuggling the cigarettes, but also saved criticism for media coverage of the smugglers, claiming news reports hurt the image of the country and weaken it in the face of ISIS.
“The published news in its current inaccurate form caused a severe pain for the people and the Iraqi government,” wrote the Iraqi Embassy to Switzerland on their website on August 25th. “In addition to suffering of our people from the genocide and the destruction made by the international terrorism, particularly as we gather our strength to expel Daesh gangs from our country.”
Our model tells us that smuggling would leap from 12 percent of all cigarettes consumed to a stunning 36 percent, a tripling of the smuggling rate to go with the tripling of the excise tax. Half of those smokes would come from casual smuggling and half from commercial smuggling.
What causes such a lucrative market for cigarette smugglers?
It’s all in the taxes, according to statistics pulled together by the Mackinac Center for Public Policy, a Michigan-based nonprofit public policy think tank.
In analyzing the effect of an additional excise tax on cigarettes currently on the referendum ballot in the American state of Colorado this November, they concluded that tripling the tax would ensure that smuggling would “leap from 12 percent of all cigarettes consumed to a stunning 36 percent.”
“Half of those smokes would come from casual smuggling and half from commercial smuggling,” they added in a guest column in the local Post Independent newspaper this week.
In India, which is set to host the seventh Conference of the Parties, the largest international gathering on the Framework Convention on Tobacco Control implemented by the World Health Organization, there have been claims that incessant warning label requirements have actively led to increased smuggling in the Indian market.
“Since smuggled cigarette packs will not carry the necessary health warnings, people can consider them safe leading to their widespread consumption,” said a spokesman from the Tobacco Institute of India, a representative body of tobacco makers.
Yogesh Deveshwar, the head of India’s largest tobacco company, has even accused U.S.-based NGOs of fueling cigarette smuggling in the country by proposing burdensome regulations, he told the International Business Times.
But regardless of the complaints from industry, various government bodies will be taking very differing stances of how to approach illicit trade.
The European Union partners with all major cigarette producers internationally to help combat cigarette smuggling and eradicate illicit tobacco. This past July, the EU let the first of these agreements to expire. And more could be on the way very soon.
Yaël Ossowski is a Canadian journalist living in Vienna, Austria and senior development officer at Students For Liberty.