Tag: Iran

  • Armenia Thwarts Cigarette Smuggling

    Armenia Thwarts Cigarette Smuggling

    Image: Gevorg Simonyan

    Armenia’s State Revenue Committee (SRC) has foiled an attempt to smuggle a large shipment of cigarettes into the country, reports Panorama.

    In an Oct. 25 statement, the SRC said its employees were told that a large quantity of tobacco products could be hidden in a truck transporting cargo from Iran.

    After inspecting the truck driven by an Armenian citizen, they discovered 68,500 packs of cigarettes without excise tax stamps hidden beneath bags of cement.

    Preliminary calculations suggest the shipment had evaded AMD22.5 million ($58,128) in excise taxes.

  • A Persistent Problem

    A Persistent Problem

    Photo: ITC

    Iran’s large illicit tobacco market has gotten even larger in the wake of U.S. sanctions.

    By Vladislav Vorotnikov

    Despite efforts to crack down, Iran continues to struggle with rampant illicit trade. In 2021, nearly half of the Iranian tobacco market was controlled by illegal businesses, according to the Association of Tobacco Products Manufacturers and Exporters. The authorities are believed to consciously turn a blind eye to smugglers and underground workshops producing cigarettes of dubious quality.

    Although domestic cigarette production expanded in recent years, nearly 5,000 tons of tobacco products, primarily cigarettes, are smuggled into the market each year, according to Mohammad Reza Tajdar, the head of the tobacco products manufacturers association. Domestic consumption is 12,000 tons while Iranian cigarette factories produced roughly 5,000 tons last year, Tajdar said.

    Legal imports exist in negligible quantities, and the gap between production and consumption is filled through smuggling and illegal domestic production, according to Tajdar. The illicit trade has bedeviled Iran for more than a decade, but it picked up tremendously after U.S. President Donald Trump imposed harsh sanctions against the country in 2018.

    Illegal cigarette workshops in Iran “spring up like mushrooms,” so the volumes illegally produced in Iran exceed even those supplied through smuggling, according to Hossein Ali Pouraqbali, the former head of the country’s tobacco production and standards department.

    Occasionally, authorities raid underground workshops, but their campaign remains haphazard. Since the beginning of 2022, the average price of cigarettes in Iran has jumped by nearly 42 percent. Without the illegal workshops, the price would rise even further.

    Meeting the Challenge

    Since the introduction of sanctions, legal imports of most cigarette brands have nearly come to a halt. The Iranian government also discourages the import of Western goods to the domestic market, citing ideological reasons but mainly to preserve foreign exchange, which is in increasingly short supply.

    Pouraqbali explained that smuggling is limited to a handful of brands that cannot be imported legally. He estimated that illegal import reaches 2,000 tons per year.

    In the past years, the Iranian tobacco manufacturers association has been waging war on illegal cigarette suppliers but with little success. Tajdar claimed that a large share of goods supplied through illegal channels turn out to be counterfeit, which means that it doesn’t comply with any production standards.

    One challenge the industry faces is ignorance; the average customer is unable to distinguish counterfeit cigarettes from legally produced cigarettes. And even if they could, it might not make much of a difference; opinion polls suggest that a significant share of customers would opt for illegal products even if they were aware of their status—as long as those products are less expensive than legal ones.

    Bringing Order to the Market

    To help bring the illegal tobacco trade to heel, lawmakers have been discussing the creation of an electronic tobacco product tracking system, but few expect it to be implemented in the foreseeable future. Iranians are very sensitive to price fluctuations of consumer goods, especially since Western sanctions have caused purchasing power to nosedive.

    Iran is currently battling one of the worst political crises in its modern history, sparked by the Sept. 16 death of a 22-year-old woman after her detention by the country’s morality police. Initial protests have quickly grown into one of the largest upheavals since the 1979 Islamic Revolution. At least 328 people have been killed and 14,825 others arrested in the unrest, according to human rights activists in Iran.

    In such an environment, authorities may hesitate to implement measures that are likely to increase cigarette prices and stoke further discontent.

    Legal Business Facing Criticism

    In addition to illegal traders, legal tobacco companies face several other challenges in Iran. Over the years, Iranian officials repeatedly expressed dissatisfaction with the dominance of the local tobacco market by Western manufacturers.  

    During a press conference in August, Hojjat-ul-Islam Syed Salman Zakir, a member of the Social Commission of the Islamic Council, complained that more than 75 percent of Iran’s legal tobacco market is controlled by Japan Tobacco International and BAT.

    Such anti-Western rhetoric is common in Iran, especially since 2018. JTI and BAT often are targeted by government officials and lawmakers who frequently demand higher taxes and import duties. Some even question whether Western businesses should be allowed to continue operating in the country.

    Hopes on the Local Factories

    The Iran Tobacco Co. (ITC), the oldest and biggest local cigarette manufacturer, currently controls around 10 percent of the domestic market, a fact that Zakir described as “regrettable.” However, the authorities hope that the balance of power will soon swing in ITC’s favor.

    “ITC is currently paying special attention to fulfilling its social duties and supporting the population’s health,” Zakir said, adding that foreign tobacco companies neglect to fulfill their social obligations. JTI and BAT, he noted, import tobacco from abroad while ITC in March of 2022 rolled out a comprehensive support program for Iranian tobacco farmers.

    “This is a good incentive for farmers [to boost operation], and we hope for a rise in its [ITC] share on the market,” Zakir added.

    Targeting the lower end of the market, ITC can produce 40 billion cigarettes annually to meet 50 percent of domestic demand. The actual production, however, dropped from 12 billion cigarettes in 2018 to 6 billion in 2021.

    In the previous years, Iranian officials estimated that ITC purchased 15,000 tons of tobacco from local farmers, creating 20,000 jobs in the industry. The government estimated that the latter figure could be ramped up to 100,000 jobs with a corresponding increase in local raw tobacco production. However, this would require allocating state aid to tobacco farmers—a step the Iranian government has been reluctant to take in the past several years.

    ITC Mulls Investment in Zimbabwe

    The Iranian Tobacco Co. wants to invest in Zimbabwe to reduce the cost associated with buying tobacco through middlemen, reports The Sunday Mail. Among the areas the Iranians are targeting are irrigation, curing and mechanization. They also want to contract with farmers and set up factories in Zimbabwe.

    The investments were discussed during a visit to Tehran by a delegation led by Zimbabwe’s First Lady Auxillia Mnangagwa.

    “We get our needs through agents, and prices go higher for us and also causing Zimbabwean farmers to have little profit,” said Iran’s vice president of commerce and economy, Hamid Gharesheikh, during the meeting.

    “We want to get companies to work with directly in Zimbabwe and do away with middlemen. We are under sanctions, and it’s difficult for us to import from other Western countries, but with Zimbabwe, we have a better understanding and for that, our cooperation will be helpful to both of us. We can also supply you with equipment such as tractors and implements for production. We can also supply dryers for curing and processing,” he said.

    The proposed cooperation dovetails with Mnangagwa’s passion to economically empower Zimbabwe’s citizenry, especially women and youths, in the effort to attain upper middle-income status for the country by 2030.

    During the meeting, Gharesheikh said Iran would prioritize women in its investments.

  • Iranian Tobacco Mulls Investment in Zimbabwe

    Iranian Tobacco Mulls Investment in Zimbabwe

    Photo: Taco Tuinstra

    The Iranian Tobacco Co. wants to invest in Zimbabwe to reduce the cost associated with buying tobacco through middlemen, reports The Sunday Mail. Among the areas the Iranians are targeting are irrigation, curing and mechanization. They also want to contract with farmers and set up factories in Zimbabwe. 

    The investments were discussed during a visit to Tehran by a delegation led by Zimbabwe First Lady Auxillia Mnangagwa.

    “We get our needs through agents, and prices go higher for us and also causing Zimbabwean farmers to have little profit,” said Iran’s vice president of commerce and economy, Hamid Gharesheikh, during the meeting.

    “We want to get companies to work with directly in Zimbabwe and do away with middlemen. We are under sanctions, and it’s difficult for us to import from other Western countries, but with Zimbabwe, we have a better understanding and for that, our cooperation will be helpful to both of us. We can also supply you with equipment such as tractors and implements for production. We can also supply dryers for curing and processing,” he said. 

    The proposed cooperation dovetails with Mnangagwa’s passion to economically empower Zimbabwe’s citizenry, especially women and youths, in the effort to attain upper middle-income status for the country by 2030. 

    During the meeting, Gharesheikh said Iran would prioritize women in its investments.

  • Iran: Production and Exports Skyrocket

    Iran: Production and Exports Skyrocket

    Photo: efesenko

    Iran produced 2.44 million kg of tobacco during the first half of fiscal 2021, 265.3 percent more than during same period last year, reports The Financial Tribune, citing data released by the Ministry of Industries, Mining and Trade.

    There are presently 43 tobacco producing factories in Iran, compared with 36 last year, the Iranian Student News Agency (ISNA) reported.

    The ministry’s data also show 400,200 kg of hookah tobacco were exported during the first six months of this year, up 445.8 percent rise over the corresponding period of 2020.

    Cigarette exports nearly quadrupled from first half of the 2020 Iranian calendar year (March 21-Sept. 22) from the comparable 2021 period, according to The Tehran Times.

    Iran exported 275 million cigarettes in the first six months of this year compared to the 71 million in the same period last year, ISNA reported.

    The country’s cigarette output rose 14 percent in the first half of this year, to 28.7 billion cigarettes

  • Foreign Firms Dominate Iranian Cigarette Market

    Foreign Firms Dominate Iranian Cigarette Market

    Photo: Emanuele Mazzoni

    Despite recent gains by Iranian Tobacco Co. (ITC), multinationals continue to dominate the Iranian cigarette market, according to a report by PressTV, citing ITC CEO Siavash Afzali.   

    Speaking at a press briefing on May 17, Afzali said that Japan Tobacco International (JTI) and British American Tobacco (BAT) control more than 61 percent of sales and some 70 percent of the value of the cigarette market in Iran. Afzali estimated that JTI and BAT supplied 46 billion cigarettes to Iranian consumers in the calendar year to late March.

    Afzali said ITC’s share of the market was around 9 billion over the same period against an estimated supply of 20 billion cigarettes that entered the market by traffickers.

    In the year to March, ITC increased its cigarettes sales in Iran by 50 percent. Its output and market share increased by 23 percent and 70 percent, respectively, over the same period.

    However, the company is responsible for only 5 percent of the value of the cigarettes sold in Iran, a market that is believed to be worth around IRR400 trillion ($1.74 billion).

    Afzali said that ITC could triple its output to 25 billion cigarettes per year, although he insisted that existing laws favor local manufacturing by foreign brands.

    “Foreign companies easily import raw material and control the market,” he said. But ITC generates more local employment than the multinationals, Afzali insisted. Including farmers, ITC employs 12,000 people—far more than JTI and BAT, according to the CEO.

  • Qom Designated Smoke-Free City

    Qom Designated Smoke-Free City

    Photo: mostafa meraji from Pixabay

    Iran declared Qom as the country’s first tobacco-free city, reports The Tehran Times.
     
    The announcement starts a five-year plan that will eventually include 63 cities and 63 villages in the country. The plan will regulate the sale, supply and use of tobacco to protect people from secondhand smoke. Direct and indirect incentive mechanisms will be restricted, and tobacco users will be encouraged to quit smoking.
     
    The plan is expected to gradually reduce the prevalence of smoking in the targeted areas.

  • Tobacco use going up

    Tobacco use going up

    Tobacco use in Iran has increased by seven times during the past decade, growing from 2,000 tons to 15,000 tons [presumably per year], according to a story in The Tehran Times quoting the Islamic Republic News Agency (IRNA) and the vice chancellor for social affairs at Tehran University of Medical Science.

    “It is necessary to devise plans to prevent and control the widespread usage of tobacco in the country,” Abdolrahman Rostamian reportedly said on Tuesday.

    The vice chancellor said that, in many countries, high taxes were levied on cigarettes to control tobacco use, and that the same policy should be adopted in Iran.

    “Currently, tobacco tax revenue for the next Iranian calendar year [starting March 21] is estimated at 28 trillion rials (about US$666 million) but it should grow to 150 trillion rials (US$3.5 billion),” Rostamian said.

    “In most countries, tobacco duty rate is up to 75 percent, but in Iran it is only 20 percent. This is among the issues that the members of Iranian Parliament should pay special attention to.

    “Currently, there are 16 tobacco factories in the country and up to 100 trillion rials (US$2.3 billion) are annually spent for purchasing cigarettes. To make … matters worse, 35 trillion rials are annually spent for treatment of the diseases that are caused by smoking.”

    According to Rostamian, 90 percent of cancers are caused by smoking cigarettes. Smoking accounted also for 25 percent of heart failures that resulted in death and was a risk factor in osteoporosis and bone fracture, he said.

    “It is more than necessary to reduce the supply of cigarettes in the country,” he was quoted as saying. “We should come up with policies to ensure that people under 18 are banned from purchasing cigarettes. Besides, only the suppliers who have a special license must be allowed to sell cigarettes.”

  • Licit sales in free-fall

    Licit sales in free-fall

    An attempt to cut smoking in Iran by raising cigarette taxes seems instead to have encouraged a significant number of smokers to buy illicit products, according to an AzerNews story.
    AzerNews reported that the number of cigarettes imported into Iran during the first half of the current fiscal year (March 21-September 22) had dropped to zero, from 1.5 billion during same period of the previous year.
    At the same time, the head of the Tobacco Products Manufacturers Exporters and Importers Association Mohammad Reza Tajdar said the Association’s members had experienced a 16 percent cut in production and sale of tobacco products.
    By the end of this year, the cut would have reached 30 percent, he said.
    Iran’s domestic cigarette production during the first half of the current year was 19.6 billion cigarettes, while production during the same period of last year had been 23.4 billion.
    The policy of raising cigarette prices to cut consumption had pushed the country’s cigarette market toward low quality smuggled products.
    If this continued, the producing factories would face serious problems in paying salaries.
    About 15,000 people are employed in the country’s tobacco industry.

  • Duty-rise proposal rejected

    Duty-rise proposal rejected

    Iran’s Majlis (parliament) has rejected a proposed increase on cigarette duties included in the next budget (March 2018-19) and referred it back to the Majlis Joint Commission for revision, according to a story in The Financial Times.
    The commission is the parliamentary body responsible for reviewing the budget bill proposed by the government, before its final ratification.
    The government has included in its budget, provision for a 350-rial (US$0.76) increase in the duty on locally- and jointly-produced cigarettes, and a 500-rial increase in the duty on imported cigarettes.

  • Price hike due in Iran

    Price hike due in Iran

    The prices of Iranian cigarettes are due to increase by 50 percent following a parliamentary addendum to the government’s proposed budget for the next fiscal year (March 2018-19), according to a story in The Financial Tribune quoting the head of the Tobacco Planning and Supervision Center.
    Ali-Asghar Ramzi said also that the price of foreign cigarettes made in Iran would rise by 10 percent.
    The duty on locally- and jointly-produced Iranian cigarettes, and on products with international brand names would increase by 350 rials (US$0.76), while 500 rials would be added to the duty on imported cigarettes.
    Close to 40 billion cigarettes were produced in Iran during the first 10 months of the current Iranian year, which began on March 21, 2017, up 12 percent on the output of the corresponding period of the previous year.
    During the same period, cigarette imports fell by 35 percent to 2.4 billion, while cigarette exports increased by about 12 percent to 330 million.
    Close to four billion cigarettes were estimated to have been smuggled into the country during the 10-month period, down 41 percent on the number smuggled in during the corresponding period of the previous year.
    Iranians consumer about 55 billion cigarettes a year.
    Last year, Iran produced about 45 billion cigarettes and there are plans to increase this figure to 50 billion by the end of the current year, March 20, 2018.