Working in Russia’s Tula region, Federal Security Service (FSB) officers dismantled a large-scale operation in a warehouse containing counterfeit nicotine products worth over 500 million rubles ($6 million). Authorities said a 27-year-old resident organized the sale of unmarked electronic cigarettes, vapes, and liquids in violation of labeling laws. A criminal case has been opened against him for trafficking unmarked goods on a particularly large scale. The investigation continues to trace the supply network and distribution channels.
Tag: Russia
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Dagestan Proposes Retail Vape Ban as Part of Russian Pilot Project
The Republic of Dagestan may become one of the first regions in Russia to ban the retail sale of vapes, as part of an experimental pilot program. The proposal was made by the republic’s head, Sergey Melikov, in an address to the State Duma, according to the administration’s press service on Telegram.
“I believe that such a measure will reduce the level of diseases associated with the use of vapes,” Melikov said. He also noted that President Vladimir Putin has supported initiatives allowing regions to impose restrictions on vape sales, paving the way for Dagestan to participate in the program.
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Russia to Require Licenses for Tobacco and Vape Sales From 2026
The Russian government approved a bill that will require licenses for the sale of all cigarettes and vaping products beginning March 1, 2026, in a bid to tighten market oversight and curb youth consumption. The bill now moves to the State Duma for debate and adoption.
The law, modeled on alcohol industry rules, will mandate licenses for wholesale, retail, and delivery sales, with penalties including license revocation for violations such as selling to minors. Authorities are also weighing tougher measures, including mandatory registration in the national “Chestny Znak” digital tracking system and criminal liability for large-scale illegal trade.
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Putin Backs Regional Vape Bans in Russia
Russian President Vladimir Putin has endorsed a proposal to give regions the authority to ban the sale of vapes, following concerns over rising youth use. At a meeting in Sarov, Nizhny Novgorod Governor Gleb Nikitin suggested his region could serve as a pilot area for the ban. Putin called it a “good proposal” and signaled immediate support.
The move comes a day after the government expanded its mandatory labeling experiment to cover e-cigarettes and heated tobacco devices, tightening controls on the sector.
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PMI Ukraine Running at Full Capacity
Philip Morris Ukraine is considering exporting cigarettes manufactured at its newly built factory in the Lviv region, company CEO Maksym Barabash said during a roundtable discussion on Ukraine’s economic recovery. Ukraine Business News (UBN) said the PMI factory in Kharkiv, which closed at the outbreak of war with Russia, produced 20 billion cigarettes annually, 50% of which were exported, including to Japan.
By launching a new $30 million factory in the Lviv region, the company sees the potential to resume exports to geographically close countries. The new factory in the Lviv region opened in May 2024 and features five production lines that this year reached their planned capacity of 10 billion cigarettes per year. This factory has become an important part of the company’s supply chain in Ukraine.
Philip Morris Ukraine has been active in the Ukrainian market since 1994 and has invested over $750 million in the Ukrainian economy during this time, according to UBN.
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JT Not Adjusting Russian Business
In a statement issued to This Week in Asia, a Japan Tobacco (JT) official said: “As announced in early 2022, the JT Group has suspended all new investments and marketing activities in Russia. At present, the group continues its manufacturing and sales operations in the country in full compliance with all applicable regulations, including but not limited to economic sanctions and export controls. We continue to closely monitor legislative developments as well as the situation on the ground and review our options.”
JT announcing that it was not pulling out of the lucrative Russian market makes news as the Ukrainian government continues its efforts to get some of the world’s largest companies to exit its combative neighbor. A Ukrainian report said JT contributed $182.3 million in taxes to the Russian government in 2023, fourth among taxpaying companies behind only Austria’s Raiffeisen Bank International ($491 million), China’s Chery Automobile, and Philip Morris, the world’s leading tobacco company.
International companies that did not exit the Russian market immediately after the invasion of Ukraine began but later pulled out from bad press include Heineken, Citigroup, and Kraft-Heinz.
JT, which is still one-third owned by the government, faces minimal criticism in Japanese media and as a result, the public – which is strongly supportive of Ukraine – is offering few objections.
“There has been no comment from the government, no pushback from the public, and nothing in the media,” said James Brown, a professor of international relations at the Tokyo campus of Temple University who specializes in Russian affairs. “So the sense at [JT] headquarters appears to be ‘why should we walk away from it?’
“The position in Japan was that if being there was not explicitly sanctioned, then it was fine to carry on. And that meant it was not a problem for the company, which was open about what it was doing.”
In May 2024, Japan Tobacco CEO Masamichi Terabatake made that stance clear when he told the Financial Times that the company’s supply chains had been adjusted to meet international sanctions and that it would remain active in Russia to protect investors’ interests.
“If worse comes to worst, there is even the risk of a shareholder lawsuit if we were to discontinue a business that we are able to continue,” he said.
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Prevalence Halved
Photo: sezerozger The share of smokers in Russia’s population has plunged from 40 percent in 2009 to 19 percent today, reports Interfax.
Russian Deputy Prime Minister Tatyana Golikova credited a national project that included the development of health centers, the creation of medical prevention offices and an informational campaign.
“We were able to only partially change citizens’ attitude to their health, reduce alcohol and tobacco consumption, reduce bread consumption considerably,” she said.
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Regulator Proposes Retail Licensing
Photo: Tabakprom Russia’s alcohol and tobacco regulator wants to extend the country’s tobacco licensing requirements to retailers, reports Interfax.
Doing so would improve regulatory oversight, boost budget revenues and reduce the share of illegal tobacco on the market, according to Rosalkogoltabakkontrol head Igor Aleshin.
Manufacturers of tobacco products have been subject to licensing since March 1. Among other things, they are required to register their machinery. Unused equipment must be mothballed under the regulations.
According to Aleshin, 225 tobacco market participants have received licenses so far, of which 190 are producers and the rest are importers.
The current law does not call for the licensing of retail sales, but it does prohibit retail sales of tobacco-containing and nicotine-containing products that are not in consumer packaging.
On Sept. 1, 2023, lawmakers expanded the role of the former Federal Alcohol Market Regulation Service, giving it the right to regulate tobacco and nicotine-containing products and renaming it Rosalkogoltabakkontrol.
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Russia Sues Dutch Owner of Megapolis
Image: somemeans The Russia government is seeking to suspend the corporate rights of Megapolis Distribution, the Dutch owner of Russian tobacco distributor Megapolis Group, reports Interfax.
On July 18, Russia’s Industry and Trade Ministry filed a lawsuit against Megapolis Distribution in the Arbitration Court of the Moscow Region, according to records.
The Russian company was earlier included in Russia’s list of economically significant organizations.
The court has agreed to hear the lawsuit, and the first hearing is scheduled for August 8.
Shortly after Russia’s invasion of Ukraine in February 2022 and just before the EU imposed sanctions on him, Russian billionaire Igor Kasaev, who owns 40 percent of Megapolis, funneled €8 million ($8.71 million) through the Netherlands, according to the NL Times.
Kasaev is known to have ties to the Kremlin and the Russian arms industry. He keeps his shares in Megapolis, the largest distributor of cigarettes in Russia, in the letterbox company registered in The Hague. The sanctions froze Kesaev’s assets in his Hague company, “trapping” some €650 million in assets in the Netherlands.
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Japan Tobacco to Keep Russian Business
Masamichi Terabatake (Photo: JTI) Japan Tobacco CEO Masamichi Terabatake said the company will keep its Russian business to satisfy investors following a supply chain reshape to comply with sanctions, reports the Financial Times.
According to the paper, JT is routing some business through Turkiye and has moved key personnel to Hong Kong. JT had originally said it would consider selling its Russian business following Russia’s invasion of Ukraine in 2022. Russia accounted for 20 percent of JT’s overall profits, according to Terabatake.
“If I said, for example, that we are going to quit the business, investors may face the risk of losses,” said Terabatake. “If worse comes to worst, there is even the risk of a shareholder lawsuit if we were to discontinue a business that we are able to continue.”
JT has more than 4,000 employees and four factories in Russia, one of the largest foreign companies left in the country. In 2023, JT’s overall profits were ¥482 billion ($3 billion).
“There are various things we need to be careful of from sanctions—what kind of people can be involved or not in decisionmaking, excluding people from unfriendly countries for Russia’s management … to putting people unrelated to sanctions in places such as Hong Kong,” said Terabatake on JT’s new structure following wide-ranging sanctions on Russia. “But otherwise, it’s business as usual.”
“We are making various efforts to ensure a sort of a ringfence by sending things from Turkiye, for example, since there are countries that cannot do trade with Russia,” he said.
Following the sanctions, many companies and investors left Russia. However, some have opted to stay, including Philip Morris International.
Japan has also implemented sanctions on Russia.
“It’s true that initially there was a question about reputation in regard to continuing our business, but more recently, it’s less of an issue,” said Terabatake. “There are fewer occasions where people are demanding to know why JT is continuing its business [in Russia].”
JT has not yet answered investors about how profits will get out of Russia and back to shareholders; to date, no dividends have been paid by the Russian entity from its 2022 and 2023 financial results.
Terabatake said he remains prepared to split off or sell the Russian unit “in the worst-case scenario,” but he does not believe it will be necessary under the current sanctions regime.