A ban on advertising e-cigarettes in Ukraine, including heated-tobacco products, goes into effect on July 11. Flavored electronic nicotine-delivery systems (ENDS) products are also banned.
The advertising rule applies to all types of media, including the Internet, social media, public transportation, and public events.
“The advertising, sales promotion and sponsorship of electronic cigarettes, liquids used in them, and devices for consumption of tobacco products without burning them (including IQOS and glo devices) will be prohibited from 11 July 2023,” according to the WHO Framework Convention on Tobacco Control (FCTC).
“Flavored cigarettes and flavored liquids for ENDS will also be banned at that date. Further, from 11 January 2024, the combined textual plus pictorial warnings will be required to cover 65 percent of both sides of the pack of smoking tobacco products (conventional cigarettes).”
The fine in the case of a violation is UAH30,000 ($812), and for each subsequent violation – UAH50,000. In addition, similar to the general smoking ban, the law prohibits the use of heated tobacco products in all public places and businesses.
In 2021, Ukrainian lawmakers passed the law prohibiting the use of ENDS in public places as well as advertising, sponsorship, and promotion of e-cigarettes. The law also bans the sale of flavored e-liquids other than tobacco flavors.
Philip Morris International is exploring options to resume production in Ukraine. In an interview with Interfax Ukraine, PMI’s Europe Region President Massimo Andolina discussed the multinational’s operations in the country in the wake of Russia’s invasion of Ukraine.
Due to safety concerns caused by the ongoing war, PMI has halted production at its Kharkiv factory. Some of its brands in Ukraine are currently produced by Imperial Brands under a temporary arrangement.
However, PMI is committed to launching its own alternative production facility in Ukraine. Andolina highlighted two reasons for this: the desire to produce PMI’s own products within the country and to signal the company’s commitment to investing in Ukraine, even during the war. PMI, he said, is actively exploring various alternatives for establishing a new production facility and hopes to make an announcement in the near future.
The interview also addressed the decline of PMI sales in Ukraine. Andolina cited two factors: the loss of consumers as some left the country or were in occupied territories, and competition from illicit products.
PMI, he said, has engaged in discussions with the government to address this problem, acknowledging that resolving the issue will take time but expressing confidence in the government’s commitment to combat corruption and criminal activities. The company anticipates significant improvements in tackling illicit trade in the coming years.
Andolina commented also on the government’s decision to equalize taxes on cigarettes and heat-not-burn products. PMI, he said, believes that these products should be recognized as different and taxed accordingly. They noted the success of heated tobacco products in Ukraine and highlighted the need for differentiated tax treatment.
The interview also touched upon PMI’s position in Russia. Andolina emphasized that during the war, the company’s primary concern has been protecting the lives of its employees in Ukraine. As a result, it suspended investments and scaled down operations in Russia. While PMI had previously announced its intention to exit the Russian market, changes in the regulatory environment have made it difficult for companies with substantial presence and assets to leave.
Since the start of the war with Russia, Ukraine has dismantled at least six illegal cigarette factories, reports EUreporter. These illegal facilities were found to be well-equipped operations that used relatively new cigarette machinery.
When Ukrainian President Volodymyr Zelensky took office in 2019, he announced an ambitious agenda to combat the illicit tobacco trade, stating that defending a 1,500 km border with the European Union against cigarette smuggling would be a key task as illicit tobacco trade has close connections to criminal activity, organized crime and other areas of black market trade.
However, since Ukraine’s war with Russia began in February 2022, illicit tobacco trade increased due to factors including the deteriorating economic situation, disruption of logistical channels, lower purchasing power due to inflation and a tobacco product excise tax increase. Due to the illegal cigarette trade, Ukraine has estimated that it lost over €375 million ($443.3 million) in 2021 and almost €500 million in 2022.
Other methods to battle illicit trade have included central coordination at the highest administrative level, intensified cooperation with EU member states, the strengthening regional and international collaboration, the vetting of the civil service, stronger control of customs and border inspectors, strengthening of police forces and legislation, and awareness campaigns for consumers.
Ukrainian detectives from the Economic Security Bureau of Ukraine and the Territorial Department of the Security Intelligence Service are searching a tobacco factory in the Lviv region upon suspicion of untaxed tobacco products.
Company officials are suspected of manufacturing and storing tobacco products without excise tax stamps; accounting and tax records do not show the economic transactions, and income received was not declared.
Tobacco companies have called on the government of Ukraine to crack down on the illegal cigarette trade, reports Interfax Ukraine.
Speaking during a roundtable discussion organized by the American Chamber of Commerce in Ukraine, Philip Morris Ukraine General Manager Maksym Barabash noted that war, inflation and the associated drop in consumer incomes had accelerated the growth of the illegal tobacco market in Ukraine.
In August 2022 alone, the share of illegal tobacco products grew by 5 percentage points to 21.9 percent from 16.9 percent in 2021. According to Barabash, the state misses out on UAH44 ($1.19) from each illegal pack of cigarettes. To date in fiscal year 2022, the state budget has already lost UAH20.6 billion in unpaid tobacco taxes.
To facilitate the fight against illegal cigarettes, tobacco companies proposed the creation of a joint working group with a coordination center in the Office of the President.
“Countering illegal turnover of tobacco products belongs to the competence of several regulatory and law enforcement agencies,” said Svitlana Sharamok, general manager of Japan Tobacco International Ukraine. “However, due to the unclear division of powers, these agencies do not always work in a coordinated manner and sometimes even compete with each other.”
Sharamok added that the work of the new group should not be judged by the number of raids or confiscated cigarettes but by the decrease in illegal sales.
The share of illicit tobacco products in Ukraine reached its highest level since the country’s independence in 1991, reports Interfax Ukraine.
According to an October study by the Kantar Ukraine Institute, illicit products accounted for 21.5 percent of the Ukrainian tobacco market in August 2022, up 5 percentage points over the average annual indicator for 2021.
The survey shows that Ukrainian smokers bought 8.46 billion illegal cigarettes since the beginning of 2022, equaling the volumes for the whole of 2021, and caused the government to miss UAH20.65 billion ($558.71 million) in tobacco tax payments.
Kantar Ukraine specified that fake cigarettes in Ukraine accounted for 8 percent of Ukraine’s tobacco market in August 2022 compared with 6.6 percent in August 2021.
Philip Morris International is expanding the production capacity of its factory in Klaipeda, Lithuania, following the suspension of its operations in Ukraine, reports Interfax, citing a company statement.
The multinational will reportedly construct a new production building connected to its existing storage facilities.
The Klaipeda factory will manufacture products intended for Ukraine, the company said. The project will cost €3.5 million and is expected to be completed toward the end of 2023.
On Feb. 25, PMI announced the suspension of its activities in Ukraine, including at its factory in Kharkov, due to Russia’s military invasion.
Ukraine accounted for around 2 percent of the multinational’s cigarette and heated-tobacco shipments in 2021 and less than 2 percent of PMI’s total revenue, according to the company.
The crisis in Ukraine offers an opportunity to transform tobacco use across eastern and central Europe.
By Derek Yach
Vladimir Vorotnikov, writing in Tobacco Reporter’s August 2022 issue, outlined how Russia’s invasion of Ukraine has upended well-established supply chain and business relationships that have been in effect for decades. In fact, a careful read of Balkan Smoke by Mary C. Neuberger traces the roots of these relationships way back to Bulgaria in the 1920s. Vorotnikov discussed the impact of sanctions on Russian tobacco production, the emergence of illicit trade in the region, and more recently, the reestablishment of cigarette production in Ukraine.
He does not discuss the massive growth over the past few years in new reduced-risk nicotine products—led by IQOS—across eastern and central Europe. The editor makes the point that Russia is (was) one the largest markets for IQOS. My own observations during a visit to Kyiv in late October 2021 were that a range of vape products and heated-tobacco products were readily available across the city despite posters funded by Bloomberg Philanthropies near the Parliament proclaiming that they were dangerous.
An anti-vaping poster in Kyiv (Photo courtesy of Derek Yach)
This is a time of profound transition for the region. Amid the horrors of war and the human tragedies it continues to bring to the people of Ukraine are opportunities to reduce future deaths from the single largest cause of premature death in the region—and especially among men—combustible tobacco products. As rebuilding begins—as it inevitably will—government, business and health professionals need to grasp the chance to avoid rebuilding the tobacco industry in the image of the past and rather take the high ground of health and make reduced-risk products the easily available option while phasing out combustible sales.
For governments, this means adopting risk-proportionate regulations that build on the approaches proposed by the recent Javed Khan report for the United Kingdom, and on the authorizations of a range of reduced-risk products by the U.S. Food and Drug Administration. Ukraine and the neighboring countries relied on FDA guidance in relation to Covid vaccine advice—now is the time to draw upon their guidance to accelerate access to reduced-risk products, citing the FDA’s comments that they are deemed “appropriate for the protection of public health.”
Tax and other regulatory approaches could be applied to accelerate the transition. Further, governments of the region need to step up investments in customs and excise oversight to stop large-scale illicit trade taking hold—as it has in the occupied territories of Georgia following Russian invasion in 2008.
The Russian government also has an obligation to protect the health of its people and take regulatory steps to ensure that the progress made by Philip Morris International, Japan Tobacco International and BAT is increasing their revenue from heated-tobacco products at the cost of combustibles. Slippage with regard to these gains will translate into a return to the very high smoking rates, and associated death rates, of the past.
Government actions will be limited, though, unless the three leading tobacco companies (PMI, JTI and BAT) active in the region commit to take concerted efforts to accelerate their transition out of combustibles and publicly clarify what “withdrawing from Russia” means. Are they continuing to profit from Russian cigarette sales albeit through local companies? Are those companies obliged to push ahead with reduced-risk products, or will they revert to cigarettes?
Outside of Russia, leading tobacco companies could communicate the benefits of switching, take measures to clamp down on illicit trade and tighten youth access to all nicotine products, through joint action. Such bold actions would give them a chance to show their seriousness to transformation—something investors should reward.
United Nations agencies have a role to play at this time. Evidence emerging from inside Ukraine suggests that smoking rates have increased among those in the military and possibly among displaced peoples. This is understandable given the unprecedented stress to which people are exposed. The current U.N. response has been to ignore this reality and simply continue to support policies that ban cigarette sales during conflicts—something that is probably ignored. A far better way forward is to support people who smoke or seek nicotine to have ready access to nicotine-replacement products and approved reduced-risk nicotine products. This would mean that a generation of people may well emerge from the war with lower overall risks to their health.
War and tobacco use are intimately linked and currently interacting in dangerous ways to the health of populations. We should not wait for the transition to peace and health to begin before taking steps to accelerate the transition of smokers away from combustibles.
A global health expert and anti-smoking advocate for more than 30 years, Derek Yach is the owner of Global Health Strategies. Previously, Yach was the director of the Foundation for a Smoke-Free World and a World Health Organization cabinet director and executive director for noncommunicable diseases and mental health. He was deeply involved with the development of the Framework Convention on Tobacco Control.
The government of Ukraine has changed the definition of “tobacco product” to include heated-tobacco products (HTPs), making HTPs subject to the same restrictions as combustible cigarettes, according to the Framework Convention on Tobacco Control.
As a result, it is now illegal to smoke HTPs in public places. Moreover, the new rules prohibit smoking rooms on company premises and empower local authorities to establish additional smoke-free places.
Smoking of tobacco products, hookahs and e-cigarettes has been prohibited in Ukrainian workplaces since 2012, but until recently, smoking areas were still permitted.
The new law holds both smokers and businesses responsible for compliance.
Earlier this year, Ukraine started requiring manufacturers of e-cigarettes and e-liquids to print health warnings covering 30 percent of the packaging.
Starting on July 11, 2023, it will also become illegal to promote e-cigarettes, e-liquids and HTPs or to sell such products with flavors.
From Jan. 11, 2024, traditional, combustible cigarettes will be required to carry pictorial health warnings covering 65 percent of both sides of their packaging.
According to the World Health Organization, up to 85,000 Ukrainians die from smoking-related diseases each year. Experts estimate smoking to result in annual economic losses equivalent to 3.2 percent of Ukraine’s GDP, in part due to the cost of treating smoking-related illnesses.
Philip Morris Ukraine will start producing some of its cigarettes at Imperial Tobacco’s factory in Kyiv this month, following a deal between the two companies, reports Interfax Ukraine.
The arrangement allows Philip Morris to continue supplying customers even as production at its Kharkiv factory remains suspended in the wake of Russia’s military invasion. It also enables Imperial Tobacco to better utilize its production capacity, some of which has been idle due to the difficulty of exporting cigarettes.
“Since the beginning of the war, we have been looking for alternative ways to ensure the supply of products,” said Philip Morris Ukraine Managing Director Maksym Barabash. “We are very pleased that we have found a mutually beneficial solution with Imperial Tobacco, which will produce products in accordance with PMI’s high-quality standards. For Philip Morris, this is a temporary measure. We hope that we will be able to resume production at our Kharkiv factory as soon as it becomes safe for workers.”
“The Imperial Tobacco factory in Kyiv has a significant production potential and a strong professional team to ensure the production of additional volumes of products with high quality and in the right time,” said Halyna Vorobyova, head of Imperial Tobacco’s board in Ukraine. “Since the beginning of the war, our company cannot carry out export deliveries; therefore, the agreement with Philip Morris will allow us to load our capacity.”
Philip Morris employed about 1,300 people prior to the war. Its Kharkiv factory exported cigarettes to more than 20 countries, including major markets such as Japan and Egypt.
