31 May 2020

Gheorghe Russu

Vice-director, The Center for Combating Economic Crimes and Corruption

Parties-Phantoms, Parties - State Institutions, Parties - State Enterprises


20 parties have registered in the current election campaign. Many people say it is a too big number for such a small country as Moldova. At the same time, much more parties could take part in the election campaign.

Last week illustrated

Activists launch Moldova’s first ‘Space Camp’ © Susan Coughtrie

How Did Moldova Become the First Player on the Romanian Market of Cigarette Smuggling

The seizures of cigarettes smuggled from the Republic of Moldova in the recent period show either an intensification of this illicit activity or a more efficient work of the customs service. Since most cases of smuggling are detected by Romanian customs points, the conclusion seems to be obvious - they work better. But we may be wrong.
Ion PREAŞCĂ, 19 March 2010, 15:04

The most recent case, when during the night of 4 to 5 March 2010, 694.370 cigarette packs of different brands (Doina, Plugarul and MT) were found in a trailer truck at Albita checkpoint, confirms our assumptions. „According to transport documents, the truck was traveling from Moldova to Turkey and transported metal pipes from a Ukrainian company to a company in Turkey. At the customs the officers discovered that, in order to justify the weight of the truck, several sacks of sand were tied to truck axles, raising suspicions regarding the transported goods. Based on a risk analysis, "the truck was subjected to a special control during which 694.370 cigarette packs were detected in the cargo compartment instead of goods mentioned in the documents", says a press release of the Romanian Border Police. This case generated a lot of discussions in the media, different politicians accusing each other of being involved in cigarette smuggling. People can notice an increase of the frequency of cases of cigarette smuggling from Moldova to Romania, lately.

Romania - the Main Market for Cigarette Smuggling from Moldova

According to a study carried out by Novel Research, the share of cigarettes smuggled on Romanian market increased from 17.6% in 2008 to 36% in January - February 2010. Romania became the main market for the smugglers not only from Moldova and Ukraine, but also from Russia and Serbia.

The evolution of cigarette smuggling in Moldova has also been spectacular: in 2008 this share amounted to 18.8% of cigarette smuggling, reaching 23.7% in 2009 and as much as 32% in the last quarter of 2009 and the first two months of 2010.

The increase of cigarette smuggling from Moldova to Romania is explained particularly by the increase of cigarette excise taxes and of cigarette prices in the neighboring country. Currently the price of one cigarette pack in Romania is 3 -5 times higher than in Moldova.

„Nowadays smuggling takes over the leadership of the national market, surpassing any other player in the category", stated Marian Marcu, Managing Partner of Novel Research quoted by Romanian media.

According to the study, commissioned by three major cigarette manufacturers British American Tobacco (BAT), Japan Tobacco International (JTI) and Philip Morris (PMI), this phenomenon records the highest level in northern and western areas, where the cigarette smuggling accounts for half of total cigarette sales. In the Northern and Eastern Romania 50% of smuggled cigarettes are from Moldova

Romanian experts estimate that the losses in the state budget caused by smuggling in 2010 will exceed one billion Euros. Currently, the most popular price category is 9.9 RON, where the best-selling cigarette brand on the Romanian market, Kent, is included as well. 80% or 8 RON in the structure of this price are customs duties, the vice taxes and VAT, and the rest of about 2 RON are production and distribution costs, mark-up and profit.

A Truck of Smuggled Cigarettes is Enough to Build a House

If Moldova maintains its current share of 32%, the value of products smuggled from Moldova will amount to about 300 million euro. It is true that these estimates are based on prices on the Romanian market, so the actual figures are about three to four times smaller. But even so, the stake is too big, since the profit from the sale of a smuggled cigarette pack is triple.

For example, the average price of a cigarette pack in Romania is 9.9 RON or about 41 Moldovan lei, while the average price of a smuggled cigarette pack is estimated at 5.9 RON (about 25 Moldovan lei). In reality the average price on Moldovan market is 4-5 times lower. This difference is the main factor stimulating cigarette smuggling. According to calculations made by Romanian border police, a cigarette smuggler earns about 200-300 EUR per day and a truck of smuggled cigarettes is enough to build a house.

Given the fact that the study makes quantitative estimates only, of the total volume of 37-38 billion cigarettes annually sold in Romania, approximately 7.5 billion cigarettes in 2009 were smuggled. Of these 7.5 billion cigarettes about 1, 7-1.8 billion were of Moldovan origin, which means about 90 million. cigarettes. If this smuggling rate is maintained, in 2010 the amount of cigarettes smuggled from Moldova could reach 4 billion units (200 million pack), or over 10% of the entire Romanian market.

The simplest calculation shows that, given the price of 5-6 MDL for a cigarette pack on Moldovan market and one of about 20 RON on the Romanian market, the profits of smugglers exceeded one billion lei in 2009, and may exceed two billion lei in 2010. These figures could be even higher, for in 2010 prices increased on Moldovan market as well.

The figures show the huge amounts circulating and that the share of detected smuggled cigarettes does not exceed 10 percent.

For comparison, Tutun-CTC, the largest cigarette manufacturer in Moldova, completed the year 2009 with a turnover (sales revenue) of 507.7 million lei, compared to 351.2 million lei in 2008. During the past year, the company produced and sold 5 billion cigarettes.

Who Counterfeits Plugarul and Doina

The General Director of Customs Service (CS), Tudor Balitchi stated on Wednesday after the government meeting that, in case of cigarette smuggling, it is necessary to study the origin of cigarettes and the involvement of certain interest groups. At the same time the CS together with ISS and the General Prosecutor's Office will intensify the inspections and investigations to combat smuggling.

Balitchi suggested that cigarettes found in the truck on March 4-5, 2010 may be counterfeit. Even Plugarul and Doina are currently being counterfeit. It is not clear however where these are counterfeited. It must be mentioned that there are no major cigarettes manufacturers in Moldova except for Tutun-CTC.

The General Director of CS argues that in 2008-2009 bulks of up to half a million counterfeit cigarettes were detected as well. At the same time he said that last year only 10% of cars had been scanned with infrared scanners, while currently this share amounted to 40%. It is true that the truck on March 4, 2010 was not inspected.

According to a press release of the Customs Service, a comprehensive analysis of the customs fraud discovery activity in the last 2 years, related to illicit tobacco products, shows that this "business" is practiced by people in conflict with the law and has its roots in Moldova, Ukraine and in Romania. The trend of illicit cigarette trafficking persists due to several factors, the most important being the price difference on domestic and foreign markets, but also the targeting of illegal channels of taking cigarettes out the country.

According to the data of the Romanian National Customs Authority about 1.5 million cigarette packs were detected at the Romanian-Moldovan border in 2009 and more than 3.2 million cigarette packs in 2008. In 2009 the Customs Service of RM filed 14 criminal proceedings, while in 2008 - 11 proceedings, of which 8 criminal investigations were initiated as result of detection of cigarettes by Romanian customs services. In these cigarette smuggling cases, not all customs officers were investigated in terms of breach of discipline, which calls into question the fairness and objectivity of made decisions, the Moldovan customs service states.

Large Scale Smuggling

In this context, the case of the former member of Moldovan Parliament, Vasile Colta, is eloquent. On September 19, 2006, Vasile Colta, Member of the Parliament of Moldova tried to smuggle cigarettes to Romania through Albita checkpoint. Colta was fined with 3000 RON, which he paid immediately. According to Iasi District Border Police Inspectorate, Vasile Colta rented a car with tinted windows which he filled with cigarettes. The member of the Parliament presented his diplomatic passport at the checkpoint and the car was not inspected by Moldovan customs officers. However, the Romanian customs officers, who were intrigued by lingering tobacco smell from the car, inspected it and found 3500 Pall Mall and 7507 Plugarul cigarette packs on the back seat and in the trunk, with a total value of more than 8,000 euros.

Shortly, Colta's parliamentary immunity was withdrawn and accusations were laid against him. According to the decision of Hancesti Court on May 27, 2008, Vasile Colta was acquitted of the charges under art. 248 par. (5). c), d) Criminal Code (taking across the customs border of the Republic of Moldova of goods in extremely large quantities, concealing them from customs control, using the privileges of one's official to not declare the goods in customs documents or other documents for border crossing ) on the grounds that no offence component was established. Meaning there was no smuggling.

The Court decision was contested, but on November 11, 2009 the Supreme Court declared Colta innocent. One of the court's arguments was "for the offense committed in Romania at Albita checkpoint, Vasile Colta was sanctioned under the Romanian law. According to Art. BCC 193 paragraph 1, Colta cannot be punished twice for the offense committed in Romania, because it would breach the provisions of Art. 4 Protocol 7 of ECHR and art. 4. (2) of the Contravention Code in force".

In other words, the former member of the Parliament remained unpunished by Moldovan justice and is as clean as a whistle.

It should be added here that, at different time, several high-ranking persons from Moldova were suspected of being involved in cigarette smuggling. Some of them are the current Prime Minister,Vladimir Filat, the Communist Vladimir Misin, the former Speaker of the Parliament, Dumitru Diacov, whose daughter was detained because she was accompanying a truck full of smuggled cigarettes, etc.

None of these cases, except for that of Vasile Colta was sent to court. And even this one ended with a discharge.

At the same time, the way these unlawful acts continue denotes the existence of well organized networks with stakeholders at the highest authority level.

The involvement of international corporations in cigarette smuggling raises many questions as well. Certain international journalist investigations carried out after the fall of the iron wall revealed that cigarette smuggling in Eastern Europe and the Post-Soviet territory was used by big corporations to conquer the market and to bankrupt the local producers. After establishing control over the domestic markets, the work tactics were changed. Anyway, it seems strange that, in most cases of cigarette smuggling from Moldova, brands such as Plugarul and Doina are involved and never Kent, Marlboro or Camel.

We should also add that, in October 2008, one of the most spectacular journalistic investigations carried out in Europe revealed that Tutun CTC in Chisinau produced Jin Ling cigarettes, which is one of the top 5 smuggled cigarette brands in Europe. There has been no official investigation carried out by Moldovan authorities on this case.



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