Russian journalists working in Kaliningrad know that to openly ask about the cigarette contraband trade is a risky business. In 2006, after criticizing the police — including the protection they give to smugglers — the local Novye Kolesa newspaper was raided and its newspapers confiscated. The paper’s co-founder, Igor Rudnikov, was then prosecuted for “beating 22 police officers.” “In Kaliningrad there were even contract killings of tobacco businessmen,” says Rudnikov, a local parliamentary deputy. “But not one of those crimes was disclosed. And it is hard to imagine that law enforcement does not know what is going on.”
Inside Baltic Tobacco
To investigate the Baltic Tobacco Factory company (BTF) in the high risk environment of Kaliningrad, ICIJ’s reporters went undercover in June 2008, with one posing as a Romanian smuggler setting up a new route to the EU. They carried concealed video and recording equipment to witness all that they saw and heard. (Their video report is available online.)
BTF’s neighborhood, Pravaya Naberejnaya, Kaliningrad (“the Right Bank”), winds along the north bank of the Pregol river past former anchorages of Soviet Baltic fleet frigates and submarines. Number 10, Pravaya Naberejnaya is a large, wooded complex of factories and warehouses adjacent to the town’s distinctive elevating rail bridge, and the home of Baltic Tobacco. The company’s facilities lack addresses or any identifying signs. At one end there is a busy loading pier; at the other, an entrance manned by a security guard watching surveillance monitors.
Jin Ling’s manufacturers welcomed their visitors. At the company’s offices, a guard ushered the reporters into an office to meet Dmitry Gyrja, BTF’s logistics manager. “We haven’t worked with Romania before, but we’d be really happy to do so,” Gyrja said.
Gyrja got straight down to business: “We don’t care” what happens to the cigarettes, the reporters were told. “According to Russian law it doesn’t matter. All the transportation arrangements are up to you…” With payment in advance, he added, a container could be ready and waiting in two weeks. “We sell them for 20.5 US cents a pack, duty free.”
The company’s manager boasted that they could make an entire container of 10 million cigarettes or “sticks” in 8 hours, and that their production lines operated 24 hours a day, 7 days a week. The price of Jin Ling at the factory gate, he was told, was 20.5 cents or € 0.16 per pack. A case would cost $102.50; a full container, $102,500.
The director general of Baltic Tobacco, Vladimir Kazakov, advised the reporters on the quickest and best smuggling routes. Manager Gyrja also offered the would-be smugglers the services of his company’s fleet of 20 brand new Volvo trucks.
The offer was genuine. ICIJ’s reporters passed a transit container lorry lined up and loading as they were shown into and around the factory. BTF’s logistics manager told the reporters that they were manufacturing 120 containers every month – or 1.2 billion cigarettes.
Entering the factory, the reporters were ushered into huge, brightly lit halls filled with modern and sophisticated blending, cutting, filling, rolling, and packing machines. Jin Ling packs could be seen pouring off the production lines, with one line operating at the rate of 400 packs a minute.
A container could be ready and waiting in two weeks, the undercover team was told. It could then be delivered to the Romanian free trade zone of Constanta in less than two months. Full payment had to be made in advance.
Publicly, BTF’s Kazakov has boasted that his company markets a range of Russian brands for sale
through a nationwide network. But during their tour of the 14,000-square-meter factory, secretly recorded on video, the reporters saw that every machine was manufacturing Jin Ling, with its distinctive yellow packaging and style. No other brand was being made.
Situated off the Baltic Sea, the Russian exclave of Kaliningrad has a reputation for crime and corruption, with a busy nightlife and frontier-like feel. Credit: Stefan Candea.
BTF director Kazakov was eager to discuss deals, offering to deliver cigarettes from factories in either Kaliningrad or Lviv in Ukraine.
“We work very well through the port in Kaliningrad, where we can also make the custom clearance,” Kazakov explained. “Transporting the cigarettes from Lviv through Odessa would bring a gain of 3 weeks, but you might waste more time with custom formalities.”
“We guarantee that delivery will be made on time,” he added. “We can manufacture a container in 8 hours.”
BTF, Gyrja added, sold an impressive two containers each month, or about 250 million cigarettes annually, at the two main border crossings into Poland — the same amount of smuggled Jin Lings seized in all of the E.U. last year.
The Road to Europe
From Kaliningrad, a team of ICIJ reporters followed the route of Jin Ling cigarettes and their containers on their journey to the west. Thirty kilometers south of Kaliningrad, at the Polish border crossing of Bagrationovsk, Jin Ling was widely available. Just outside the shabby town, parts of which have been left unrepaired since 1945, smuggling is big business. As at other border crossings between Russia and the EU nations of Poland, Latvia, and Lithuania, cigarettes are not only smuggled through in full container loads; they are also broken down into small quantities by armies of personal smugglers and their managers.
Peddlers’ booths lined the roadside. Reporters observed as Russian customs officers looked on with no apparent concern while lines of Polish-registered cars and their drivers crammed their vehicles with hidden cigarettes bound for the west.
Others, in broad daylight, could be seen taping dozens of packs of Jin Ling to their arms and legs before crossing the border. Their clothing packed and bulging with cigarette packets, their appearance resembled nothing so much as fully equipped and padded American football players.
Discarded Jin Ling cases were left dumped on the street as Russian customs officers looked on. Each empty case seen at the roadside had contained 10,000 cigarettes. Each box would have cost $102.50 at the Kaliningrad factory, but would be worth at least 10 times more if smuggled successfully to Western black markets. Each abandoned box was prominently marked in red and blue with the crest and name, in Cyrillic, of the Baltic Tobacco Factory.