Tobacco manufacturers Philip Morris and Japan Tobacco, which remained in Russia, have been reaping huge profits since the invasion of Ukraine.

A report by B4Ukraine, a coalition of Ukrainian civil society organizations, reveals that several multinationals have been operating profitably in Russia since the beginning of the invasion of Ukraine. Philip Morris and Japan Tobacco International are among the companies that are profiting the most from the situation.

Entitled “The Business of Staying: a closer look at multinational revenues and taxes in Russia in 2022”[1], which could be translated as "The Economic Activity of Companies Remaining in Russia: A Closer Look at Multinationals' Revenues and Taxes Paid in 2022", this report was produced in partnership with the Kyiv School of Economics (KSE). It reveals the situation of several companies - mainly in the food and tobacco sectors. These have continued to operate in Russia since the beginning of the war, and this despite the sanctions imposed by Western countries.

Data on business withdrawals, income, profits, accruals and taxes, particularly income taxes, come from KSE research, which draws on a range of public sources, including the Russian business register, activity reports and corporate tax returns. Since the Russian tax year covers a full calendar year, the data collected for 2022 therefore extends somewhat ahead of the date of the invasion of Ukraine on 24 February 2022.

During the period from January to December 2022, companies operating in Russia generated $213.9 billion in revenue, with a total profit of $14.1 billion $. With a combined revenue of $46.8 billion, the 20 largest foreign companies remaining in Russia saw their revenue increase by $27% compared to 2021. Companies remaining in Russia paid $3.5 billion in taxes and other fees.

According to the report, however, these figures reflect only a part of the amount actually paid to the Kremlin regime in 2022. Income and tax figures are available only for companies with subsidiaries and therefore a legal entity in the country. In addition, taxes paid on employees' salaries, social security contributions and VAT are not included in the assessment.

Philip Morris and Japan Tobacco top 20 multinationals in Russia

According to the report, cigarette companies Philip Morris International (PMI) and Japan Tobacco International are the top two companies among the top 20 multinationals studied and ranked in terms of profit. In 2022, they earned US$7.9 billion and US$7.4 billion in profit, respectively, and paid US$206 million in corporate income tax for Philip Morris and US$193 million for Japan Tobacco to Russia. The latter, in particular, experienced a strong growth in 2022, with its profits increasing by more than US$251.3 billion.

Companies that fund the Russian war effort

After Russia began its invasion of Ukraine in February 2022, many international companies ceased operations in the country – both due to economic sanctions imposed by the European Union and its allies, but also to protect their reputations and avoid being associated with the Russian belligerent.

The report highlights the continued existence of a significant number of large companies in the country. It reveals the scale of the sums at stake for the various companies studied, in particular tobacco manufacturers, and also for the Russian regime, which benefits from them. The justification given referring to the supply of essential goods such as medicines or even food cannot be accepted in the case of tobacco products.

The decision of these cigarette manufacturers to stay in Russia is indeed the result of a financial decision. With a smoking prevalence rate of 27% in 2019 according to the Tobacco Atlas - a prevalence that does not seem to be decreasing [2] - Russia is an important market for the tobacco industryAccording to Bloomberg, the Russian market accounted for 61.3 trillion of Philip Morris' revenue in 2021.[3]The authors of the study call for a mobilization to force these companies to withdraw from this country.

Keywords: Russia, tobacco industry, turnover, war, Ukraine, cigarettes

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[1] The Business of Staying: a closer look at multinational revenues and taxes in Russia in 2022, B4Ukraine & Kyiv School of Economics, July 4, 2023, accessed July 5, 2023

^[2] Smoking Prevalence, Tobacco Atlas, May 18, 2022, accessed July 5, 2023

[3] Philip Morris CEO Says Russia Exit Won't Happen Until Year End, Bloomberg, July 21, 2022, accessed July 5, 2023