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Chief of Ukraine Presidential Administration backs Russian tobacco monopoly

The chief of Ukraine’s Presidential Administration Boris Lozhkin is backing a Russian tobacco monopolist.

Lozhkin openly supports the Russian tobacco company Megapolis, which monopolized 90 percent of tobacco product sales in Ukraine under former President Viktor Yanukovych. Megapolis under Yanukovych managed to monopolize cigarette sales on the Ukrainian market. The company signed longterm contracts for almost all products produced in Ukraine by the so-called “Big Four” – British American Tobacco, Japan Tobacco, Inc., Imperial Tobacco Group and Philip Morris.

Megapolis sells to large and small retailers, taking a large part of the profit. Megapolis behaves in the same way monopolistic companies in the United States did during the 20th century before anti-trust laws were passed. Retail chains which do not agree with its draconian terms are shut out of the market altogether. It’s not possible on the Ukrainian market to purchase cigarettes directly from producers, according to contracts which grant Megapolis exclusive sales rights.

The Ukrainian distributor Megapolis is a subsidiary of the Russian distributor Megapolis, which controls 70 percent of the Russian tobacco market. According to Forbes, the principal owners of the group are Igor and Sergei Kesaev.

In 2013 they sold a 40 percent share in the international cigarette companies Japan Tobacco, Inc. and Philip Morris International for 1.5 billion USD. According to Forbes, a portion of the sale receipts were invested in weapons production companies and notes that this includes the “principle owner” of the Degtyarev factory which produces automatic Kalashnikov firearms (AK-47 through AK-103).

“The tobacco market is the fourth largest taxpayer and its influence on the country’s economy and domestic market is enormous.”

At the same time, when the entire world is imposing sanctions against Russia, a Russian company is exacting monopolist rent on the Ukrainian market. In addition, proceeds are directly funneled to a weapons producing Russian company, which directly supports pro-Russian separatists in an armed conflict in east Ukraine.

The interests of Megapolis in Ukraine’s political world are represented by Boris Kaufman, who has on numerous occasions been linked to the Ukraine’s Presidential Administration chief Boris Lozhkin.

Ukrainian media on several occasions earlier reported on ties between Megapolis and Yanukovych family members.

It is worth noting that the Austrian bank account of Boris Lozhkin was frozen last month. Some 130 million USD had been deposited in the account from fugitive Ukrainian oligarch Serhiy Kurchenko.

Many people in Ukraine connect the fact that even after the victory of the democratic revolution in Ukraine two years ago there continues to exist a monopoly created by Russian traders of weapons with the Ukrainian partner Megapolis represented by businessman Boris Kaufman. It was namely Kaufman who was able under the previous administration to arrange protection from the family of the former president Yanukovych and with Lozhkin when he became the head of the new Presidential Administration.

Hopefully the monopolist control of the Russian company on the Ukrainian tobacco market will serve as the basis for a serious investigation by the Ukrainian Anti-Monopoly Committee and that top Ukrainian bureaucrats supporting the scheme are punished

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