Tobacco giant Philip Morris International (PMI) promised to exit the Russian marketplace in 2022 due to its ongoing war in Ukraine. Two years later, the company is still pulling in billions of dollars in revenue from Russia and paying Moscow hundreds of millions in tax dollars.
PMI raked in nearly $8 billion in profits from Russian sales in 2022, generating around $600 million in taxes for Moscow’s government as it wages a brutal invasion of Ukraine. The cigarette maker’s net profits jumped 45 percent in just the first year of Russia’s war, at a time when one of PMI's associates faced sanctions for providing Moscow with arms.
PMI’s growing business in Russia raises questions about its earlier promise to flee the country, plans that now appear to be on the back burner.
Jacek Olczak, the company’s CEO, confirmed last year that PMI may never leave Russia due to the difficulty of dismantling business operations there. Olczak said he’d "rather keep" the business open than sell it under the Kremlin’s strict terms on foreign businesses.
The admission marked a significant about-face for the cigarette maker, which initially promised in 2022, shortly after the war started, that it would "scale down operations" and eventually leave. The company, facing pressure to cut off Russia over its war crimes, originally touted "concrete steps" to discontinue products in the country.
But the Russian marketplace has proved too lucrative to abandon.
The country accounted for 9 percent of PMI’s cigarette and heated tobacco in 2023, making it the company’s third-largest market behind Indonesia and Turkey. PMI still has around 32 percent market share in Russia.
Additionally, nearly 14 percent of PMI’s global IQOS sales, a heated tobacco product, comes from Russia.
The company reported adjusted profits of $1 billion from Russia and Ukraine in 2022, even after the latter designated PMI as "an international sponsor of the war." The millions in taxes that PMI has paid Russia are a critical revenue source as Moscow struggles to feed its war machine in the face of international sanctions.
"The business of staying in Russia has been extremely lucrative for several companies that have chosen to stay," according to a July report from a watchdog group that reviewed PMI and other companies that have chosen to keep their businesses open. "All the more troubling is the extent to which these companies have been paying billions of dollars in profit tax to the Kremlin whilst Putin wages a horrific and unprovoked war on Ukraine."
A PMI spokesman did not respond to a request for comment on the company’s past promises and the status of its business operations in Russia.
PMI has also faced scrutiny for its connections to Russian billionaire Igor Kesaev, who was sanctioned for funneling arms to the Kremlin.
Kesaev is a PMI business associate who has reportedly "used holdings in tobacco distribution and weapons production" to help keep Russia armed, according to Reuters.