Egypt’s No. 1 brand of cigarette, Cleopatra, was born in 1961 when Egyptian ruler Gamal Abdel Nasser asked for a local version of the smuggled American Kent brand he liked to smoke.
Created by the century-old Eastern Company S.A.E., Cleopatra is now one of the most widely smoked cigarettes in North Africa and one of the top sellers globally.
So it is perhaps ironic, given its copycat roots, that the brand should be undercut by a state-owned factory across the Mediterranean in Montenegro, a former Yugoslav republic negotiating to join the European Union.
But that is precisely what authorities in Egypt, Britain and the European Union flagged for four years, according to confidential correspondence obtained by reporters from Balkan Investigative Reporting Network, BIRN, and Arab Reporters for Investigative Journalism, ARIJ.
And Montenegro ignored them.
The warnings, BIRN/ARIJ can reveal, went to the highest echelons of the Montenegrin government, raising questions over the country’s claim to have turned a page on the 1990s, when cigarette smuggling was effectively a government-sponsored means of financial survival amid the war and sanctions of Yugoslavia’s bloody collapse.
It also speaks to the scale of the task to ready Montenegro, an Adriatic country of 620,000 people, for accession to the EU after almost three decades of rule of by the same party and, effectively, the same man – President Milo Djukanovic.
According to the findings of the BIRN/ARIJ investigation, Cairo, London and the EU’s anti-fraud office, OLAF, considered the flood of cigarettes coming out of Duvanski Kombinat Podgorica, DKP, “counterfeit”, suspecting they were being channelled to Libyan smugglers who distributed them illegally across North Africa.
Egypt asked repeatedly through diplomatic channels for Montenegro to shut the operation down.
Production did stop, finally, in 2016, but only after the factory was privatised and came under new ownership. But the offshore firm that contracted the factory to produce the cigarettes has not given up, according to the BIRN/ARIJ investigation; it has explored setting up production in Kosovo and has invested 1 million euros in a new operation in Montenegro.
This story reveals the unusual cast of mostly Greek characters behind the “counterfeiting” operation, including a man who has hosted Djukanovic at his Athens restaurant on more than one occasion.
Production lists seen by reporters show that besides Cleopatra, the factory also produced smaller quantities of Tunisian Mars 20, Algerian Rym and Libyan Riyadi.
“We all know how strict EU rules are on smuggling,” Sami Ben Jannet, managing director of the RNTA factory in Tunisia which produces the Mars 20 brand, told BIRN/ARIJ. “That’s why when we found out the factory belonged to a government we were shocked.”
From port of Bar to lawless Libya
DKP denies any wrongdoing. It says it was contracted by an offshore company called Liberty FZE, which it said showed the factory a trademark registration to produce the cigarettes.
According to contracts obtained by BIRN/ARIJ, DKP was expected to produce 400 million packs, or about eight billion individual cigarettes, between 2010 and 2016, though the actual number that left the factory is not known.
A DKP official, who spoke on condition of anonymity, said that the North African brands mentioned on the production lists were all made on behalf of Liberty FZE, a fact later confirmed by DKP as part of an investigation into the tobacco trade that concluded in November.
In court proceedings in Greece concerning two seized shipments of Cleopatra, Liberty FZE has insisted its exports of Cleopatra were entirely legal.
But this is disputed by the owner of the brand in Egypt – Eastern Company S.A.E. – as well as by British and EU authorities, according to emails submitted to the Greek courts and others leaked to BIRN/ARIJ.
Eastern Company S.A.E. told BIRN/ARIJ: “Our company has not issued any licence, authorisation or declaration to the Emirates LIBERTY FZE Company.”
The Egyptian company, according to a report seen by BIRN/ARIJ, estimated that the proportion of smuggled cigarettes on the Egyptian market had rocketed from less than one per cent in 2010 to 20 per cent in 2012, and that, as a result, the Egyptian state had lost in excess of 100 million euros in uncollected taxes.
Egypt, according to correspondence seen by BIRN/ARIJ, took its concerns to Montenegro’s then ambassador to Cairo, Gojko Celebic, as well as directly to the Montenegrin foreign ministry and to a foreign policy adviser to the then Montenegrin president, Filip Vujanovic, an ally of Djukanovic. It complained “over and over”, according to a note sent from Egypt’s foreign ministry to Eastern Company in January 2016.
Outlining a meeting between Egypt’s ambassador to Prague and Celebic, the note cited Celebic as saying that he had received Egyptian protest letters since 2012 but that he had been unable to secure any “official explanation” from his superiors as to why production had not been stopped.
Celebic was quoted as citing the “complexity and sensitivity related to the issue,” including the fact DKP was in the process of being privatised and that “there is a possibility that some officials in Montenegro have stakes in the tobacco company in Montenegro.”
Celebic said he would ask Montenegro’s foreign minister to raise the issue again with the minister of agriculture, who was ultimately responsible for the factory.
Nothing ever came of it.
‘Fake Cleopatra’
Ben Jannet said that RNTA had not issued a licence for the production of Mars 20 cigarettes in Montenegro, and, though he was well aware there were counterfeit cigarettes on the market, Jannet was startled to learn from reporters about the operation at a state-run factory in an EU candidate state.
He also noted the link between cigarette smuggling and funding for terrorism.
“Terrorism needs cash,” he said, “and one of the biggest sources is the smuggling business.”
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