You've got -- one side is broke-ass Europe --
the Ukraine --
and the other side you have, you know wonderland,
The European Union.
And they figured out a black market
to make cheap cigarettes.
I'm on my way to buy some unmarked, untaxed,
under-the-counr tegacies.
The job is to get them over to the European Union
where the taxes are so high.
The reason why the taxes are so high is
because they want people to stop smoking.
So Tom Littlewood is headed to Ukraine
to investigate how smugglers
are finding ingenious ways
to get their goods across that border.
Our goal is just to simply show the world a window
as to why people do the things they do,
where that desperation comes from.
It's like they say, when the system fails you...
you create your own system.
♪
[ Train whistle blows ]
Tom: According to Berlin's custom authorities,
there are over 350 points of sale
for black-market cigarettes in the city.
Those are nearly exclusively in the former East Berlin
and run by the Vietnamese mafia.
I'm about to meet a gang
who sell cigarettes here in this housing estate.
These vendors sell contraband cigarettes on street corners
and public parks for half the price of legal smokes.
Tom: Which cigarettes are you selling?
Marlboro.
Interestingly without the tax stubs on them.
These ones do have tax stamps.
But this brand is not officially sold in Berlin.
And how much do you sell a pack
of these cigarettes for?
Do you know exactly where they come from?
These underground cigarette dealers
are the end of a supply line
that starts hundreds of miles away in Ukraine.
Ukraine is a country on the brink.
Revolution, war, economic stagnation,
the perfect conditions for a thriving contraband economy.
And ordinary people struggling to get by
are increasingly relying on smuggling products
like illegal cigarettes to make ends meet.
I'm just walking through the city center of Lviv
and I'm on my way to buy some unmarked, untaxed,
under-the-counter cigarettes.
[ Speaking foreign language ]
Cigarettes are some of the most
heavily taxed products in the world.
In some EU countries, two-thirds of the price
goes to the government.
The big money in cigarette trafficking
is made here in Eastern Europe,
where underground factories produce unregulated cigarettes
made specifically to be smuggled.
They are known on the street as "Cheap Whites."
Cheap Whites cheat governments out of billions in taxes
and they also pose a serious public-health threat.
These half-priced cigarettes drive up smoking rates,
which leads to more cancer and heart disease.
And because Cheap Whites are made in unregulated factories
from the Soviet era,
they contain all sorts of nasty ingredients.
Public-health campaigns across the EU
warn people of some of the surprising ingredients
you might find in Cheap Whites,
from rat feces to toxins such as arsenic and asbestos.
These Jin Lings,
from the quality, they look identical.
The thing is that these guys cost half the price of these.
We're talking 50 cents and $1.
At first glance, these look incredibly similar to Camels.
Of course you got a different name on the pack
and importantly a goat instead of a camel.
That's why a lot of the smugglers refer
to these Jin Lings as the little goats.
Ivan is a small-time smuggler
who agreed to show us how his operation works
if we hide his identity.
First he needs to pick up the cigarettes.
We just stopped in a town where Ivan's gonna buy the cigarettes.
There's a local market here.
Tom: Is there any way
those cigarettes are made in England?
Yeah, let's have a look inside.
These are made, manufactured,
designed and sold all within the Ukraine.
All the writing and the health warnings,
everything is in English.
And they've even taken the cheek
of putting the Royal Crest
on top of the packet.
And I saw you also have
a box of Marlboros in there as well.
A handful of underground factories
in Russia and Ukraine produce
24 billion of these cigarettes each year.
But with the state of Ukraine's economy,
nobody makes any money on these,
unless those cigarettes can make it
over the border into the European Union.
You're the guy who drives the car across the border?
And when you're actually in Poland,
how do you sell them?
Why did you start smuggling cigarettes?
Tom: The car itself -- there's a Polish license plate.
So that car has to be constantly crossing the border
between Ukraine and Poland.
Do you ever worry about getting caught?
Tom: We're back on the road and we're traveling to Poland
where those cigarettes go from being worth
$50 to $300.
Ivan's partner will sell his Cheap Whites on
to a contact just over the border.
If all goes according to plan,
he will return in 12 hours
to give Ivan his split of the money.
Tom: The smuggler's partner safely crossed into Poland,
sold off the cigarettes and crossed back into Ukraine
without detection.
Together they made about $150 each for this run.
It might not seem like a lot
for an international smuggling operation,
but in Ukraine, it's actually a big payday.
And how long do you think you'll carry on doing this?
How many people do you know who live the same way as you,
smuggling cigarettes?
And do you have kids?
And what do you hope for your kids?
They'd love to just stop doing this,
they'd love to get out.
But in order for that to happen,
there needs to be a change in the system,
there needs to be a change in the country.
And because of endemic corruption,
both of them just seemed like they are,
they are not sure they are ever gonna see that happen.
I'm about to meet the chief editor
of a local journalist collective.
She's one of the few people in the region
reporting on the black market.
Because of that, she's been the victim
of numerous threats and intimidation.
So can you tell me about the organizations
behind the black market?
How important is that to Ukraine economy?
Galina just told me this is a good way
to understand Ukrainian mentality.
Basically a bunch of guys digging up the road
to fill in the existing holes in the road.
And that way no one really knows
how much money has been spent on the whole thing.
And it was frustration with this corrupt system
that drove millions of Ukrainians
to the streets in 2013
to demand a change of leadership.
After months of protests, they overthrew
the Russian-backed President, Viktor Yanukovych.
But today Ukraine is isolated.
Cut off from the European Union to the west
and a war with Russia simmering in the east.
With the country going broke, so many Ukrainians
are working in the underground economy,
the tax revenues are dwindling.
And government officials have come to depend
on bribes and kickbacks.
Smugglers who can afford to pay off government officials
can manufacture and distribute illegal cigarettes
with little risk of arrest.
But to the border with the European Union,
authorities are waging a military-style crackdown.
[ Men yelling in native language ]
And one of the frontlines of the battle
between smugglers and law enforcement
is the border of Ukraine and EU member Romania.
We literally just stepped over the border into Romania
and our Chief of Police got a call saying
some cigarettes have been seized on the border.
We're heading there right now.
Tom: We've just crossed into Romania
and the border patrol claims they've made a big bust.
The contraband cigarettes would've been worth
more than $20,000 on the streets of the EU,
but the smugglers escaped before they were caught.
Tom: What kind of punishments are dished out to people
who get caught with cigarettes in their cars?
Authorities tried to discourage smuggling
with violent interdiction and jail time.
But cigarette syndicates stand to gain
so much if they can get across this border
that they are still not deterred.
More and more money the state throws at the problem
trying to catch these untaxed cigarettes,
the more and more creative the guys smuggling have become.
I'm currently driving through the Carpathian Mountains
with the boss of a local smuggling gang.
The boss, who goes by the name of Legion,
is going to show me the creative way
he smuggles his cigarettes to avoid the EU crackdown.
We've just arrived at the boss's secret mountain hideout.
It's a deserted ski lodge,
the beautiful panoramic view of the mountains
and there's a little log fire burning
and these two blondes that he lovingly referred to
as his babies.
[ Legion whistling ]
What are their names?
Where did you find them?
Tom: Do you think, like, your business can only exist
because of the high tax in Europe?
Yes. Yes.
[ Speaking native language ]
Just getting real-time translation.
Demand?
Demand, yeah.
Do you see yourself as a criminal at all?
Cheers!
Tom: So, how did you get into the black market
in the first place?
How old were you?
What was that like, to be 17 and carry
a huge bag of weapons over the border?
You're a boss of your own group, your own gang,
but you have bosses above you as well?
How about your organization?
How is your organization set up?
Tom: The next day we head out to the secret spot
on the Ukrainian side of the Carpathian Mountains
where Legion's smuggling operation takes off.
[ Cellphone ringing ]
But just as we start up the mountain,
he gets a phone call.
The weather has turned,
and his smuggler is having second thoughts.
Tom: I'm with a Ukrainian cigarette smuggler
who's figured out a way
to avoid the Romanian border patrol.
So we're all set up and ready to go.
We're just waiting for the pilot to give the okay,
the wind to drop a little bit more,
and then he's gonna be lifting off
with a nice small amount of cigarettes
strapped to his machine
and end up flying off over there straight into Romania.
The pilot will fly one and half hours into Romania
and drop the package for a smuggler
on the other side.
Flying over this heavily patrolled border
is high-risk smuggling.
Just last month, two of his pilots
were shot out of the sky.
So they were flying over the Romanian border
and the cops shot them?
Tom: What are the main risks that he's facing now?
How do you feel now watching him fly off?
How many cigarettes is he carrying?
How much money is he gonna make with that?
Do you know who buys for the Germans?
Oh.
Flying high to evade the authorities,
this is the moment where the pilot crosses the river
that separates Ukraine from the EU.
And the price of the cigarettes he is carrying
just went up 300%.
Demand for Cheap Whites on the streets of Berlin
and across Western Europe continues to grow.
But since we filmed, the fight over illegal cigarettes
in Ukraine has heated up.
Right-wing paramilitary groups
began waging a vigilante campaign
they claim is to root out corruption --
opening fire on local police
they say are involved in cheap-white trade.
As a result, Legion says he has shut down
his entire cheap white smuggling operation.