The issue of Ukraine's integration into the European Union faces a serious economic challenge that often remains off the radar of political discussions. This refers to the scale of the illegal tobacco market. According to the latest data, the share of contraband and shadow products in the country has reached 17.6%. Experts warn: if this sector is not brought into compliance with European standards, the opening of the EU single market borders could turn into a catastrophe for the budgets of Western partners.

Excessive Profits for Shadow Players

Alexander Farkosh, the new General Director of JTI Ukraine, identified the main problem in an interview with RBC-Ukraine. The removal of trade barriers will allow illegal products from Ukraine to penetrate European markets without hindrance. Given that tobacco prices in the EU are significantly higher than in Ukraine, shadow players will have the opportunity to reap excessive profits by reselling contraband.

For the European Union, which strictly plans its tax revenues, this will become a critical factor. Farkosh provides a clear calculation: if even 20% of Ukraine's illegal market appears, for example, in Germany, the losses for the EU will amount not just to billions of hryvnias, but to billions of euros. These losses will fall on the shoulders of European taxpayers, not Ukrainian ones.

Economic Damage: Figures and Forecasts

The situation within Ukraine itself is also alarming. In 2025, the state budget has already lost about 26.5 billion hryvnias due to the "shadow" in the tobacco industry. Experts predict a further deterioration of the situation. If current trends persist — annual excise increases and rising income for shadow operators — by 2027, losses from illegal cigarettes alone could reach 32 billion hryvnias.

Among the main drivers of the growth of the illegal market, Farkosh named two factors:

  • Annual excise increases, making legal goods less affordable.
  • Lack of proper law enforcement and control by law enforcement agencies.

Market Dynamics: From War to Records

Statistics show a dramatic growth of the shadow component in recent years. In 2018, the share of illegal cigarettes was less than 5%. However, with the start of the full-scale war, the situation got out of control. In October 2023, the indicator reached a record 25.7%.

In 2024, positive dynamics were recorded: thanks to strengthened state control and the attention of international partners, the share of the illegal market dropped to 12.6%. However, in 2025–2026, the trend turned negative again, returning indicators to dangerous levels.

Crisis in the Vape Segment

The situation in the electronic cigarette market is of particular concern. According to Farkosh, the shadow sector dominates almost completely here — 93% of the entire market is in the "shadow". This indicates a systemic failure in the regulation of this new category of goods.

The Role of Legal Business

Against the backdrop of rising contraband, legal players continue to fulfill their obligations to the state. JTI Ukraine paid 45 billion hryvnias in taxes in 2025, entering the top ten largest taxpayers in the country. Before the war, the company supplied products to 22 countries, being an important element of the export sector. Now, the business faces the task not only of maintaining tax payments but also of helping the state fight shadow schemes that threaten both the Ukrainian budget and the prospects for European integration.