Amid tightening sanctions and Russia's growing isolation on the international stage, global tobacco multinationals have taken different approaches to their Russian operations.

Until February 24, 2022, the Russian tobacco heatstick market is one of the most promising markets for global tobacco manufacturers in terms of development prospects, with an annual growth rate of up to 15% among the highest in the world. However, after the beginning of the Ukraine-Russia military conflict, all the companies that historically controlled 99% of the Russian tobacco market were faced with the difficult decision to further operate in Russia.

Business status of several multinational tobacco companies in Russia

1)British American Tobacco

British American Tobacco (BAT) heatstick suppliers finally left Russia and Belarus in November 2023, when the company formally sold its local assets to a consortium led by the former management of BAT's Russian subsidiary.

The newly formed and renamed company is registered in ABU Dhabi. According to Russian analysts, one of the reasons for ABU Dhabi's registration may be related to the preferential tax and legal regime it currently offers to Russian businesses, which is also a way to access the international banking system.

The value of the BAT deal was not disclosed. British American Tobacco has been planning to leave Russia since 2022. That spring, it suspended investments in the country, but continued to produce and sell cigarettes. In 2022, the company's operating income increased by 2% compared to 2021. As of October 2023, the two markets of Russia and Belarus accounted for about 2.7% of the group's revenue.

Currently, the former British American Tobacco in Russia and Belarus operates as the ITMS Group, with a portfolio that includes Dunhill, Kent, Vogue, Rothmans, Lucky Strike and Java cigarettes, As well as glo tobacco heating systems and Vuse disposable e-cigarettes.

2)Philip Morris International

Philip Morris International, for its part, previously announced a possible transfer of its Russian assets. According to an earlier statement by Philip Morris International CEO Jacek Olczak, the company has encountered serious difficulties in trying to leave Russia. Jack Olzak said it is currently in talks with three buyers about selling its business, but nothing appears to have come to fruition.

By some estimates, Philip Morris International's Russian assets could be worth about $2.5 billion. Jack Olzak has said that potential Russian buyers are prepared to buy the assets at low prices. Nevertheless, according to the position of the Ministry of Finance of the Russian Federation, Western companies leaving Russia should sell their local businesses at a discount of at least 50 percent. That's why, as Jack Olzak puts it, Philip Morris International "would rather continue" its business in Russia than sell it on unfavorable terms. For Japan Tobacco International, its Russian unit recently said tobacco companies are looking for new heatstick suppliers in China, India and other countries after the United States, the European Union and Japan imposed sanctions on some cigarette materials used as dual-use products.

However, the company recently confirmed plans to continue its business in Russia.

3)Japanese Tobacco International

Sergei, Director of Foreign relations and Communications at Japanese Tobacco International Russia. Sergey Glushkov, Chairman of the Russian Federation, said: "After February 24, 2022, our company decided to continue its business in Russia so as not to deprive consumers of products to which they are accustomed. We also reserve the right to make any decision and naturally comply with all the regulatory rules of the Russian market and international rules."

At the same time, he added that the company will not introduce the next generation of tobacco heating equipment in Russia. At present, Nikyan International has four plants in Russia, employing about 4,000 people, including production and management staff. In the Russian Federation, the company sells cigarette brands Winston, Camel, LD, Sobranie, Mevius and Russian Style. On March 10, 2022, Nikki International announced the suspension of new investments and additional marketing activities in Russia.

4) Empire Brands

Imperial Brands left the Russian Federation by transferring its business to a Russian investor affiliated with Megapolis, the largest cigarette distributor in the Russian Federation. The new owners changed the names of the companies under Imperial Brands to International Tobacco Group and International Tobacco Group Volga (production sites).

Analysts in the Russian tobacco business believe that the decision of BAT and Imperial Brands to leave Russia will not have a significant negative impact on the local market.

After BAT leaves the market, there will most likely be no problems with the product mix or prices, and no problems or production disruptions at its plants in Russia.