Two Russian Billionaires Become Wealthier Through Cigarette and Alcohol Trade During Ukraine War

Two billionaires from Russia have become wealthier during the years of war and sanctions by selling cigarettes and alcoholic beverages produced in Western countries. These two billionaires are also compelled to spend a significant portion of their wealth to financially support the arms industry and the security organization of Russia, while their leisure activities still take place in Western resorts. According to 'Proekt', an independent Russian media outlet for investigative journalism, these two Russian billionaires also control the tobacco market in Ukraine through intermediaries and fake companies. Siddhartha Mukherjee, a contemporary Indian-American physician and oncologist, wrote in one of his books, 'War boosts two industries: arms and tobacco.' With this quote, the Russian publication 'Proekt' has addressed the story of two billionaires who have made huge profits from the sale of cigarettes and alcohol during the war between Russia and Ukraine, and a large portion of that is spent on supporting arms production in Russia. How much has the wealth of Russian billionaires increased since the start of the war? According to the World Health Organization, Russia ranks first in Europe and sixth in the world in tobacco consumption. Before the start of the war against Ukraine, this profitable market was divided among four multinational companies, but after Western sanctions were imposed, these companies were forced to either exit Russia or at least negotiate with new players for the Russian tobacco market through representatives based mainly in the United Arab Emirates. Currently, about 70% of total tobacco sales in Russia are managed by 'Megapolis', owned by two Russian citizens: Igor Kasaev and Sergey Katzyf. They also own a chain of alcohol stores with 25,000 branches across Russia. According to Forbes magazine estimates, 'Megapolis' earns over one trillion rubles (approximately 10 billion dollars) annually from cigarette sales and about 1.2 trillion rubles from alcohol sales. The personal profits of the two owners of this company reach billions of rubles. According to the same report, the business of these two Russian billionaires is not limited to tobacco and alcohol sales; they are also shareholders of the 'Moscow City' residential-commercial complex, where, for example, the family of Bashar al-Assad, the ousted president of Syria, owns at least 19 apartments worth over 40 million dollars. In the latest list of Russian billionaires by Forbes magazine, Kasaev ranks 29th with 5.5 billion dollars, and Katzyf ranks 72nd with 1.9 billion dollars. This means Kasaev's assets have doubled from 2.6 billion dollars in 2022 during the war years. According to 'Proekt', the reason for this remarkable success is not only the significant increase in tobacco and alcohol consumption in Russia but also the influential friends of this Russian oligarch. According to 'Proekt', the 'Megapolis' company has made astronomical profits, especially in the last three years, but its roots go back to the 1990s, the 'reckless' years after the collapse of the Soviet Union. According to this report, during those years, 'Megapolis' was primarily engaged in cigarette smuggling, and its owners made huge amounts of money through tax evasion and avoiding customs duties. At that time, oversight of tobacco and alcohol imports into Russia was under the control of the country's security organization. According to 'Proekt', the fact that Igor Kasaev and Sergey Katzyf have never been held accountable for their illegal activities is explained by the fact that they have been sharing their profits with senior officials of the Russian security organization, especially with the family of Nikolai Patrushev, for three decades. Nikolai Patrushev was the head of the Russian security organization for 10 years and then the head of the National Security Council for 16 years. He remains one of Vladimir Putin's closest associates and one of the most influential politicians in Russia. Vladimir Anisimov, who initially was Patrushev's driver and later became the deputy head of the Russian security organization, now oversees the security system of 'Megapolis'. According to 'Proekt', most of 'Megapolis's' competitors, under pressure from tax inspections and interrogations by the security organization, have gradually been forced to partner with Igor Kasaev and Sergey Katzyf or cede their market share to them. In 2003, Igor Kasaev and Sergey Katzyf established a 'non-profit' foundation called 'Monolith', which continues its activities. According to 'Proekt', this foundation, whose board consists of current and former members of the FSB (Russian security organization), declared its assets to be over two billion rubles, which is unusual for a non-profit organization in Russia. The newspaper 'Novaya Gazeta' previously reported that Russian oil giants like 'Gazprom' and 'Rosneft' are also financial supporters of the 'Monolith' foundation. According to 'Proekt', this foundation also owns undeclared properties and assets, such as a resort in the port of Sochi established for former and current security organization officials, managed by Viktor Patrushev, Nikolai Patrushev's older brother. Other examples of these secret assets include a residential complex in the suburbs of Moscow that was built instead of a kindergarten; this kindergarten belonged to the security organization during the Soviet Union but was 'renovated' with the financial support of Igor Kasaev, resulting in 20 senior FSB officials owning apartments valued at approximately two and a half million dollars each without paying construction costs or even government fees. However, according to 'Proekt', the 'Monolith' foundation was established not only to enrich senior security officials but also primarily serves as a fund for covert security operations and arms projects that the Russian government does not want to acknowledge. According to this report, this non-profit foundation has now become a profitable business. It is said that 'Monolith's' investment in the production of weapons used by the Russian army in the war against Ukraine has grown by about 30% over the past two years, reaching about 30 billion rubles in 2024. Igor Kasaev was sanctioned by the European Union in the spring of 2022, about two months after the start of Russia's large-scale military invasion of Ukraine, and announced that he would step down from managing all his projects in Russia. However, 'Proekt' states that this 'resignation' was merely on paper. Furthermore, according to this report, multinational companies like 'British American Tobacco', 'Japan Tobacco', and 'Philip Morris' have always known that a significant portion of their tobacco sales revenue in Russia flows into the pockets of Patrushev and his associates, and this trend continues despite the war and sanctions. According to 'Proekt', each of these companies sold cigarettes in Russia through 'Megapolis' until a year ago, and in 2023, Philip Morris made 56 billion rubles and Japan Tobacco made 43 billion rubles in profit. Only in 2024, by order of the Russian government, these companies were deprived of receiving profits from their cigarette sales in Russia. The Russian company 'Megapolis', which entered the Ukrainian market 15 years ago with the help of Viktor Yanukovych, the ousted president of Ukraine, and took over 99% of it three years later, continues to operate in Ukraine through a representative office in London. Igor Kasaev and Sergey Katzyf, who used to spend their vacations mainly in European resorts before the war, no longer travel to Western countries; however, their family members have been seen several times in resorts in France and Italy over the past three years. Kasaev, who also holds a Cypriot passport, still owns an island in Finland, and at least two of his yachts have not yet been seized by European authorities. Katzyf also has a historic villa in Oregon. 'Proekt' reported that it sought explanations on this matter, but none of the Western companies mentioned in the report responded to journalists' inquiries.