700m smuggling tunnel found between Ukraine and EU

SLOVAK officials discovered a 700-metre tunnel complete with its own train used to smuggle goods and maybe people from neighbouring Ukraine into the European Union (EU). They seized some 13,100 boxes of cigarettes and arrested a pair of men caught in the act. This has never happened before. "It is as if this has been cut out of a movie from the Mexican-American border,” Peter Kažimír, the finance minister, said.

The bust came as a joint effort between tax and customs officials in an operation code named “Tax Cobra.” Robert Kaliňák, the interior minister, said officials detained two men loading a truck on July 18th, confiscating a tobacco haul that would have bypassed some €350,000 in excise tax. Police had to fire warning shots as the 59-year-old allegedringleader – who was renting the industrial property where the tunnel emerged -- sought to flee the scene.

The tunnel begins in a house in the Ukrainian city of Uzhorod and exits inside a building some 220 metres into Slovak territory on private property between the villages of Vyšné Nemecké and Nižné Nemecké. Officials estimate the tunnel could have helped dodge up to €50 m in tobacco tax over the past year.

“I walk by everyday,” said Milan Husár, the mayor of Nižné Nemecké. “I haven’t noticed anything. It’s a fenced property and it seemed like they were processing wood there. Three-hundred people go-by everyday to work. Police, customs, everybody.”

The tunnel varied in depth between 3 and 6 metres underground. Officials said the tunnel was “unusually professional” in its use of mining technology. It was outfitted with tracks and a trolley for transporting goods and was about 1 metre in diameter. With warning labels that were written in English, the cigarettes were not destined for the Slovak market, highlighting growing concerns over illicit cigarettes that bypass taxes and, once they are within the 26-country Schengen area, move freely between countries.

A study in 2011 by KPMG, the consulting firm, found that some 10% of all cigarettes consumed in the EU are contraband – 64 billion smokes annually­­--with Italy as the largest single destination. Slovak customs alone confiscated 41.3m illicit cigarettes last year. “Today, smuggling is not about goods that are difficult to get, but about goods with consumer taxes in our region,” said Miroslava Slemenská, a customs spokeswoman.

Among the brands confiscated July 18th was Jin Ling, a cigarette label produced in the Russian territory of Kaliningrad, which is banned in the EU and produced specifically forsmuggling. Some studies of the brand have found they contain asbestos. The two men arrested thus far hail from western Slovakia, far from the Ukraine border. Police are declining to release more details saying additional arrests are likely. Ukrainian officials are now involved, although there have yet to be any arrests on that side of the border.

At least as intriguing as what Slovak authorities have confirmed is what they have declined to refute: The tunnel may also have been used to smuggle people.