of cigarettes from many countries. The share of those imports provided by the two major suppliers of the past (United States and United Kingdom) has shown a downward trend during the last five years while the share for European Union exporters and some countries of East Asia increased. Total cigarette imports entering Middle East countries increased to about 184 bn pieces during 2006. The pace of growth for cigarettes into the region has slowed down. The increase of 2% in 2006 was less than the average rise during 2002–04. The average price for cigarettes delivered to Middle East importers from all sources was about 24 cents per pack of 20 for a value of about $2.2 bn in 2006. The 2006 value was about 39% above the 2003 level. Intense competition meant a lower average price for imports entering most countries in the region than during 2001 when the average delivered price for imported cigarettes was about 30 cents per pack of 20.
US cigarette exports to the Middle East declined from a peak of 39 bn pieces in 2004 to 20 bn pieces in 2006, as the value fell from $314 mn in 2004 to $211.5 mn in 2006. A major reason for the decline was the drop for shipments directly to Iran from 14.5 bn pieces in 2004 to 1.6 bn by 2006. Iran was the third major destination for US cigarette exports during 2003–05, following Japan and Saudi Arabia. During the first four months of 2007, no US cigarette exports directly to Iran were reported. US cigarette exports to Saudi Arabia declined from a peak of 11.7 bn in 2002 to 8.4 bn pieces by 2006, valued at $70.8 mn.
Trade among the seven members of Gulf Cooperation Council (Saudi Arabia, United Arab Emirates, Kuwait, Qatar, Oman, Bahrain, and Yemen) has increased in recent years. The 150% ad valorem import duty for cigarettes entering Gulf Cooperation Council countries (GCC) tended to cause transit traders operating in some locations like Oman to shift their business to duty-free zones like Jebel Ali in Dubai. The import duty applies to cigarettes entering the country for distribution to retail outlets. Multinationals manufacture leading American blended brands in many countries, and Middle East importers do research on the quality of imported cigarettes and then often compare prices. The attractive prices provided by Poland’s cigarette exporters contributed to their dramatic expansion in exports to Middle East markets. While many importers have a strong focus of the average price for brands of blended cigarettes, some traders in Saudi Arabia want to buy the best quality brands since the 150% import duty already has the delivery price bolstered.
Iran Becoming A Larger Cigarette Importer: Cigarettes enter Iran from many countries and matrix tabulations indicate that the delivery of imported cigarettes into Iran in 2006 was in the range of 50 bn pieces. Domestic output of about 16 bn pieces provides about a fifth of the cigarette supply. Total cigarette imports into Iran were estimated at about 24 bn pieces in 2002, but increased sharply to nearly 40 bn by 2003 when the import duty was reduced to 4% ad valorem, compared with 40% ad valorem previously. International trade matrix tables report shipments of cigarettes to Iran by about two dozen countries, plus estimates for purchases in transit trade zones of UAE, Oman, and Turkey. Matrix tabulations for cigarette shipments to United Arab Emirates indicate that the major distribution of cigarettes delivered to Dubai are for smokers in Iran. Many boats from Iran transport passengers to the Jebel Ali duty free zone of Dubai each day. The duty-free zone has an advantage that the 150% import duty imposed by GCC is not levied there. Shoppers from Iran find many advantages to doing business in Dubai, including efficient banking, a strong currency, and an elaborate array of goods from around the world at attractive prices.
Switzerland became a much larger supplier of cigarettes for Iran and Swiss shipments rose to a range of $48 mn by 2005. Some of the Swiss cigarette exports to the Netherlands and Germany were for ship stores or transit traders, and some of those cigarettes eventually made their way to Iran. Swiss banking flexibility helps exporters to deal with the situation in Iran, where the currency value is now only about a third the level it was a decade ago. Iran’s petroleum exports of over $60 bn per year are about double the value for recorded imports.
In 2004, the United States had been the leading exporter of cigarettes directly to Iran, by deliveries declined to 4 bn pieces by 2005. A shift from inexpensive brands to higher priced premium brands for export to Iran occurred after 2004. No direct exports of US cigarettes to Iran were reported in the first four months of 2007. South Korea was a greater competitor for the Iranian market with larger deliveries to transit traders in UAE during 2002–04, and the beginning of direct exports to Iran in 2003. South Korea’s cigarette exports to Iran rose from an initial 262 mn pieces in 2003 to 7.1 bn pieces in 2004 and were in a similar range in 2005. Ukraine’s cigarette exports to Iran began with the shipment of 950 mn pieces in 2004, and advanced to 970 mn pieces in 2005, before retreating about 28% in 2006.
Turkey’s cigarette exports to Iran increased from $8 mn in 2003 to $22.2 mn in 2004 and then to $39.8 mn by 2005. Deliveries of cigarettes by trucks from Turkey to shops in Tehran and Tabriz may be more convenient than deliveries to Iranian ports. In addition, some Turkish cigarette exports to the Mersin free trade zone at this Mediterranean seaport also eventually go to Iran.
Greek cigarette exports to Iran tend to go through transit traders in the UAE or the Suez Canal free trade zone. Direct exports of cigarettes to Iran from Russia and Ukraine increased in the last two years. Strong competition for sales in both the European Union and Commonwealth of Independent States has tended to cause more cigarette exporters in the two major free trade areas to seek customers in the Middle East.
United Arab Emirates Expands Cigarette Trade: The United Arab Emirates has expanded both cigarette imports and exports in recent years. The stable currency and relatively free trade setting tend to attract many business people from around the world, both for investing and shopping. Cigarettes entering the UAE increased from 21 bn in 2001 to about 44 bn in 2006. An estimated 80% of the cigarettes imported into UAE were eventually smoked in other countries, especially Iran.
Dubai is a great trading center with the enhancement of a free trade policy, a stable convertible currency, flexible banking, and competition among many private traders. Newer cigarette exporters in Europe and some countries of East Asia have had their best cigarette sales in the Middle East in Dubai. Exports of cigarettes from South Korea to UAE doubled in 2004, reaching 21.3 bn pieces, valued at $96.5 mn, and remained near that level in 2005. Most of the cigarettes from China and India to the Middle East go to UAE. Ukraine tripled cigarette exports to UAE with the shipment of 113 mn pieces in 2005, followed by a further rise of 7% for 2006 deliveries.
Charter flights from Russia and Ukraine carry shoppers and suitcase traders to Dubai. They may carry rolls of $20 bills or euro notes with them. The availability of the latest electronic items from many countries in Dubai shops contribute to the appeal among shoppers from East Europe and some other Middle East countries.
Iraq’s Cigarette Imports Reached A Peak In 2004: Iraq reported imports of 21.4 bn cigarettes valued at $168 mn in 2004, compared with 12 bn pieces with a value of $72 mn in 2003. Then reports on cigarettes clearing customs into Iraq declined to about 17.8 bn pieces by 2005.This may have been because drivers of trucks making deliveries through Silopi Pass from Turkey did not have their comparatively small deliveries reported. Also, they may have had a barter arrangement of diesel fuel for cigarettes, and no money was passed. Gasoline and diesel fuel cost over $5 per gallon in Turkey, and prices in Iraq are less than a fifth that level.
No direct exports of US cigarettes to Iraq have been reported in recent years. Shipments for sale in stores operated for US government and military personnel are not counted as exports by Bureau of the Census.
Apparently most of the Turkish cigarettes smoked in Iraq come in through transit traders making purchases in the Mersin free trade zone. Turkey’s direct exports of cigarettes to Iraq increased from $60,000 in 2004 to $760,000 in 2005. Some Swiss and German cigarette exports to Turkey go to free trade zones for distribution in Iraq.
UK cigarette exports to Iraq reached a peak of 1.4 bn pieces in 2004, but no direct exports to Iraq were reported in 2005 or 2006. Greater deliveries from East Europe and Jordan helped to offset the lack of Iraq’s imports of UK cigarettes in 2005 and 2006. Poland’s cigarette exports to Iraq peaked at 1.5 bn pieces valued at $16.2 mn in 2004, but deliveries declined to about a fourth that level in 2005, before rebounding to $12.9 mn in 2006.
Cigarette output in Iraq has remained below the range of 5 bn annually, and Babylon is a leading brand. Back in the late 1980s, Iraq’s cigarette output was about 14 bn annually. Both domestic leaf production and leaf tobacco imports declined sharply after 1990. Leaf tobacco imports were in a range of 2,000 tons annually during 2002–05. The search for flue-cured tobacco at low prices has resulted in some purchases from Asia. Some traders in Iraq bought dark Kentucky-Tennessee fire-cured tobacco valued at $10,000 in 2005, apparently for use in water pipes.
Market Share Setting For Saudi Arabia’s Cigarette Imports Changing: The share of Saudi Arabia’s cigarettes provided by the United States and United Kingdom has shown a downward trend, while the share of some EU members and Switzerland trended upward. The US share of Saudi cigarette imports averaged about 51% during 2002–04, but then declined to about 36% of the 24 bn pieces imported in 2006. The UK share of Saudi cigarette imports declined from an average of about 17% during 2002–04 to about 12% in 2006. Switzerland may become a more important source Saudi cigarette imports in 2007.
Kuwait Remains A Steady Market For Imported Cigarettes: Sales of cigarettes in Kuwait reached a peak of 4 bn in 2003, but averaged about 3.5 bn pieces during 2004–06. Smaller per capita purchases may reflect a reaction to the 150% GCC wide import duty. Also, many Kuwaiti families travel to locations where they can buy cigarettes in the duty free shops of ports and airports.
Oman’s Transit Trade Activity Declined Sharply Since 2001: The area of Oman close to Iran once had a thriving business in selling imported cigarettes to customers from Iran. Oman’s reported cigarette imports declined from 27.5 bn pieces in 2001 to 17.4 bn pieces in 2002. Then a downward drift continued and imports in 2006 were apparently less than half the 2001 level. Oman has lost much of the transit trade business for cigarettes with Iranian shoppers to the busy Dubai merchants. Dubai offers attractive banking for traders and dealing with various currencies is advanced. The reduction for Iran’s import duty to 4% ad valorem in 2003 appears to have contributed to a shift from Oman to Dubai for transit trade in cigarettes destined for Iran.
Bahrain’s Cigarette Imports Show Upward Trend: Imports of cigarettes into Bahrain increased to about 2 bn pieces in 2006—an increase of 57% over 2002. The causeway between Bahrain and Saudi Arabia has contributed to greater visits by shoppers from other Gulf countries. US cigarette exports to Bahrain declined 4.4% to 345 mn pieces in 2006. UK cigarette exports to Bahrain tumbled 59% to 121 mn pieces in 2006.
Qatar Importing More Cigarettes: Qatar Airways now has jet flights directly from Washington, DC to Doha. More multinational firms have an office in Doha’s modern new tall buildings. Cigarette imports into Qatar increased to nearly 2 bn pieces in 2006—a rise of 54% since 2003. US cigarette exports to Qatar were steady in 2006 with the shipment of 424 mn pieces. UK cigarette exports to Qatar declined a fifth to 308 mn pieces in 2006. German exports of cigarettes to Qatar increased a third to 64 mn pieces in 2006.
Yemen Imports More Tobacco Mixtures Than Cigarettes: Yemen has been a significant importer of mixtures of dark tobacco from India for use in water pipes in the recent decade. Cigarette imports into Yemen in 2006 were in the range of 300 mn pieces—triple the 2000–02 average. US cigarette exports to Yemen increased a fifth to 67 mn pieces in 2006
Lebanon Has Stable Cigarette Imports: Despite some wide fluctuations for cigarette sales to Lebanon by certain companies, total cigarette imports into Lebanon were steady in the range of 7 bn pieces annually during 2004–06. US cigarette exports to Lebanon declined 4.4% to 3.758 mn pieces in 2006, after remaining steady at about 3.9 bn pieces annually during 2002–05. German cigarette exports to Lebanon reached a peak of 999 mn pieces in 2005, but declined 36% in 2006 as competition from new suppliers intensified. Poland’s cigarette exports to Lebanon zoomed from $719,000 in 2005 to $3.87 mn in 2006.
Syria’s Cigarette Imports Rising: Imports of cigarettes into Syria increased to about 4.8 bn pieces in 2006, after averaging about 4.3 bn pieces annually during 2002–05. UK cigarette exports to Syria advanced to 87 mn pieces in 2006—five times the 2005 level. US cigarette exports to Syria peaked with the delivery of 1.46 bn pieces in 2003, but were missing in 2005 and 2006. German cigarette exports to Syria doubled in 2005 reaching 175 mn pieces, before falling 15% in 2006. Poland began exporting cigarettes to Syria in 2006 with deliveries valued at $1.9 mn.
Jordan Diversifies Cigarette Imports: Jordan’s cigarette imports advanced to a range of 4 bn pieces in 2006—nearly triple the average of about 1.2 bn pieces annually during 2002–04. Rising competition for cigarette trade within the EU contributed to greater efforts by some exporters in EU countries to find extras sales in Jordan. German cigarette exports to Jordan increased 30.8% in 2006 to 4.5 bn pieces. US cigarette exports to Jordan zoomed from 31 mn pieces in 2005 to 142 mn pieces in 2006. Poland’s cigarette exports to Jordan reached a peak of $4.86 mn in 2005, but declined 64% in 2006.
Jordan has expanded local cigarette output in 2004, partly to meet demand in Iraq. Efforts to find new export markets faced too much competition in 2005 and 2006. Total cigarette exports from Jordan increased sharply in 2004 to 9.5 bn pieces, valued at $45.4 mn, but retreated about 15% in 2005 as competition for sales in Iraq intensified with arrivals from more countries.
Israel Diversifies Sources Of Cigarette Imports: US cigarette exports to Israel declined from a peak of 5.05 bn pieces in 2004 to 1.47 bn pieces in 2006. The average price for US cigarette exports to Israel increased from 22.4 cents per pack of 20 in 2004 to about 27 cents per pack in 2006. This was the highest average price reported for US cigarette exports to a country in the Middle East in 2006. The next highest price was 25.6 cents per pack for shipments to Iran. German cigarette exports to Israel increased 62% in 2006 to 235 mn pieces. Some other EU countries have made gains recently in cigarette exports to Israel, including Poland. UK cigarette exports to Israel declined from 178 mn pieces in 2003 to 14 mn pieces in 2006. Switzerland and Greece have viewed Israel as a market for potential expansion as deliveries of US cigarettes declined.
Free Trade Zones Important For Turkey’s Cigarette Trade: Free trade zones have an interesting role in Turkey’s cigarette trade. Output of over 133 bn cigarettes annually puts Turkey at the top of the list for domestic production in the Middle East. Exports of cigarettes from Turkey increased from 8.5 bn pieces in 2004 to 11.5 bn pieces in 2005 and to about 12 bn pieces during 2006. Iran about half of Turkey’s cigarette exports during 2004–06. In addition to direct exports to Iran, some of the shipments to Mersin free trade zone were eventually delivered to Iran or Iraq.
Most of the cigarette exports reported by European countries to Turkey apparently go to free trade zones for distribution in other countries, rather than passing through customs for sale to smokers in Turkey. Poland reported exports of cigarettes valued at $22.3 mn in 2005, compared with only $51,000 in 2004, but shipments then declined to $9.2 mn in 2006. Since
Turkey did not report those large imports from Poland, it is apparent that the deliveries were made to free trade zones in Turkish ports for distribution to other countries, mostly Iraq and Iran. UK cigarette exports to Turkey declined a fifth to 276 mn pieces in 2006.
Turkey imports of leaf tobacco from the United States and Brazil helped multinationals to produce more quality-blended brands. A focus on maintaining high quality for exports of oriental tobacco contributed to the burning of some lower quality tobacco in the past. Managers of cigarette factories in Iraq were concerned that they should have been given a chance to explore buying some of that tobacco because their stocks were at a low level.