Tobacco Asia

60 tobaccoasia Issue 1, 2026 January / February By Eugene Gerden The Russian tobacco sector may face a sharp rise in prices in the coming months due to record inflation and recently approved government plans to further increase excise taxes on tobacco products starting in 2026. These factors could also contribute to growth in the illicit segment of the market. Amid an increasingly strict sanctions regime and the ongoing war in Ukraine, Russia is grappling with serious economic challenges. These pressures show most clearly in declining consumer purchasing power and rapidly rising inflation. While official figures from Russia's state statistics service Rosstat and other government agencies put annual inflation at 10–12%, many independent analysts estimate the real rate to be significantly higher, at around 35–40%. In the meantime, inflation in the tobacco sector runs even higher, driven mainly by steadily rising taxes. Growing tax pressure from the state forms part of the government's efforts to secure additional funding to support its strained war‑focused economy. Under a previously ad‑ opted government decision, excise taxes on tobacco products will rise by 11% starting January 1, 2026, bringing the rate to RUB3,278 per 1,000 cigarettes. Analysts say this increase will push prices higher across most tobacco products on the domestic market and could drive some consumers toward the illicit segment. Over the medium term, this shift may also negatively affect Russia's tobacco industry as a whole, which remains one of the country's largest taxpayers, with excise revenues alone accounting for about 2% of the federal budget. Russian Tobacco Faces Price Surge A typical tobacco store in Moscow.

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