Tobacco smuggling to Spain stokes resentment over Gibraltar

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Super-powered dinghies carrying contraband tobacco are crashing through hopes of better relations between Spain and the UK over the British territory of Gibraltar.

Cigarettes are cheap in Gibraltar because the British territory does not apply sales tax or other levies, enabling smuggling gangs to sell them at a mark-up in Spain after hauling them there on five-minute boat dashes.

This booming black market is an irritant in UK-Spain relations as Gibraltar remains in limbo following Brexit, with Madrid pushing for greater tobacco controls as part of any new deal over the territory’s ties with the EU.

Lisardo Capote, the Spanish customs official leading the fight against the night-time smugglers, accused Gibraltar of letting trafficking thrive, depriving Spain of tax revenue and fomenting criminality.

“Tobacco is not a problem in the colony,” he told the Financial Times, referring to Gibraltar. “It is a source of funding. The problems it creates are on this side of the fence.”

Capote, head of the customs surveillance service in Andalusia, the Spanish region neighbouring Gibraltar, estimates that the trade in cigarettes — known as “illicit whites” — is denying his country some €400mn a year in import duties.

“In one night there can be between six and nine boats, normally working in a co-ordinated way,” he said. “We try to chase them down, to seize the tobacco, to arrest the suspected criminals. But it’s a very risky activity.”

Gibraltar’s government firmly rejects the suggestion it is turning a blind eye to tobacco smugglers and says that Spain “grossly” overestimates the volumes they trade.

Fabian Picardo, the chief minister who this week called a general election for October, says Gibraltar’s law enforcement patrols and an array of countermeasures have reduced the quantity of contraband smuggled in recent years.

The Gibraltar government sets a minimum price for cigarettes, which currently stands at £2.60 (€3.03) for a pack of 20. In Spain, by contrast, where the government mandates all cigarette prices, the cheapest are €4.10 per packet.

Authorities in the British territory seized 1.6mn cigarettes and made 12 related arrests last year. Its anti-smuggling measures include rules that limit the amount of tobacco a person can purchase or possess at any one time. Spain, meanwhile, allows travellers to bring no more than 200 cigarettes across the border from Gibraltar.

Madrid, which does not recognise British sovereignty over Gibraltar, wants the territory to do more to rein in smuggling as part of its price for a post-Brexit deal with London. Those talks were put on hold after Spain’s election in July, pending the formation of a coalition government.

Perched on the eponymous strait that connects the Mediterranean Sea to the Atlantic Ocean, Gibraltar has been a smuggling hub throughout the 300-plus years that it has belonged to the UK. In a 2018 deal Gibraltar agreed to raise cigarette prices to narrow the price gap with Spain, but smuggling has continued.

In one incident in February, two Spanish customs officers whose engine had failed — leaving them stranded on Gibraltar’s Eastern beach — were pelted with rocks by smugglers. They fired warning shots to deter the criminals, an act that was labelled as a “gross violation of British sovereignty” by Gibraltar officials.

Smugglers operate with inflatable dinghies that typically carry 10,000 packets of cigarettes, fitted with high-powered engines. That gives Capote’s team a narrow window to pursue them in customs boats that are more unwieldy than dinghies. “They are also taking more precautions, deploying more personnel to watch our movements,” he said.

A report from tobacco maker Altadis earlier this year said Gibraltar accounted for 16 per cent of the illicit cigarettes sold in Spain in the first half of 2022, down from 67 per cent a year earlier.

Capote claimed that the Gibraltarian authorities knew what smugglers were doing. “They know exactly what’s going on because they have it monitored,” he said. “Nothing can happen without it being caught on camera.”

The British military has a significant presence in Gibraltar and a surveillance system monitoring its waters. The UK’s ministry of defence said: “As smuggling is a criminal matter, countering it is the responsibility of HM government of Gibraltar and its agencies . . . Were we to detect any suspicious activity, we would of course pass this information on to the relevant civilian authorities.”

The Gibraltar government has its own cameras but one person close to it said it was wrong to suggest that cameras alone could stop smuggling or any other criminal activity.

Picardo said in June his government knew where tobacco was being stored and sold “legitimately”. But he added: “The problem is it’s then being exported illegitimately by Spanish gangs.”

On the Spanish side, Capote said smuggling was luring young people into lives of crime. “They say: why am I going to make an effort? Why am I going to get up early? Why am I going to look for a job when I am going to earn much more money with tobacco?”