A strong call for co-ordinated action against illicit economies in Europe

Europe’s economic stability and public security are increasingly under threat from so-called “blended threats”—complex combinations of organized crime, terrorism, cyber-attacks, and illicit trade. A high-level roundtable convened in Brussels on Wednesday investigated how NATO, the European Union, and industry can collaborate to assess these threats and coordinate a joint response. As an example of a hybrid economy, the debate also focused on a KPMG report on illicit tobacco trade against the backdrop of wider threats.

The report indicates that the increase in illicit cigarette consumption in Europe was primarily driven by France and the Netherlands. The study points to an especially alarming situation in France, where 18.7 billion illicit cigarettes were consumed in 2024, almost 7.8 billion of which were counterfeits. In the Netherlands, illicit cigarette volumes increased drastically, by 1.1 billion—more than doubled in a year—reaching 17.9% of total consumption. Had these cigarettes been legally purchased, an additional €9.4 billion would have been raised in taxes in France and almost €900 million in the Netherlands.

Understanding blended threats

Blended threats are hybrid in nature, driven by both state and non-state actors, and exploit both physical and digital vulnerabilities. These threats include cyber-intrusions, trafficking, counterfeit goods, and subversion campaigns, often tied to global networks of organised crime.

Alessandro Politi, director of the NATO Defence College Foundation, opened the discussion by warning: “These threats, whether from China, Mexico, or within our borders, are no longer isolated. In 2021 alone, over 100,000 deaths were attributed to criminal activity linked to blended threats, equivalent to 20% of the U.S. Army’s active force. If left unaddressed, this number could rise to half a million within two decades.”

Politi emphasised that the very fabric of Europe’s internal and external security is now interconnected, calling for a comprehensive, multi-agency strategy.

Illicit trade as a case study

The panel highlighted illicit tobacco trade as a vivid example of a shadow economy fuelling broader criminal operations. Drawing on data from a KPMG report, the discussion spotlighted how illegal cigarette markets damage EU tax revenues and enable organised crime.

Tobacco smugglers and black market salesmen are increasingly using technologies such as social media and drones to deliver cigarettes to smokers in Europe and avoid law enforcers, the report published on Wednesday found.

Howard Pugh, anti-illicit trade consultant and former senior specialist at Europol, broke down the problem: “There are three primary fraud types:

Illicit production—where criminal groups operate hidden cigarette factories;
Cheap whites—legally produced cigarettes smuggled across borders to evade taxes;
Excise duty abuse—criminals hijack legitimate schemes to avoid paying duties.

"These methods represent a large-scale criminal economy undermining the rule of law.”

Christos Harpantidis, senior vice president of external affairs at Philip Morris International, added: “Illicit trade not only damages public finances but also weakens public health initiatives. It undercuts legitimate businesses, impedes job creation, and floods European streets with unregulated products, making the smoke-free future harder to achieve.” “The illicit tobacco trade threatens the European economy, public health, security and social stability; today, higher-taxed and higher-priced markets such as France and the Netherlands are especially impacted by illegally imported and counterfeit goods. Its massive socioeconomic impact negatively affects tax collection, job creation, and legitimate businesses, the engine of our European economies. The availability of cheap, unregulated cigarettes in the underground economy also impairs efforts to reduce smoking rates and achieve a smoke-free future.”

Ukraine and the reconstruction challenge

Adding a critical dimension to the conversation was Oksana Shvets, Deputy Policy Director on European Integration, AmCham Ukraine. She underscored the dual challenge of rebuilding war-torn regions while defending against hybrid threats.

“We are 1180 days into this brutal war. Ukraine’s economy must survive not just bombs but also cyber-attacks, illicit trafficking, and corruption. Reconstruction is not enough—we must secure what we rebuild.”

She stressed that successful recovery hinges on public-private partnerships and deep NATO-EU-Ukraine collaboration to prevent hybrid threats from undermining recovery efforts.

A call for co-ordinated action

The roundtable concluded that blended threats expose Europe’s physical and digital infrastructure to converging attacks. Participants agreed that a clear, cross-sectoral strategy is urgently needed, combining intelligence sharing, joint operations, and targeted regulatory action across NATO and EU structures. Europe can no longer afford to treat these risks in isolation. As cyber and criminal tactics evolve, so must the policy responses.

Picture copyright: C) Erwin Hodister

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