Tobacco wars sparked by cigarettes costing £39 a pack

A burned-out truck sits amid the twisted wreckage of what used to be the Grab n' Go convenience store in Mickleham, a commuter town in Melbourne's northern suburbs.

It's been there since 1.20am on Sunday, when a gang of youths reversed the stolen Toyota Hilux up the kerb, across a pavement and through the front door. Then they doused the vehicle in petrol and set it alight.

In a vaguely comic twist, CCTV footage later obtained by the police seems to show that at least one of the arsonists accidentally set his trousers on fire as he fled.

When the Mail arrived, 24 hours later, the pavements had been cleared of ash but an acrid stench lingered. The community's GP surgery and kindergarten, both of which were next door to Grab n' Go, were also in ruins.

It was an odd spectacle, all told, with apocalyptic piles of charred metal and melted plastic sitting incongruously next to the respectable neighbourhood's manicured lawns and pressure-washed driveways.

Yet here in Australia's second city, such scenes are bizarrely common. Since last March, no fewer than 110 convenience stores have been firebombed.

This crime-wave has become an almost daily feature of news bulletins. The week since I arrived in Melbourne has seen two other reported late-night arson attacks, on shops in Thornbury and Frankston, plus an incident in Flemington, where a storekeeper wielding an axe drove off assailants armed with machetes and Molotov cocktails.

Even the smartest neighbourhoods are affected. Walking through Port Melbourne, an ultra-posh residential district where homes set you back $3 million AU (£1.52 million), I find a burned-out shop amid a line boutiques, upscale cafes and yoga studios. Locals tell me it was firebombed in August, by a gang using a stolen Porsche SUV.

To understand what is fuelling this explosion of violence takes just minutes. In fact, you need only visit one of Victoria's 1,000-odd convenience stores that have not (yet) been set on fire.

There, behind the till, they will generally display a price list for cigarettes. And the cost is mind-blowing. The shop next to my hotel sells Marlboro Reds for $68.10, or £35 for a pack of 20. Rothmans will set you back $76.19, or £38, and Benson & Hedges go for an astonishing $77.09. That equates to no less than £39.

The soaring prices, well over double what you'd pay in the UK, are due to punitive tobacco taxes brought in at the behest of Australia's powerful public health lobby. They now account for between 60 and 85 per cent of the cost of a cigarette, depending on the brand.

Originally, these tariffs were designed to price smokers out of their habit. But they've now been ratcheted up so far it's resulting in a nasty side-effect. One that ought to give our Chancellor, Rachel Reeves – who this week hammered smokers with a hike of up to 12 per cent above inflation on tobacco – pause for thought.

For Australia's criminal gangs can make huge profits by smuggling cheap cigarettes from overseas, and persuading local stores to sell them under the counter through a combination of appealing to their money making instincts and veiled threats. A pack costing $2-3 (£1.01-£1.52) in Asia or Latin America can be sold for $15 or $20 (£7.60-£10.15) on the booming black market.

Amid a cost-of-living crisis caused by soaring mortgage rates, there is no shortage of buyers.

And profit margins are growing yearly: under Left-wing Prime Minister Anthony Albanese, cigarette prices are being jacked-up each March and September by about 5 per cent above inflation. 

Crucially, this is fuelling a gangland 'tobacco war', with bloodthirsty cartels fighting it out for control of convenience stores that sell their product. And this, in turn, is causing the firebombings.

'In Australia, tobacco is the new cocaine,' is how one of Melbourne's veteran underworld observers puts it.

'The profit margins aren't far off narcotics, and you don't need to run street dealers, or crack houses, because people will just buy the stuff out of proper shops.

'Plus the penalty for being caught is tiny. You get busted bringing cigarettes in via a shipping container and it's treated as an excise offence, so you get months not years in jail.

'The tariff for a coke shipment of similar value might start at a decade.

'Of course, when there's so much money to be made, you'll find that bad people will do some very ugly things.'

For gangsters, the economics of tobacco smuggling are as follows: you can fit about 15 million cigarettes into a single shipping container. Get it into Australia, and you are looking at a $4 million (£2.03 million) profit. 

Figures from the Australian Criminal Intelligence Commission suggest only one in 30 containers needs to make it into the country for a smuggling syndicate to turn a profit. And the Border Force checks only about 1 per cent of containers coming into ports.

Odds are, in other words, very good indeed.

In a country with about two million smokers, this adds up to a billion-dollar industry. But to carve out a niche, gangs must prevent rival operators flooding 'their' patch with cheap cigarettes. And that's why so many shops are catching fire, says Detective Inspector Graham Banks, who heads the Victoria Police taskforce battling the crimewave.

'For people who are into drugs or illicit tobacco, they're making millions of dollars, so to fork out at the highest $20,000 to do an arson, it's chump change to them,' he told reporters recently.

'They'll target multiple premises that are simply associated with that person. It's a demonstration.'

Attacks are happening across Australia – in the past couple of months, stores have been 'catching fire' in every State – but things are currently at their worst in Melbourne. That's because of a vicious feud between rival gangs that have traditionally controlled the city's underworld.

At its centre is Kazem Hamad, a 40-year-old from Basra in Iraq who came to Australia with his parents in the 1990s, as a refugee from the First Gulf War.

A violent drug-user, with what court documents have dubbed 'substantial anger management issues', he clocked up his first court appearance in 2001, aged 17, and was first imprisoned in 2003.

By 2010, his record of criminal convictions, largely for gang-related offences, stretched to some 19 pages.

Hamad's fortune – which was partly spent on Lamborghinis and other supercars with which he posed on social media – initially came from drugs. In 2015, he was convicted of running a big heroin-smuggling operation and jailed for eight years.

During his incarceration – when he was able to retain control of a sprawling crime syndicate – he decided to diversify into the illegal tobacco trade, which in turn meant driving rival Melbourne gangs out of business.

Around the time of his 2023 release, Hamad duly ordered his associates to launch violent attacks on the 'assets' of other organisations, targeting not just tobacco stores but restaurants, beauty salons and – in one grisly heist – the grave of rival crime lord George Marrogi's sister, Meshilin, who'd died aged 30 in 2021 from Covid-related complications.

His underlings wore gas masks during the raid on Preston General Cemetery in Bundoora, just north of the city centre, busting open her coffin and removing a $100,000 diamond ring from her finger. The desecrated corpse was left in what reports dubbed a 'state of disarray' at the scene.

As ever, violence begat violence. Hamad's rivals retaliated by burning down tobacco stores selling Hamad's wares. The rest is history. Since it all kicked off last March, 110 have been torched across the state of Victoria.

This places storekeepers in an impossible position. Although Hamad was deported in 2023, and is believed to have based himself in Dubai, later Iraq, he still masterminds the tobacco-smuggling operation by mobile phone.

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'A gang member will go into the shop and say, 'Someone is here to talk to you',' says one law-enforcement source, speaking on condition of anonymity. 'They will hand over a phone and Hamad pops up on FaceTime saying: 'Pay me or suffer consequences.' To be frank he's more trouble since we shipped him back to Iraq.'

Last month, Melbourne's Herald Sun newspaper published two messages posted on a group chat for convenience store owners.

One was from Hamad: 'I like to ask for every shop $1,500 a month. If you don't like it, please get off the group chat. When I call you outside this group chat, u be paying 5k a month and goes up every 6 months (and) if you don't pay u see ur shop on the news one day.'

The other came from a well-known figure in a rival gang. It suggested that his associates would attack stores whose owners did business with Hamad. 'Think smart and hard… any dogs who wanna pay the Kaz tax, enjoy the news clips,' it read.

In other words, storekeepers are damned if they do, and damned if they don't. Little wonder increasing numbers are selling up, with those left behind forced to pay soaring insurance premiums.

More than 75 tobacco retailers in the State of Victoria currently have listed their businesses for sale, the newspaper added, quoting one owner from the inner Melbourne suburb of Carlton as saying: 'I live in the back of my store. Every day I am fearful I will get a knock on my door that will end up in my shop being destroyed.

'I don't want to be in danger, so it's not worth it any more.'

To critics, the sorry state of affairs exposes the limitations of Australia's sprawling nanny state, which has become one of the most coercive in the developed world.

Aside from its counter-productive war on smoking, the Government sees fit to regulate everything from whether adults should wear a bicycle helmet (they are mandatory), or buy fireworks (now largely outlawed).

The national obsession with lawmaking, which became starkly apparent during the country's hardline Covid lockdowns, has exacerbated the tobacco crisis via not only the punitive taxation on cigarettes, but a strict regulatory regime for vapes.

The disposable ones are banned – a policy now being followed by the UK government – and other vaping products can only be legally sold in pharmacies. Initially, consumers had to get a prescription from their GP to buy them, though that requirement was dropped last month. There is also talk of a 'ban on recreational vaping'.

As night follows day, this has fuelled a rampant black market.

'Over a million people vape every day, but only about 10 per cent have been doing it through a prescription, so this is clearly not working,' says Kevin Hogan, a frontbench MP for Australia's National Party.

'It has opened up the industry to criminal gangs, and the product people are buying illegally is completely unregulated, so we have no idea what's in it.

'Prohibition simply isn't working. It's putting real lives in danger. There has been an arson attack in my constituency. People were living above the store. It's genuinely dangerous.'

Hogan is campaigning for vapes to be sold legally in normal stores. But the rest of Australia's political class, who have grown accustomed to approaching complex problems by simply banning things, seem unlikely to listen.

In Victoria, the government has announced plans to combat the 'tobacco war' with a new licensing system for stores selling tobacco.

Supporters say that will make it easier to close down shops breaking the law, thereby making it harder for gangs to sell their product. Opponents point out that international crime syndicates tend not to be so easily fazed.

But, for now, in a crime wave that Britain's increasingly censorious political class would be well advised to learn from, Australia's convenience stores continue to burn.