Western electronics such as Apple Inc.’s (NASDAQ:AAPL) iPhones cost hundreds of dollars more in the states of the former Soviet Union (FSU or CIS) than they do in the rest of the world, making them a valuable item for smuggling and all kinds of skullduggery in those countries. The harrowing, highly corrupt blend of predatory capitalism and irrational pseudo-communist economic cronyism in these countries make black market activities appealing to ordinary citizens, as do shortages of many items westerners take for granted, such as film DVDs.
The man arrested by Russian border authorities comes from Kaliningrad, a city under Russian control which is separated geographically from the rest of Russia. Originally named Konigsburg, the city was renamed after Mikhael Kalinin, a supporter of Stalin who is noted in history as being so supine as to make no protest to the Soviet dictator even when his own wife was arrested, tortured by the NKVD, and sent to a gulag for seven years.
The city is sandwiched between Lithuania and Poland, a geographic circumstance that probably aided the unnamed smuggler in obtaining the contraband Apple (AAPL) iPhones he attempted to slip into Russia. According to the news website Klops.ru, the smuggler was detected and arrested at 2:00 PM on the afternoon of August 17th, 2014, with 120 iPhone 5s hidden inexpertly under his vehicle’s seats.
With an iPhone selling for around $832 in Russia, according to a report on the Moscow Times website, the smuggler had well over $80,000 worth of iPhones in his possession when he attempted to slip them past border guards at the “Maritime – Nida” customs post on Curonian Spit. This post is located on the border between Russia and Lithuania, on a sandy spit that is registered as a UNESCO World Heritage Site and is noted for its 200-foot-tall sand dunes.
The smuggler may have chosen this scenic route because of the large numbers of tourists who flock there each summer, particularly from Germany, whose presence likely overworks the border guards and may distract them from spotting a box or two of contraband. Either the man miscalculated or 106 pounds of iPhones are simply too large an object to overlook, since he was detained and his iPhones impounded.
Even if he bought the iPhones at retail, the smuggler could likely have realized around $24,000 profit from his expedition, considering the iPhone’s $200 price gap between the EU and CIS markets. There is no proof, either, that this was his first attempt, and even if he is briefly imprisoned and fined, he may well end up in the black from his unlawful attempts at “iPhone arbitrage” between the two markets.
