ECONOMIC CONSEQUENCES OF THE SHADOW CIRCULATION OF SURROGATE ALCOHOL UNDER MARTIAL LAW: FORENSIC AUDIT TOOLS AND THE RETURN ON INVESTMENT IN INNOVATION

Abstract

This study examines the financial and economic consequences of the shadow market for surrogate alcohol in Ukraine under martial law. It also considers the macroeconomic feasibility of investing in innovative forensic audit tools to prevent this phenomenon. Martial law has exacerbated the shadow trade in excise goods significantly. Temporary bans on the sale of legal alcohol have led to a consistent demand for illicit products. This results in multimilion losses to the state budget due to lost excise and value-added tax revenue. Meanwhile, the consumption of surrogates, particularly among military personnel, leads to significant human capital losses and places a substantial financial burden on the healthcare system in terms of the costs of intensive care, antidotes and long-term medical rehabilitation. In this context, the study examines the economic feasibility of using high-tech equipment for isotopic analysis to identify the sources of counterfeit products at an early stage. The study takes a comprehensive approach, combining methods of macroeconomic analysis, health economics and criminalistic modelling. The cost-benefit analysis methodology was used to evaluate the financial viability of purchasing innovative analytical equipment (GC-IRMS), contrasting it with the state’s current expenditure on treating intoxications and losses from the shadow economy. The empirical basis consisted of an analysis of current Ukrainian legislation and materials from criminal proceedings under Article 204 of the Ukrainian Criminal Code, as well as European scientific studies in toxicology and economic security. The main objective of this article is twofold: firstly, to assess the economic losses incurred by the state due to the illegal alcohol market (in terms of budget losses and medical expenses for military personnel); and secondly, to provide a scientific and economic justification for implementing chemical profiling methods (such as isotope mass spectrometry) as a cost-effective forensic audit tool. This demonstrates that proactively identifying the source of counterfeit alcohol is more cost-effective than addressing the medical and demographic consequences of mass poisonings. The study demonstrated that temporary administrative bans on the legal alcohol market (the 'zero tolerance' paradox), without adequate enforcement mechanisms, stimulate a highly profitable shadow economy. It has been established that the state’s financial expenditure on emergency medical care, intensive care unit stays and subsequent social support for military personnel poisoned by surrogates or new psychoactive substances (NPS) exceeds the cost of preventive measures by a factor of ten. The existing forensic and expert control system in Ukraine has a critical methodological gap in that it is purely reactive and does not allow the source of supply (the manufacturing plant) to be traced. The purchase of gas chromatography–isotope ratio mass spectrometry (GC-IRMS) equipment is economically justified, offering an extremely high return on investment (ROI). Implementing this innovative forensic investigation tool will enable the identification of the geographic and botanical origin of raw materials at an early stage, eliminating industrial supply sources for the black market and recovering lost tax revenue for the budget. Furthermore, it will prevent large-scale losses of human capital in Ukraine’s security and defence sector.