GENEVA: Cigarette and tobacco smuggling finances militant groups such as the Pakistani Taliban and saps about 40 billion dollars a year from government budgets, a report and campaigners said Monday.

The claims were made as 160 countries resumed talks at the World Health Organisation on expanding an international anti-smoking treaty to clamp down on the illicit trade in tobacco.

Apart from issues such as enforcement and coordination, the 10-day preparatory negotiations are also examining a possible halt to duty free sales of cigarettes or measures against Internet sales, WHO documents showed.

An alliance of some 350 anti-tobacco campaign groups said in a statement that concerted action against the contraband and counterfeit cigarettes trade would far outweigh the 40.5 billion dollars in lost tax revenue.

Some 11.6 percent of the global cigarette market was illicit, equivalent to some 657 billion cigarettes a year, the International Union Against Tobacco and Lung Disease estimated in a report.

Citing enforcement officials, other researchers also alleged that "half a dozen terrorist" or militant groups rely on black market tobacco and smuggling for revenue.

They included the Pakistani Taliban, Al-Qaeda in the Islamic Maghreb, Hezbollah, leftwing FARC rebels in Colombia, the Real IRA in Northern Ireland, and a Tutsi rebel group in the Democratic Republic of Congo.

"We believe that tobacco has been second only to drugs as a source of finance to the Pakistani Taliban," David Kaplan, editorial director of the US-based Center for Public Integrity, told journalists.

His body's report also highlighted "smuggling hubs" in China, Paraguay and Ukraine, where either illegally produced counterfeits or contraband excess production from legal factories were fuelling black markets around the world.

It estimated that 80 percent of counterfeit cigarettes in the European Union and 99 percent of those sold on US streets were among the estimated 400 billion made illegally every year in China.

"Renegade factories, multinational companies and weak enforcement all play a role in fuelling this massive illegal trade, whose profits rival those of narcotics," said Bill Buzenberg, executive director of the Center.

Legitimate cigarette factories in Ukraine helped feed a two billion dollar black market in the European Union, according to the report.

"Ukraine... is overproducing and flooding the market," said one of the authors, Marina Walker Guevara.

Meanwhile, plants in Paraguay produce 20 times what can be consumed in the country, and local officials estimated that some 90 percent of output -- one billion dollars -- disappeared into the black market, especially in South America.

The report was produced by the center's International Consortium of Investigative Journalists, backed by the Johns Hopkins School of Public Health in Washington.

The WHO negotiations are aimed at expanding the 2003 Framework Convention on Tobacco Control, that strengthened measures against smoking, possibly next year.

One of the measures being considered is a ban, or restrictions, on duty free sales that are "often diverted into illicit trade," according to official reports for the meeting.

They concluded that there would be no legal obstacles to such a ban, while a "track and trace" system on tobacco to prevent contraband was "feasible".