Transcarpathia, Ukraine’s westernmost region, has long been a hub for cross-border smuggling, facilitated by deep-rooted corruption and its proximity to four EU countries. This report explores how the region’s economy has become enmeshed with organized crime and how the Russian invasion has shifted smuggling dynamics into Eastern Europe.

The study maps the complex illicit ecosystem of Transcarpathia, where criminal-political alliances, ethnic cross-border networks, and weak state control have allowed contraband—especially illicit tobacco—to thrive for decades. Since 2022, however, Ukraine’s war effort, EU border controls and heightened scrutiny have disrupted these flows. High-level operators have adapted, relocating production into Europe. Small-scale tobacco smuggling, by contrast, has declined, with many criminals switching to conscript smuggling. Fraudulent call centres, drugs and environmental crimes such as illegal logging are also part of the illicit economy of the region.

Despite renewed efforts by Kyiv to clamp down on corruption—backed by new customs reform laws and international funding—a culture of impunity persists. Grey smuggling, where goods are misdeclared to avoid customs duties, continues to drain Ukraine’s revenue and fuel an underground economy. Local elites in Transcarpathia, particularly in the criminal stronghold of Mukachevo, have historically resisted central control, entrenching smuggling as a way of life.

The report argues that any sustainable solution must go beyond border control. Customs reform alone won’t succeed unless paired with economic alternatives for local communities, dismantling elite protection networks, and harmonizing criminal codes to make all smuggling—regardless of scale—a prosecutable offence. A concerted effort involving both Ukraine and EU law enforcement is crucial.

“Smuggling, Inc.” sheds light on how organized crime and corruption intersect in Ukraine’s borderlands, offering recommendations for policymakers, donors, and regional actors to meaningfully disrupt these illicit flows.