The energy “restructuring” of the European Union that began in 2022 was intended to deprive Moscow of revenue from raw material exports and to secure the European market. However, the rejection of direct supplies and the hasty redesign of logistics routes produced an unexpected side effect: while regulators and customs services were still adapting to the new reality, organised crime entrenched itself in the “grey zones” of the European market. Exploiting loopholes in tax legislation and cross-border carousel schemes, it turned the trade in petrol and diesel into one of the most profitable criminal enterprises of the 21st century.
In the early morning of 1 July 2026, operational groups of the Italian Financial Guard and investigators from the Customs and Monopolies Agency (ADM), acting on the orders of the European Public Prosecutor’s Office (EPPO), entered several large commercial sites in the province of Milan as well as luxury residential complexes in Lombardy, Liguria and Valle d’Aosta. The operation resulted in the freezing of bank accounts worth approximately €10 million, the seizure of commercial and residential property valued at €13.5 million, and the confiscation of a fleet of heavy goods vehicles. The total value of assets seized reached €23.5 million, while prosecutors estimated the overall damage to the state budget in this case at €60 million.
At the centre of the investigation was a wholesale network that channelled more than 188 million litres of petrol and diesel through shadow circuits. The criminals used the mechanism of the so-called “excise warehouse” (IVA all’estrazione). Fuel was delivered for storage to major logistics hubs in Lombardy and then formally released into free circulation, supposedly for export or for transfer to preferential categories of taxpayers. In reality the product was immediately sent into the retail network without payment of the 22% VAT. The main result of this financial manoeuvre was aggressive dumping: tax-free fuel was supplied to “white” independent filling stations at prices that crushed any honest market participant. The Milan episode, however, was only one of many in a wider investigation into how Europe’s fuel sector fell under the control of shadow operators.
To understand why fuel fraud reached a historic peak in Europe precisely between 2022 and 2026, one must examine the changes in the energy market.
The successive packages of sanctions and the embargo on Russian oil and petroleum products completely destroyed the direct supply chains that had been built up over decades. Transparent contracts between major producers and European refineries gave way to complex, multi-stage logistics. Intermediary trading structures registered in Turkey, India, Slovenia, Croatia and Middle Eastern countries began to participate en masse in diesel and petrol supply schemes. This logistical chaos coincided with a sharp surge in price volatility. When global fuel prices changed daily, customs and tax authorities in EU member states found it extremely difficult to verify in real time the actual market value of imported consignments; any anomalies in the paperwork could easily be attributed to market factors and the more complicated delivery routes.
At the same time the tax burden on the end consumer remained enormous in several EU countries. In Italy, for example, the combined excise duty and VAT in certain periods exceeded 55–60% of the final pump price of every litre. Under such a high tax component, non-payment of VAT guarantees criminals a colossal profit margin — tens of cents on every litre.
The principal instrument for extracting billions of euros from European budgets became the scheme known as Missing Trader Intra-Community (MTIC) fraud, or carousel fraud within the European Union.
The mechanics of the scheme rest on a fundamental principle of the single European market: when goods are sold between the jurisdictions of different EU member states a zero rate of VAT applies, and the tax is paid only when the goods are sold to the final consumer inside a particular country. The scheme unfolds according to a well-rehearsed script. First, a wholesale consignment of diesel is purchased by an intermediary company in an EU country with relatively light port controls — for example Slovenia or Croatia — and brought into Italy without payment of VAT. Inside the country the fuel is then placed on the books of a fictitious shell company, usually managed by front men — individuals with no fixed address, social problems or foreign nationals without real assets. The firm issues sales invoices including the standard 22% VAT, accumulates the tax on its accounts, but never remits it to the budget. As soon as a substantial sum of tax liability has built up, the money is rapidly transferred to accounts in offshore jurisdictions or banks in Eastern Europe, where it is cashed out through courier networks. The company itself is abandoned, leaving the tax authorities with nothing but an empty shell. Finally, intermediate “buffer” companies sell the fuel to independent retail filling-station networks, which lawfully reclaim the VAT while having acquired the product at a price below the cost of any legal importer.
The most vivid illustration of what fuel fraud becomes in the absence of proper controls is the case of the “Fuel Family” syndicate. At the centre of the investigation was a family group that linked criminal business structures in Naples and Milan with financial institutions in Croatia, Slovenia, Hungary and Romania.
Materials from the investigation, which involved a series of arrests between March 2024 and November 2025, reveal the scale of criminal penetration of Italy’s fuel sector. The syndicate built an extensive network comprising more than 40 fictitious shell companies and 13 operational logistics structures. The key link in the chain was an excise warehouse in the town of Magenta, province of Milan, formally registered in the name of the main organiser’s wife. The financial scale of the “Fuel Family” operation is impressive: the volume of fictitious invoicing exceeded €1 billion, the direct VAT loss from unpaid taxes surpassed €260 million, and more than €35 million in net illegal profit was moved through bank branches in Hungary and Romania, followed by systematic cash withdrawals via controlled couriers.
On 15 October 2025 an Italian court handed the group’s leader a harsh sentence of eight years’ imprisonment. The court also ordered the confiscation in favour of the state of a large tourist resort, more than 150 residential and commercial properties, and financial assets totalling €73 million. EPPO investigators stressed in the case file that the criminal “family” operated with the scale of a major corporation, having built its own “assembly line” for the production of fictitious documents and the neutralisation of checks by the local tax inspectorate.
While some groups churn out forged waybills, others exploit chemical loopholes. A second powerful vector of fuel crime in the EU has been the fraud involving so-called “designer fuels”. In the European Union the movement of duty-free petroleum products is tracked through the automated Excise Movement and Control System (EMCS). This system tightly monitors only traditional grades of petrol and diesel; if a product is classified as lubricating oil, technical solvent or liquid anti-corrosion compound, it falls outside strict EMCS surveillance. Criminal groups began producing chemically modified blends based on diesel fuel, mixing it with special additives that altered density and flash point. The surrogate was then declared at the border as a technical product. Millions of litres of petroleum products entered the EU under the guise of lubricating materials without payment of excise duty. At intermediate warehouses in Poland and Latvia chemical neutralisers were added that restored the product to the parameters of standard diesel, after which it was supplied to illegal filling stations. The total damage in related episodes exceeded €90 million in lost excise duties and €45 million in VAT, with overall budget losses surpassing €240 million.
Between November 2023 and June 2026 the European Public Prosecutor’s Office, supported by law-enforcement agencies in Germany, Poland and Latvia, conducted Operation “Water into Wine”, dismantling the criminal network that had industrialised this process.
It must be acknowledged that fuel fraud has today ceased to be a purely economic crime: its consequences directly affect the social and political stability of European states. The first and most tangible blow falls on the social obligations of governments. The billions of euros that vanish irretrievably in “VAT carousels” represent colossal lost revenue for national budgets. Against a background of severe economic pressure — with the European Union simultaneously obliged to increase defence spending and to finance the large-scale energy transformation of the Green Deal — state coffers are under strain. Governments are forced into unpopular measures: cuts in funding for healthcare, education, social benefits and strategic infrastructure projects.
A further negative effect of the shadow sector is the systematic elimination of legitimate business. On the retail market a paradoxical and destructive situation has arisen in which an honest filling-station owner who pays VAT and excise duties in full is powerless against operators who, by avoiding tax, enjoy a “discount” of 10–20 euro cents on every litre. Unable to withstand the aggressive dumping, independent family-run stations go bankrupt and close in large numbers; the market share they vacate is instantly taken over by front structures, and the retail network consolidates in the hands of shadow operators.
The most dangerous aspect of the problem, however, is the penetration of organised crime into legitimate structures. According to the Italian Financial Guard, powerful mafia clans from Campania and Sicily have actively moved into fuel VAT schemes. For them fuel fraud has become an ideal business: profit margins are comparable to those of the drug trade, yet the criminal risks are far lower and the possible prison sentences for financial offences relatively lenient. The excess profits from the “carousels” are laundered by purchasing real estate, logistics companies and construction-sector enterprises.
European institutions are attempting to adapt to the challenge. The principal “breakthrough” of recent years has been the expansion of the powers of the EPPO under the leadership of Laura Kövesi. Unlike national authorities, the EPPO can freeze assets and conduct simultaneous searches across several EU countries without losing time in lengthy bureaucratic coordination.
The fight against excise and tax fraud has been officially included among the key priorities of the EMPACT platform (European Multidisciplinary Platform Against Criminal Threats). Experts nevertheless agree that cosmetic measures are insufficient. Closing the schemes requires deep systemic reform, including in particular the implementation of the ViDA project (VAT in the Digital Age) — a transition to mandatory real-time electronic invoicing for all cross-border transactions within the EU, which would deprive shell companies of the time needed to extract funds. It is also clearly necessary to revise the EMCS classification system, tightening control over the chemical components used in diesel production. Excise warehouses require end-to-end audits, together with the introduction of strict material liability for their owners in respect of the storage and release of fuel with unpaid tax status.
The experience of 2022–2026 has shown that sanctions policy and market restructuring cannot function in isolation from tax and customs control. For as long as the bureaucratic mechanisms of Brussels and national capitals lag behind the agility of criminal networks, Europe’s fuel sector will remain a source of multi-billion-euro leaks from the public purse.