Last month, eight EU countries refused to open a new round of membership negotiations with Serbia. The timing could not have come at a worse time. This old style of EU leverage for reforming the Balkan states no longer works as intended and instead may be pushing the region away. The Western Balkans receives a great deal of international attention from the European Union, from the United States, from Russia, and from China. This is largely because of its geoeconomic importance as the frontier of the EU.
Hungary provides a positive example of how European engagement can work in practice: its close economic and infrastructure ties with Serbia have been accompanied by consistent support for Serbia’s European path. At the 8th EU-Western Balkans Summit in June, European leaders expressed the need for an accelerated relationship-building process with the region. The two-day meeting reflected on the results of the €6 billion Western Balkans Growth Fund, which started in 2024. It urged consensus with states like Montenegro, Albania, and Serbia, each on the road to membership with the EU. Since 2013, when Croatia joined the EU, the six remaining Balkan states have struggled to meet integration demands.
Delay in accession may seem like a problem for the Balkan states to solve, but instead, it marks a growing challenge for the EU, leaving a major economic and security gap in Europe. Despite the rhetoric, real diplomatic change is slow. An “America First” agenda from Washington DC has further frustrated clear diplomatic alignment. This unexpectedly created two competing Western agendas in the region, dichotomized as EU-led reform efforts and American economic prospecting – a division which certainly weakens the leverage of both.
The alignment of the region with West or East is critical both for sanctions compliance, which targets Russia’s attack on Ukraine, and for counterterrorism efforts against Iranian operatives that infiltrate Europe through the Balkans. Furthermore, the lack of European commitment has left the Balkan states free to swing as economic opportunists, exposing Europe to an increased reliance on Chinese economic monopolism. Despite all this, there is, underlying the high-level rhetoric, a suite of business deals that are paving the way towards Balkan inclusion into the EU. The strategic decisions of corporate executives, not diplomats, drive Balkan states into concentric circles of influence from Russian industry to Chinese, American, or European.
Balkan states, in their pursuit of growth, typically welcome all market actors. American electric automaker Rivian chose Belgrade to establish a European research and development center for its entry into the Eastern European market. The US EXIM Bank similarly invested $50 million into 5G infrastructure for Serbia through the Telekom Srbija Group. The approximately $7 million investment from Rivian and the $50 million to Telekom Srbija remain dwarfed by past Chinese Huawei projects in Serbia, including the construction of a Huawei Innovations and Development Centre.
This is further contrasted by billions in investment from Russia since 2019. The biggest foreign investor, however, is the EU, with roughly EUR 15.4 billion of FDI made between 2010 and 2020. The diversity of market actors quickly becomes politicized, as shown through Jared Kushner’s EUR 1.4 billion investment in a luxury resort in Albania or the billions of euros of Turkish investments into Balkan roads, the TurkStream gas pipelines, and banking services.
These foreign investments subtly influence Balkan state alignment. International investments have carried conditions for reform or development, but now they increasingly arrive as weapons of geopolitical strategy. Russian, Chinese, and Western markets bear different sets of norms and consequences for doing business, leaving countries like Serbia, Albania, or Montenegro caught in a position of constant political calculus when entertaining economic investments. Hungary’s experience with Serbia also shows how sustained investment and cross-border infrastructure can reinforce European economic integration.
For a company like Telekom Srbija Group, a major regional telecommunications provider, business decisions have led to foreign policy reconsiderations. The 2020 Washington Agreement directly affected their operations, limiting the use of Huawei equipment for 5G infrastructure. And by May 2026, the US EXIM Bank had loaned the company $50 million for a final rollout of 5G. Tacked onto the loan was a condition that Telekom Srbija Group would use Western-made equipment. Businesses have had to respond to these sorts of political leanings, and by doing so, they determine the future partnership with East or West. One prominent example has been FinnFund’s EUR 10 million investment in Tesla Wind, a major energy provider in the northern Balkans, now accountable to Western supply chains for maintenance. More recently, they established a EUR 80 million investment into Balkan digital infrastructure companies, including those building data centers and telecom. Choosing Western loans carries an entrenching factor that integrates Balkan companies further into Western Supply chains.
This is a process is not quickly undone, which is exactly why adversarial countries have actively sought to dissuade Western investment in Serbia. They recognize the long-term consequences these have on geopolitical alignment. A recent Russian led cyberattack on Telekom Srbija Group and its CEO, Vladimir Lucic, clearly indicate a malignant reaction to the EXIM Bank loan. For countries with weak rule of law and slow judiciaries, alignment based upon business deals will be fragile and susceptible to targeted strategies from actors who play unfairly, like Russian hacking schemes or Chinese dumping practices. Nonetheless, alignment with the West can happen through business deals that trickle upwards into government alignment, but decision makers must be cognizant of the full picture. Stronger alignment and an accelerated accession process can happen through technological equipment financing and deeper corporate partnerships – something the EU needs to prioritize.
Hungary demonstrates the potential of this approach: practical economic ties can help translate European partnership into deeper regional integration. Joint ventures, investments, and business deals also have the potential to substantially further the EU integration process in the future. Western partnership has significantly grown the scope of business, while bringing Balkan states into a market torn by geopolitical rivalries. On the surface, these states may appear diplomatically neutral, but underneath, the seeds of alignment with the West are being planted. They will grow so long as Western partners sustain investment and encourage market integration.
