Introduction and Scene Setter

The countries of Southeast Europe—including Bosnia and Herzegovina, Croatia, Kosovo, and Serbia—are at risk. Following the bloody ethnic wars of the 1990s, these countries are experiencing what seems to be a period of peace and economic development.  Yet, in reality, the seeming stability of the past two decades is built on a foundation of nationalism, corruption, ethnic tensions, and government stagnation that threatens to erode if left unattended—with dangerous consequences for the region and the world. Active U.S. leadership has been absent in the region for more than a decade. During that time, the potential for Islamic extremism to take root, the actions of foreign powers including Russia, and—until borders were closed—a stream of refugees fleeing violence and economic deprivation have all increased pressure on a region with little political leadership at home and little attention from abroad.

What happens to these counties is no small matter: NATO surrounds Southeast Europe and each of these countries is either a NATO member or a partner in varying degrees. One country is a European Union member and the others aspire to that status. All counties are situated squarely in Europe—both important for the continent’s stability and too often overlooked. If the EU accession process stagnates or is applied unevenly, if foreign influences shift political and economic dynamics, if economies do not provide youth the opportunities they are seeking, or if governments continue to stoke ethnic nationalism as a means of distracting citizens from economic and other problems, then the United States and the world could face at worst a new home for Islamic extremism on the European continent or renewed ethnic conflict and at best the end of a foreign policy success story after decades of halting progress.[i]

In the 1990s, the United States, the United Nations, and NATO managed to stop two wars, but that legacy is at risk. Washington and the countries in question have not yet been able to guide the growth of functioning political environments or economies that are necessary for regional stability and security. Under the administrations of George W. Bush and Barack Obama, the United States has retreated from its earlier prominent leadership in the region, focusing instead on policy crises such as the Arab Spring and its fallout in Libya, Syria, and Iraq; Russia’s illegal annexation of Crimea; an increasingly bellicose Beijing in the South China Sea; and the ongoing conflicts in Afghanistan and Iraq.

These challenges all rightly deserve attention, but without leadership, a region that has been a success story threatens to unravel, jeopardizing a relative accomplishment in the annals of U.S. foreign policy and risking lives and the security of Europe. The region is an important bulwark in the fight against terrorism—one of the suspects in the November 13, 2015, terror attacks in Paris traveled through Serbia and Croatia from Syria and weapons used in those same attacks also came through the region.[ii]

Recent global developments threaten to change regional dynamics, making the need for leadership in political and economic development more urgent than ever. International actors—Russia, China, Turkey, and Saudi Arabia—are actively pursuing their own interests, some of which run counter to U.S. objectives. These interventions, which include investing in journalists and media outlets (as in the case of Russia in Serbia) and supporting the development of strict Wahhabi Islam (in the case of Saudi Arabia in Kosovo and BiH), threaten to strangle independent media and alter the religious-cultural landscape. The 2016 vote by the United Kingdom (UK) to leave the European Union has fomented an existential crisis, reinforcing a pervasive sentiment against further enlargement of the union this decade. Two of the non-EU member countries that we visited—BiH and Kosovo—have no Plan B for political and economic advancement other than EU membership. The third non-EU member, Serbia, is currently looking to both EU membership and Russian support as a means of advancement.

A new strategy is needed, one that addresses the political exploitation of ethnic tensions, the waning pull of the European Union, and the region’s sputtering economies. Interviews conducted with forty-five regional and local policy and opinion leaders over the course of ten days in May of 2016 reveal opportunities for constructive changes in U.S. policy, as well as a vital and mutually beneficial role for increased private sector investment. This report draws on those interviews in Pristina and Mitrovica, Kosovo; Zagreb, Croatia; Sarajevo and Banja Luka, Bosnia and Herzegovina; and Belgrade, Serbia; as well as others that took place in New York, Washington, DC, and by phone both prior to and following the regional travel. This report highlights the issues that the authors find to be of particular relevance for policymakers and business leaders in the United States.

Each country in the region has its own political, economic, and cultural peculiarities that shape its unique challenges. Yet, our research finds many shared and interconnected themes that are emerging across the region. For that reason, this report will lead with an overview of each country and then delve into specific challenges that unite some or all of the countries in the region.

Scene Setter

Just over twenty years ago, representatives from Bosnia and Herzegovina, the Federal Republic of Yugoslavia, and the Republic of Croatia signed the Dayton Peace Accords, bringing an end to the war in BiH and relative stability to the region.[iii] A little over a decade later, the Ahtisaari Settlement Plan laid the groundwork for Kosovo’s 2008 independence following its war with Serbia.[iv] However, the Dayton Accords were designed to end conflict, not foster peace: the borders and political agreements mandate an ethnically divided country. Similarly, the Ahtisaari plan paved the way for Kosovo’s independence, yet Kosovo has yet to achieve full international recognition. The unfinished business of Dayton, combined with the internal trends in each country, leave the region unstable. “The biggest misconception about the Balkans,” says one former Croatian diplomatic official, “is that the conflict is over because the violence is over.”

This instability matters not only to the region and its immediate neighbors, but also to the United States, which has an interest in keeping the peace and countering Russian interference, and to Europe, where shared borders and significant economic ties between European and Balkan markets create strong incentives to maintain stability. The map below shows how—although the Balkan region is encircled by EU and NATO countries—it remains unintegrated. As one businessman says, “There is a hole in the underbelly of Europe.”


In Bosnia and Herzegovina, the continuing reliance on the Dayton Accords as a framework for the current political structure leaves that country in a precarious political situation where ethnic divisions are emphasized. Croatia’s rightward drift, while stabilized, still manifests in nationalist sentiment: a recent government appointed an avowed nationalist as its minister of culture. Kosovo struggles to find political stability amid a backdrop of increasing emigration. And Serbia, the heavyweight of the region, is experiencing a decline of free and independent media, despite Prime Minister Aleksandar Vučić’s aim of joining the European Union.

Recent news stories about ethnic and religious divisions are not encouraging. Tensions between the governments of Kosovo and Serbia spiked in early 2017 following an attempt by Belgrade to send a train emblazoned with the slogan “Kosovo is Serbia” to the border of Kosovo;[vi] in October 2016, Kosovar journalist Leonard Kerquki has received death threats for his recent documentary detailing war crimes against Kosovar Serbs by members of the Kosovo Liberation Army;[vii] at a soccer match in October 2016, Croats and Kosovars came together to chant “kill the Serbs”;[viii] in July 2011, Serbian nationalists set fire to the border crossing in Northern Kosovo and have had repeated clashes with the Kosovo police and international KFOR protection forces;[ix] and Croatia’s government had been appointing high-level government officials who are apologists for the fascist Ustaše movement.[x] Although the current Croatian government—formed after a no-confidence vote in early 2016—has backed away from this practice, the appointment of an anti-secular foreign minister who supports the Roman Catholic Church’s involvement in public life underscores another regional flashpoint. Religion looms large. Whether a magnet for national identity or a political tool used to deflect attention from scandal and retain power, religious identity continues to serve as a divisive force in the region.


Collision course? The government of Serbia sends a Russian-donated tourism train to the border of Kosovo.[xi]

Legal frameworks reinforce divisions along ethnic and religious lines. Serbs in Kosovo live primarily in separate enclaves and increasingly look to Serbia—where most have dual citizenship—for their future. Similarly, the roughly 500,000 Croats living in BiH have dual citizenship.[xii] With a frustratingly weak political position within the federation of BiH, many see Croatia and the broader European Union as an increasingly attractive prospect and are emigrating, decreasing the number of Croats in BiH. Within BiH, ethnic quotas and requirements for government jobs make it difficult to identify as simply Bosnian—a far cry from the Yugoslavia of Josip Broz Tito, the former leader of Yugoslavia from World War II until his death in 1980, where ideological identity subsumed ethnic identity. Even today, there is no unifying Bosnian identity; it is fractured along ethnic lines and leaders of political factions play the ethnic-nationalist card in order to stay in power. There is no place for an individual to identify by political ideology.

In all Balkan countries, the long shadow of socialism has yet to disappear. Prior to the collapse of the Socialist Federal Republic of Yugoslavia and the fall of socialism, it had been nearly a century since any of these countries experienced a free market economy. In the ensuing period, industries were shattered by war and the transition to capitalism was either hindered by a mentality stuck in centralized-economy mode or burned by failed privatizations and government bloat, which discourages entrepreneurship and rewards entrenched voting patterns.

Previous: Executive Summary

Next: Country Profiles – Bosnia and Herzegovina

[i]Radicalism in the Balkans; Parikh, T., Davis, D. L., Hadar, L., & McCarthy, D. (n.d.). How Islamic State Is Putting the Balkans on Edge. Retrieved February 13, 2017, from

[ii] Weapons used in the November 2015 Parris terrorist attack; Bajekal, N., & Walt, V. (n.d.). How Europe’s Terrorists Get Their Guns. Retrieved February 06, 2017, from

[iii] Dayton Peace Accords; Dayton Accords. Retrieved February 06, 2017, from

[iv] Comprehensive Proposal for the Kosovo Status Settlement; Comprehensive Proposal For the Kosovo Status Settlement [Advertisement]. Retrieved from

[v] Map of EU and NATO members in the Balkans; The Problems Foreign Powers Find in the Balkans. Retrieved February 06, 2017, from

[vi] Controversial train from Serbia intended to enter Kosovo; Kentish, B. (2017, January). Retrieved February 06, 2017, from

[vii] Kosovo journalist received death threats;

[viii] Provoking chants at a Croatia-Kosovo football game; Staff, A. (2016, November 03). Croatia, Kosovo fined by FIFA for anti-Serbia chants by fans. Retrieved February 06, 2017, from,-Kosovo-fined-by-FIFA-for-anti-Serbia-chants-by-fans

[ix] Incident on Kosovo-Serbia border; Bilefsky, D. (2008, February 19). Angry Serbs Burn Border Posts in Kosovo. Retrieved February 06, 2017, from

[x] Croatia’s previous controversial Minister of Culture; Rujevic, N. Croatia has bigger problems than minister’s Nazi hat | Europe | DW.COM | 21.02.2016. Retrieved February 13, 2017, from

[xi] Serbia launches train with provocative statement; Dwyer, C. (n.d.). Sparks On The Tracks: Kosovo, Serbia Spar Over Train Stopped At The Border. Retrieved February 07, 2017, from

[xii] 2013 BiH census results; Agencija za statistiku BiH. Retrieved February 06, 2017, from

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