From Institution Building to Direct Return on Investment: Role of the US in the Western Balkans

With its active foreign policy, the United States has been integral in ending the Yugoslav wars. Together with actors like the EU, the UN and NATO, it played a key role in the following societal reconstruction, economic recovery and institution building of the Western Balkans. Although the peninsula has been on the sidelines of Washington’s foreign policy agenda for years now, with most of the USAID funds halted in January 2025, it became clear that the second Trump administration is seeking a radical change in its overall approach to international development.

From the gas pipeline in Bosnia to Trump Tower in central Belgrade and a luxury resort on the Albanian coast – the products of Washington’s new foreign policy can already be observed across the Western Balkans. This article aims to examine the effects these developments have had so far on the specific states and asks what the new US strategy means for the EU.

Behind the strategic shift

Due to new geopolitical risks, opportunities and rivalries presenting themselves elsewhere in the world, the importance of the Balkan peninsula has been shrinking in the eyes of US policymakers ever since the turn of the millennium. Still, in the period of 2020 to 2024, Washington spent $1.7 billion in foreign aid in the Western Balkans on “governmental and civil society-led projects in areas ranging from human rights and media to energy efficiency.” The suspension of these funds since the beginning of Trump’s second term has already caused NGOs across the region to cancel programmes, lay off staff, and scale back activities, increasing democratic backsliding and potentially hampering the countries’ EU accession.

In its new Balkan strategy, presented in May 2026, the Administration outlines a shift from “open-ended institution building” to “activities with direct return for U.S. companies.”  While the statement provides continuity with support for Bosnia and Herzegovina’s territorial integrity, universal recognition for Kosovo, the stabilising influence of transparent institutions, and continued US partnership to dismantle transnational criminal networks, it also prioritises “near-term, measurable results.”

The US isn’t treating the region like an unstable post-conflict zone anymore, but as countries with cheap labour costs and governments hungry for investment. Instead of a policy of nation-building, Washington in the Western Balkans is embracing a colder, more transactional doctrine with a focus on energy security, strategic stability, and geopolitical competition with great powers like Russia and China.

Bosnia: Pipeline at any cost

In no other field are Washington’s interests in the Western Balkans as clear as in the energy sector. The new strategy mentions the region’s dependency on Russian energy as a “strategic vulnerability” which can be remedied by the abundant sources of the US. In April, the Department of Energy launched the new “Trump Peace Pipelines Framework,” the most notable project of it being the “Southern Interconnection” gas pipeline connecting Bosnia and Herzegovina to the Krk LNG terminal on Croatia’s coastline.

Although the pipeline project was first set to be financially supported by the EU, the Bosnian parliament tasked a US-based firm in April with the whole investment. AAFS Infrastructure and Energy, a company founded in 2025, with no prior pipeline construction experience and links to Trump, has been awarded the contract without a transparent public procurement process.

The pipeline faces obstacles, though, as Republika Srpska, with its de facto leader Milorad Dodik, who is seen as pro-Russian, could block the construction under Bosnia’s complicated land ownership system. For his nationalist rhetoric, Dodik was treated by the Biden administration as a pariah and, in 2025, was stripped of office in 2025 following a court conviction for defying the decisions of the High Representative Christian Schmidt. However, U.S. sanctions on Dodik were cancelled by Trump in October 2025. The Bosnian Serb and a Trump ally remained the unofficial leader of Republika Srpska and is now onboard with the pipeline project.

In May, Schmidt resigned under pressure from Washington. As a replacement, the US proposed Antonio Zanardi Landi, an Italian diplomat unfamiliar with Bosnia but experienced as an ambassador to the State Union of Serbia and Montenegro. Should Landi become the High Representative, he will likely be less hostile to Dodik and, crucially for Washington, won’t be in the way of Southern Interconnection. This is just one example of the new strategy of the US in the Western Balkans: prioritising economic goals over support for the institutions and rule of law.

Albania: Luxury resorts

In May, localised protests erupted near the Albanian village of Zvërnec. The protestors attempted to stop the construction of the luxury resort complex, which would stand in a protected coastal area on the peninsula and on the island of Sazan. The development was spearheaded by Affinity Partners, an investment firm of Trump’s son-in-law, Jared Kushner.

The Albanian government of Edi Rama has been supportive of the project for years, making it possible with a 2024 amendment allowing luxury tourism-related development in protected areas. Despite Rama’s claims that the Zvërnec investment will create “10,000 well-paid jobs,” the protests have only grown, expanding to Tirana with daily numbers reaching over 250,000 in June.

Although the public movement coined “the Flamingo revolution” has outgrown the Kushner resort and widened its focus on criticism of the Albanian elites, oligarchs and state corruption, it’s noteworthy how the development of a luxury resort by the Trump family was able to mobilise hundreds of thousands against the government of a country largely seen as making quick and stable progress towards EU membership. This results-oriented approach of American administration-aligned businesses can spark societal outrage, which can then lead to political instability.

Serbia: Removing the legacy

Together with the Albanian Zvërnec reservation, Kushner’s Affinity Partners had a project in the centre of Belgrade. The still-standing ruin of the old General Staff, destroyed by the NATO bombing in 1999, was to be demolished and replaced by a luxury Trump Hotel. To pave the way, the Vučić government stripped the building of its cultural heritage status – an act which in December led to corruption charges against the Minister of Culture, Nikola Selaković.

Despite Vučić’s insistence on the importance of attracting foreign investments like this, the protests against the development erupted, and legal challenges started to mount. In December 2025, Kushner shelved the project, which previously was declared “of special importance” by Serbian law.

Although the fallout from real estate deals of Jared Kushner in Albania and Serbia can be seen as positive cases of active civil society, it sheds light on how American Trump-affiliated companies plan to carry out business in the Western Balkans. Similarly to the Southern Interconnection pipeline, we observe sidestepping of the institutions and little regard for public opinion. Instead, the businesses focus on fostering close ties with the political elite, which then re-models the system to facilitate the investments in the easiest way possible. The active undermining of the rule of law by US businesses is something which the EU needs to watch closely.

Lessons for the EU

Even though the European Union has been active in supporting the rule of law and the proper functioning of democratic institutions in the Western Balkans, the cuts of USAID, as previously stated, may lead to democratic backsliding, social unrest and ultimately stagnation in the EU accession process.

Brussels is pushing ahead with the enlargement, but the amount of funding available is limited. In its July statement, the European Commission reiterated that the €6 billion available from the Reform and Growth Facility (for years 2024-2027) will be redistributed across the “frontrunner” countries, which are right now Montenegro, Albania and North Macedonia. Serbia, Kosovo and Bosnia and Herzegovina have so far received little or no funding from this tool, as they’re not delivering the reforms tied to EU accession.

The frontrunner status is, however, coming under scrutiny in some cases, as exemplified by Albania’s Flamingo revolution. MEP’s have warned that by pursuing the Kushner project, Albania’s leadership is “playing with fire” and endangering not only protected areas but also the country’s odds of joining the European bloc.

In Serbia’s case, the EU hasn’t been as vocal, but that’s because there’s a different dynamic between the two sides, as exemplified by the raw materials deal and Brussels’ muted response to the student-led protests happening since 2024. Despite his authoritarian tendencies and visits to Moscow, Vučić is seen by the EU as a safe partner keeping the wider region stable. In a sense, the EU, which chooses stability and raw materials over supporting the destabilising democratic protests, is playing the same game in Serbia as the US elsewhere in the Western Balkans.

Besides sometimes having clashing interests in the region, the two Western powers also have to compete with strong Russian and Chinese influence. Bosnia and Herzegovina still imports all its gas from the Russian Federation, while Chinese initiatives increasingly grow in attractiveness as the accession talks drag on.

Region still at the crossroads

The Western Balkans have moved far beyond the period of conflict and instability, yet the region remains caught between EU integration and intensifying competition among external powers. As the US adopts a more transactional approach alongside Russia and China, new investment opportunities may come at the cost of weaker incentives for institutional reform and democratic governance.

The cases of Albania and Bosnia show how a US strategy focused on direct returns can generate political and social tensions that run counter to the EU’s longer-term objectives. Brussels now faces a difficult choice: reinforce its existing emphasis on reform and conditionality, even at the risk of pushing governments toward alternative partners, or adopt a more pragmatic approach of its own, as already visible in Serbia.

Either path carries trade-offs. What is clear is that the Western Balkans remain a key geopolitical arena where competition over investment, influence and alignment will continue to shape the region’s political trajectory.