As Western economic sanctions tank Russia’s economy, the Kremlin and its supporters are scouring the globe for jurisdictions to use to evade sanctions. Moscow appears to have set its sights on the Western Balkans, long plagued by corruption and malign Russian influence. Washington and its Western allies must work to combat Russia’s illicit financial networks and broader malign influence in the Western Balkans while expanding our own economic ties to the region.
Exploiting corruption in the Western Balkans is central to the Kremlin’s efforts to cultivate influence in the region. This problem began decades ago. As the former Yugoslav states liberalized their economies after the 1990s, festering corruption exposed openings for Russian manipulation. Under Vladimir Putin, Moscow has used the corrupt actors who benefited from this kleptocracy to exploit economic, ethnic, and religious fissures in Balkan societies, in order to use that instability to challenge the United States and our allies. Western disengagement has compounded the problem, allowing Russia and China to fill the void through corruption and “debt-trap” investments in critical areas such as energy and security.
This inattention may ultimately weaken the impact of Western sanctions against Russia. Serbia and Bosnia and Herzegovina, where Russian influence is particularly strong, have refused to sanction Russia. Serbian media reported in early April that nearly 300 Russian persons, including many in the IT sector, had opened companies in Serbia since Moscow invaded Ukraine on Feb. 24, likely reflecting an attempt to dodge Western sanctions by re-registering Russian firms in Serbia. And although Albania, Montenegro, and others have developed Russia sanctions regimes in line with EU sanctions, they may be unable or unwilling to enforce them if Moscow can prevail upon their leadership through either political pressure or corruption.
For a Biden administration that’s declared fighting corruption and Russian sanctions evasion to be top priorities, this should be a call to action. While the Kremlin has a head start, the West can wield a combination of economic incentives and pressure to undercut Russia’s efforts in the Western Balkans. Washington and its European allies should leverage existing regional institutions to strengthen their political and economic influence. In concert, the Western allies should use sanctions to expose and disrupt Russian illicit financial schemes and discourage regional actors from working with Russia.
The newly minted Open Balkan initiative represents the West’s best opportunity to build and effectively utilize economic leverage in the region. Established by Albania, North Macedonia, and Serbia in 2021, the project aims to promote ties between the three countries by ultimately creating a single market for goods, services and capital.
The Open Balkan initiative could enable the West to exploit its greatest advantage over Russia in the Western Balkans: economic clout. Europe’s economic ties to the region dwarf Russia’s, which are concentrated mostly in the energy sector. While Russia dominates Serbia’s energy industry, Russia is only Serbia’s fifth-largest trading partner, lagging behind Germany, Italy, Bosnia and Herzegovina, and Romania. Russian trade with Albania, Bosnia and Herzegovina, North Macedonia, Croatia, and Montenegro is similarly limited. By spurring Western investment in the region, using the Open Balkan initiative as an instrument for incentivizing regional players to embrace anti-corruption, anti-money laundering and other rule of law measures, Washington and its allies could work to limit Russia’s influence.
While the Open Balkan initiative’s underlying concept is sound, the West must ensure this prospective asset does not turn into a long-term liability by perversely facilitating Russian and other illicit finance.
Unless properly policed, a single market in the Western Balkans could create opportunities for Russian sanctions-evasion networks and transnational criminal organizations to move Russian capital into and through regional economies. For these reasons, trade liberalization initiatives such as Open Balkan require strong institutions that can track and thwart illicit financial schemes involving Russia or other malign actors.
Western governments should pair the promise of economic opportunity with sustained pressure to strengthen the rule of law and defenses against illicit finance. Washington and its allies should also encourage Western companies to invest in the Western Balkans — but on the conditions that regional governments and their private-sector counterparties comply both with international anti-corruption and anti-money laundering standards and with Western sanctions against Russia.
Along with these economic carrots, Washington and its allies should wield the stick. The West should threaten and, if necessary, impose sanctions against regional actors who continue to facilitate Russian illicit finance or other malign Russian activity in violation of U.S. sanctions against Moscow. Executive Order 14033, signed by President Biden in June 2021, offers an additional tool for the administration to do so, authorizing sanctions against persons who are involved in corruption or undermine security or democracy in the Western Balkans.
As Russia’s invasion in Ukraine continues, more Western sanctions are likely to follow. Russia’s cultural and political influence and economic presence in the Western Balkans offers the Kremlin a chance to establish one or more jurisdictions for sanctions evasion in the middle of Europe. Through a combination of carrots and sticks, the United States and its allies can foil Russia’s plans.
Ivana Stradner is an advisor to the Foundations of Defense of Democracies (@FDD) and Matthew Zweig is a senior fellow at the FDD. FDD is a nonpartisan research institute focused on national security and foreign policy. Follow the authors on Twitter @ivanastradner and @MatthewZweig1.