October 18, 2022 | Policy Brief

For Sanctions to Work in Bosnia, EU Must Join the U.S.

October 18, 2022 | Policy Brief

For Sanctions to Work in Bosnia, EU Must Join the U.S.

The U.S. Treasury Department on September 26 and October 3 imposed sanctions against prominent Bosnian individuals and entities for allegedly engaging in corruption and eroding democracy in Bosnia and Herzegovina (BiH). Coming amid what Treasury called “BiH’s most serious political crisis since 1995,” these designations aim to fight corruption and promote democracy but will likely have little practical effect.

The September 26 package targeted Diana Kajmakovic, whom Treasury called a “brazenly corrupt BiH state prosecutor with links to criminal organizations.” According to Treasury, Kajmakovic has “helped hide evidence, prevent prosecution, and otherwise assist criminal activity in exchange for personal gain” in support of narcotics traffickers and other criminals.

The October 3 sanctions targeted two individuals and one company. The first individual is Fadil Novalic, prime minister of the Federation of Bosnia and Herzegovina, which together with Republika Srpska (RS) forms the State of Bosnia and Herzegovina. According to Treasury, Novalic repeatedly leveraged “his position of political influence for personal or party gain,” including by misusing pensioner data to facilitate campaign ads during the run-up to the country’s 2018 elections.

Treasury also designated Slobodan Stankovic, one of Bosnia’s wealthiest businessmen, and his Republika Srpska-based engineering firm, Integral Inzenjering A.D. Laktasi. The department accused Stankovic and Integral of leveraging their “proximity to RS leadership” to secure lucrative construction contracts, which “are often handed to Stankovic without fair and open competition.”

Treasury’s sanctions, issued pursuant to Executive Order (E.O.) 14033, freeze any U.S. assets of the designated parties and bar them from the U.S. financial system. Signed by President Joe Biden in June 2021, E.O. 14033 empowers Treasury to designate persons who engage in corruption related to the Western Balkans or who undermine peace, stability, or democracy in the region, including by obstructing the implementation of regional peace agreements. Treasury’s recent designations are the fourth and fifth sanctions packages issued under this authority.

Since the Dayton Agreement ended the Bosnian War in 1995, Bosnia and Herzegovina has been held together by a delicate balance between the Serb-run Republika Srpska and the Bosniak-majority Federation. However, Milorad Dodik, the Serb member of Bosnia’s tripartite presidency, is now threatening — with Russian and Serbian backing — that Republika Srpska will secede. This could reignite ethnic violence in the country and destabilize the broader region. Treasury sanctioned Dodik under E.O. 14033 in January, having already designated him under a different authority in 2017.

Unfortunately, these sanctions likely will have no serious effect on the level of corruption or democratic backsliding in Bosnia, because the sanctioned parties have few business ties with the United States. As such, it is essential that Washington convince the European Union to join these and future sanctions against bad actors in Bosnia, who tend to do more business and travel in Europe. In March 2022, the Council of the European Union adopted a decision “extending its framework measures on individuals or entities” who undermine the stability of Bosnia. Germany has argued for sanctioning Dodik, but Hungary has balked, arguing it would be “counterproductive” for Bosnia’s EU integration. Hungary has a long history of doing Moscow’s bidding in the Balkans, and the European Union should put pressure on Hungary to support sanctions. This should be a major focus of U.S.-EU cooperation in the Balkans.

Bosnia must not descend back into the chaos it experienced in the 1990s. Western powers can help prevent it from doing so by holding accountable the entities and individuals that seek to tear apart the country.

Ivana Stradner is a research fellow at the Foundation for Defense of Democracies (FDD), where she contributes to the Center on Economic and Financial Power (CEFP). For more analysis from Ivana and CEFP, please subscribe HERE. Follow Ivana on Twitter @ivanastradner. Follow FDD on Twitter @FDD and @FDD_CEFP. FDD is a Washington, DC-based, nonpartisan research institute focused on national security and foreign policy.


Sanctions and Illicit Finance