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Fact Sheet: Captive Serbia

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For two decades, post-Yugoslav states’ weapons stockpiles have fed organised crime and terrorist networks in Western Europe. Weapons are trafficked in the European Union’s Single Market, with illegal networks exploiting high levels of political and administrative venality. This corruption presents a systemic challenge to EU member states and has led to a captive-state phenomenon in smaller, weaker states

For a detailed analysis of Serbia and the phenomenon of captive states, download Tactics Institute’s report, The Security Cost of Enlargement Fatigue, here.

Chapter two of the Tactics report, The Serbian Defence Industry & the Middle East, connects the dots between the UAE’s investments in Serb real estate, agriculture, air transport, electronics, and arms manufacturing.

  • For an outline of the captive state phenomenon, of which Serbia is an example, see our previous fact sheet here;
  • The prospect of Serb accession to membership of the EU appears remote and foreign states have stepped in as investors in Serbia’s struggling economy;
  • Brexit has increased Serb ambivalence about possible EU membership;
  • The United Arab Emirates has invested in Serb aviation, with Air Serbia now 49% owned by the UAE’s state-owned company Etihad;
  • The Emiratis have also invested in construction, including Belgrade's riverfront regeneration project;
  • Combined with investments in Serbia’s agriculture and defence industry, the UAE has created a portfolio unmatched anywhere in the Balkans;
  • The commitment of the Emiratis to Serbia is a sign of soft power at a new level, with the aggressive investment and power dynamics mirroring those usually seen in the worlds of finance and banking;
  • GRAIN, an NGO fighting illegal land grabbing practices issued the 2016 GRAIN Report, identifying UAE-based companies Al Dahra and Al Rawafed as not meeting the standard, transparent investment practices;
  • In 2012, Abu Dhabi's Al Dahra Agricultural holding announced plans to develop 9,000 hectares of farmland in Serbia with a €300 million investment in Serbian farming companies;
  • The build-up of this agricultural portfolio was financed by the Abu Dhabi Development Fund, which approved a US$400m credit line to Serbia to invest in irrigation and provide loans to farmers;
  • In October 2013, the Abu Dhabi state-controlled strategic investment company Mubadala Development penned a series of agreements for investment in aerospace manufacturing, telecoms, renewable energy, and semiconductors. Concerns have been raised about corruption and a lack of transparency in the deals;
  • In March 2014, the UAE’s Department of Finance signed a loan agreement with Serbia of €750m to support the Serb economy and bolster bilateral investment;
  • In 2017, the UAE emerged as the single most crucial contractor for the Serbian defence industry in terms of exports, with Saudi Arabia coming third;
  • Serbia's leading exports to both the USA and Saudi Arabia are mortars and mines;
  • Serbia-produced rocket launchers, assault rifles, pistols, and other arms have made their way to the Middle East: Yemen, Libya, Syria, and Iraq.
  • Over the last decade, the UAE has also invested in specific production lines in Serbia, including a coastal defence missile system.
  • In 2018, the grain production company Elite Agro LLC, registered in Abu Dhabi, acquired 100% ownership in Al Rawafed Holding, becoming the sole owner of 12,000 hectares of arable land in Serbia and one of the largest landowners in the country;
  • Regarding Serbia’s construction and engineering industries, Arabtec holdings, in which the Abu Dhabi investment fund has a 21% share, has set up its regional headquarters in Belgrade.