A Courageous Tug o’ War for American Investment
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A delicate game attracting Democrat and Republican attention in the Western Balkans
Mark Crawford
Sir Humphrey: There are four words you have to work into a proposal if you want a Minister to accept it.
Sir Frank: Quick, simple, popular, cheap. And equally there are four words to be included in a proposal if you want it thrown out.
Sir Humphrey: Complicated, lengthy, expensive, controversial. And if you want to be really sure that the Minister doesn't accept it you must say the decision is courageous.
Bernard: And that's worse than controversial?
Sir Humphrey: (laughs) Controversial only means this will lose you votes, courageous means this will lose you the election.
“The Right to Know”. (March 17, 1980) In Yes, Minister. British Broadcasting Corporation
The Western Balkans attract a certain kind of international American investor. None who understand the region come because profitable investment is quick or simple. That leaves popularity and affordability as potential draws.
An opportunity may be relatively popular because of the investor's ethnic ties to the region, view of the strategic geography of the Balkans, or the investor's ties to American strategic interests. The Balkan region is still a virgin market in many ways and the appeal of ‘making a difference’ does attract some Foreign Direct Investment. However, good intentions only go so far. Opportunities that initially appear to be cheap, become expensive when combined with inefficient bureaucracies, corruption and the occasional odd mix of malicious Balkan incompetence. More than one American has returned to invest in the region wide-eyed and hopeful that they would add their expat experience back to their ancestral homeland, only to return to the United States' disillusioned by their local experience.
American investments in the Balkans are more likely to be Complicated, Lengthy, Expensive and Controversial. While historically, turmoil and conflict have been complicating barriers to Western investment, more recently, hard financial data has become a tangible deterrent. According to the European Bank for Reconstruction and Development, the region’s population is declining at a rapid rate, making the investment for the domestic market increasingly unattractive.
Citizens of the Western Balkans are voting with their feet and are leaving. Job opportunities are generally better in Western Europe, where countries such as Germany are actively recruiting blue collar workers to relocate. The evaporating labor market is a warning sign that groups such as the American Chamber of Commerce and OECD have highlighted for years. It is now reaching a critical stage.
Initiatives to expand the perceived domestic market, including an Open Balkans initiative, have been launched. These initiatives are meeting resistance especially by politicians who fear Serbian dominance of the market. This issue is expected to remain a limiting factor for the near-term. The take-away for American investors is, given the declining population and limited local buying power, foreign investment should look toward sectors where initiatives can export goods and services.
The Balkans is no longer a region starved for capital. Public financial reports show that the formal economy is healthy and the banking sector is liquid. Reports indicate that the informal sector is also healthy and adding to the liquidity of the region. Cocaine linked money flows alleged to be tied to Albania alone reportedly exceed over a billion dollars annually, often finding its way into real estate development projects.
If Balkans region is not starved for money, what does it need? From a Western perspective, the region remains starved of quality management. An American investor seeking to participate in the formal economy may determine that investing their own money is not the only way to enter the market. Americans can enter the market offering branding, and management standards, mobilizing either local or third party capital in a more effective manner.
Export potential from the region include natural resources, energy from renewable sources, and services such as tourism, and to some extent, business process outsourcing. There are some natural resources in mining and diluent oil in the region and some logistics possibilities; however, these projects often attract a range of difficulties including political corruption. More often than not, American investors either directly, or alongside investors from a friendly country, are lured by the prospect of these sectors, but just end up in arbitration with Balkan governments.
The traditional tourism and hotel groups including Marriott, Hilton, Hyatt are all present in the region. These groups have not bought the real estate or built the buildings, but they have brought international management and American branding to a project. This approach has had early success both from a Western and a local government perspective.
Support from policy makers in Washington, D.C., has also been instrumental to reducing a major risk that American investors face in the region: political risk. The “Washington Agreement,” which developed out of an economic initiative between Israel and Kosovo, was later expanded by the Trump Administration to include diplomatic ties between Israel, Serbia and Kosovo.
A revival of American investment interest in the region is very welcome. The current White House has implicitly abandoned the momentum laid by the foundation Washington Agreement. This loss of momentum had led to an opening for greater Russian influence and a weakening of America’s position in the region. The more D.C. policy makers and American private sector participants can reverse this situation and increase American management influence in the region, whether employing American capital, local capital or capital from a third country, the better. The resultant momentum provided a foundation for collaboration and investment across historically tense ethnic lines, all of which support energy independence for American allies and weaken anti-American influence in the region.
The latest potential American project to attract international attention is Florida-based Affinity Partners, which has raised a reported two billion dollars from Saudi investors in order to develop real estate projects within three areas of the Balkans. Given the high level of liquidity in the Balkan region, it makes little sense to invest two billion of capital into a project without using available debt in order to leverage the project. The actual investment amount, based on the public information available, should be a fraction of the two billion of projected project value.
The principal involved with Affinity Partners has made multiple trips to Albania to meet with local government officials, including visiting tourist areas in 2021 and 2023, looking for private sector opportunities. The project is reported to have been brokered by a Republican appointed diplomat, who served as U.S. Ambassador to Germany, Acting Director of National Intelligence, and Special Presidential Envoy for Serbia and Kosovo Peace Negotiations that led to the “Washington Agreement”.
First, the Affinity Partners project is considering development of a site currently within an Albanian island, Sazan. Sazan measures approximately 5.7 kilometers (3.5 miles) in length and 1.6 kilometers (1 mile) in width. The entire island is a military exclusion zone located approximately 9 kilometers (5.6 miles) off the coast of Albania in the Adriatic Sea. The island has limited infrastructure and allows organized day trips to parts of the island by boat. There is no bridge access from the island to the mainland. In spite of its lack of development, a study commissioned by the UNDP gave an economic valuation of the Karaburun-Sazan marine and coastal protected area at 1,684 billion ALL (15.72 billion USD) per annum.14 While the military island is unique for Albania, the geography isn’t entirely unique to the greater coastal area, including Montenegro, Croatia, Greece and even Italy on the opposite side of the sea. The island does represent a major undeveloped asset in Albania. Multiple attempts15 to privatize the island or develop it for private interests have been rebuffed publicly by the Albanian Ministry of Defense, as recently as June 2022.
Secondly, the Affinity Partners project is reported to develop a site on Zvernec. The second site is located within the lagoon of Narta, on the mainland of Albania across from Sazan island, north of Vlora. The area is home to historic settlements including a Byzantine monastery. Zvernec was historically part of a legally protected national park and bird sanctuary, attracting flamingos and other endangered species. The announcement of the Affinity Partners project regarding Zvernec follows decisions made by the Albanian Parliament at the end of February 2024 to adjust the law on “Protected Areas”.
Thirdly, the project is considering the development of a site on the location of the former Yugoslavian General Staff headquarters in Belgrade, Serbia. The Serbian site, which housed the Yugoslav Army Headquarters and the Federal Ministry of Defense, was destroyed by NATO in the 1999 bombings. In 2005, Serbia designated the location a cultural monument. President Trump, prior to his term in office, reportedly expressed interest in developing the location in 2013.
Ideally, Washington DC policy supports transactions between private sector participants. Government should support the market without being the market, or market-maker. While the American motivation for the proposed projects might be rooted in tying the region together through economic activity, none of the three projects considered by Affinity Partners are solely opportunities between private sector participants, which is a complicating factor.
Further complicating the projects are Serbian media implications that the deal was brokered during the Ambassador’s tenure at the State Department and is now being implemented in a private capacity. The former Ambassador has publicly distanced the project from the idea that it is politically exposed. Affinity Partners may believe that in spite of current optics, their role in the project is not due to political ties; however, the project is clearly political. Each of the three sub-projects require relevant local Government support and direct intervention by the local government, therefore each project is accompanied by relative political risk, generally tied with being complicated, lengthy and controversial.
The local motivations for promoting American investment are quite different from an American perspective. From a local government perspective, the region requires a foreign umbrella under which it can shield itself from the external elements while keeping going on the path that they are currently walking. Local actors will publicly parrot the benefits of increasing visibility, employment, and increased economic activity, all of which are true. The deeper motivations lie within a game that some in the Balkans believe must be played – the game of political influence in Washington. While Americans tend to view the Balkans as a muddy pond, full of potential friends, if the economic and political sticks and carrots can be harmonized, the Balkans governments view the Americans as a big brother with chinks in its armor.
The chinks in the armor being politically exposed individuals or their circle of influencers, which can be influenced by cash, sex, substances, finder’s fees or sweetheart deals. The game is to find the cocktail of incentives to achieve one’s objectives.
The game begins with allegations, which don’t have to be rooted in fact. However, once the game begins, something tangible is inevitably offered. If the Serbs are alleged to offer an apartment in Belgrade, the Albanians might offer to build a complex in a national park. If the Serbs counteroffer a half-billion-dollar project on a historical military site with a twenty-two percent profit share, the Albanians might counteroffer access to build a luxury resort on a military island. This is the current tug-of-war for influence in Washington.
The Prime Minister of Albania, for example, has long had ties to Democratic donors, such as the Soros family, who refer to him as a ‘brother from another.’ The Washington Examiner, alleging that the Biden Administration has turned a blind eye to Albania’s alleged ties to narcotics trafficking insofar as the Albania’s Socialist Government is actively “buying senior American officials.”As recently as January 2024, the United States Department of Justice prosecuted and convicted a senior FBI counter-terrorism agent who was compromised by individuals associated with a former Socialist Albanian Minister of Energy in connection with oil interests. Among the Albanian group that compromised the FBI agent is an individual connected to Chinese petroleum interests, who also reportedly appears in correspondence found on Hunter Biden’s laptop as one of his business affiliates.
The Washington Examiner, along with multiple local language Balkan media sources, claim that the rogue FBI agent and his foreign affiliates were involved in a Balkan-wide racketeering operation, exchanging money for influence over American sanctions. Among the oligarchs, allegedly extorted for as much as 12 million EURO by the rogue FBI agent, is a group historically involved in oil and international logistics, which has been working hard to establish links to Affinity Partners, reportedly acquiring real estate in Miami, Florida, from the Qatari royal family, which was reportedly brokered, in part, by the former Ambassador.
The Albanian group has been subject to criticism in relation to the government's failure to crack down on organized crime as well as its close links to Government concessions in multiple sectors.
The now-jailed FBI agent was recently employed as the head of security of the Aman Resort group. Aman Resorts is a five-star resort management group, led by a Russian investor. The Aman group has experience in the region, specifically managing Montenegro’s elite Sveti Stefan island resort. However, the resort is currently closed while its Greek based-ownership group has taken the Government of Montenegro in arbitration of a beach access dispute. Aman is reported to be the management company that Affinity Partners will employ to manage the Sazan project.
Albania has learned its lesson from 2016, when prematurely picking the wrong side in the US Presidential election. More recently, the Prime Minister has remained publicly neutral on the upcoming US election, establishing close ties to influencers on both the left and right side of US politics, recognizing that sometimes apparent political enemies are working together in business.
While not a certainty, given President Biden’s perceived domestic and international weakness, specifically regarding the Ukrainian situation, the Israel-Hamas situation and the Serbia-Kosovo situation, there is increased expectation in the Balkans, in line with American polls, that the Republicans will take the White House in November 2024. If the GOP takes the White House, based on President Trump’s historic success in bringing decisiveness to break through historic political deadlock there is a reasonable argument that Trump will put an end to the Ukraine war and the Gaza conflict, sooner rather than later.
Recently, principal members of Affinity Partners that were involved in the Washington Agreement have attracted significant attention, going on record as to what investment in Gaza might look like post-conflict.
If the Ukrainian-Russian conflict resolution includes the ceding of parts of eastern Ukraine to Russia, there is concern in the Balkans that a precedent may be established. In which case, the redrawing of the Balkan borders influenced by ethnic heritage is perceived to be on the table. In that case, the Affinity Partners deal represents a tug of war. An attempt to enshrine ties to the American political right. A tug of war between ethnic Serbs versus ethnic Albanians. The borders of Kosovo being the prize at stake and players are jockeying for leverage with both sides of the American political aisle.
Beyond jockeying for bargaining power when the controversy of local borders arises, if the goal of a Balkan Government is to wrap themselves and alleged political-wealth schemes in the American flag, fully covered on both the American political right and the left, that objective may surpass all other considerations such as preserving a military base or a national park in both Albania and Serbia. In the Balkan context, the larger the warts on the local administration, the more outrageous the compensation towards countries who may hold them to account needs to be. However, none of the leadership in the Balkan region are reducing their blemishes in a meaningful way, therefore they risk running out of national assets that they can use to barter.
The normal checks and balances to protect a country do not function well in the Western Balkans. The media are easily influenced by pay-for-play incentives in order to support propaganda. If not bought on a case-by-case basis, an entire media outlet may be acquired by Government friendly supporters or even Ministers themselves through crony-capitalist deals. Independent journalists asking difficult questions in the Balkans are even physically intimidated in order for power-brokers to avoid meaningful criticisms. In some of the Balkan countries antiquated laws are in place in order to criminally punish CEOs of private companies for Communist era concepts, such as shaming the state. Combined with the ability of some countries to hold the accused without charge for several months, it is easy for Governments to give political opposition a ‘time out’, when necessary.
There is the consideration that the American foreign investor will run afoul of US laws, including the Foreign Corrupt Practice Act. There is a precedent that as long as both the Balkan and the American side gets relatively muddy in a deal, any problem will fall mostly on the American side and the locals will sweep their sins under the rug. Take the example of the bad actor from the Ministry of Energy in Albania, reportedly mentioned in Hunter Biden’s laptop as facilitating controversial deals. The same person is also named in US court documents and US Congressional oversight reports as working the Russians and the Chinese against US interests. The same person, along with his affiliates, are walking free today. Therefore, there is a perverse incentive for the Balkan governments and their agents to press forward with controversial deals and hide behind claims of hypocrisy when confronted. Why look at the speck in the eye of the Balkan country if there is a plank in the eye of America?
The Balkan region does present a number of opportunities for American investment. Few, if any, are simple, quick, easy or cheap when considering the attached bureaucracy and corruption. The Affinity Partners project is no different. As further details come out, will the Serbian and Albanian public accept the use of prime, protected locations for a 99 year lease at little to no cost? Will the Serbian and Albanian public accept that the actual investment into the project may be significantly lower when coupled with debt leverage? Will the Albanian and Serbian public accept if that debt leverage also comes via channels, which attract allegations that the local governments are simply using the project to launder their politico-wealth parked in the Middle East, as has been alleged in both the Albanian Port of Durres project and a Belgrade waterfront development.
Will Affinity Partners be satisfied, if the project approval becomes drawn out and stalls until the U.S. elections are complete? And if the political winds blow against the U.S. political right-wing, will Affinity Partners be satisfied if the project dies entirely? Will Affinity Partners be satisfied as the mud starts to fly and exponentially increase, especially as questions are raised in terms of who is actually partnering with the development and what baggage they bring to the table?
Given some of the public statements, it is unclear whether Affinity Partners failed to do a simple Google search of the properties in question during its due diligence, or if they have surrounded themselves with group thinkers, or if they are simply tied to local oligarchs fronting business activity for local politicians who benefit equally if the projects are successful or unsuccessful, so long as high level politically-connected Americans are publicly attached when the mud starts flying. Before the final decision on the project is taken, perhaps a re-assessment of the factors at play is warranted insofar as Sir Humphrey from the BBC’s ‘Yes, Minister’ might interpret the currently proposed Affinity Partners deal as not only complicated and controversial, but also courageous.
