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'They see real economic significance'

In a sign of thaw in tensions, Serbia opens trade office in Jerusalem

Israeli diplomats hope inauguration of innovation center in capital is sign that Belgrade has moved past its anger over Israel recognizing breakaway Kosovo

Lazar Berman is The Times of Israel's diplomatic reporter

Serbia's Trade and Tourism Minister Tatjana Matic (L) and Jerusalem Mayor Moshe Lion (R) cut the ribbon at the Serbian Chamber of Commerce innovation office in Jerusalem, November 14, 2021 (Lazar Berman/Times of Israel)
Serbia's Trade and Tourism Minister Tatjana Matic (L) and Jerusalem Mayor Moshe Lion (R) cut the ribbon at the Serbian Chamber of Commerce innovation office in Jerusalem, November 14, 2021 (Lazar Berman/Times of Israel)

In a sign of burgeoning business ties — and a possible rehabilitation of political ties  — Serbia inaugurated its innovation and trade office in Jerusalem last week.

The move comes after months of Serbian anger after Israel got itself involved in a US effort to broker a bitter dispute in the Balkans and recognized breakaway Kosovo.

That saw Belgrade apparently renege on its earlier promise to move its embassy to Jerusalem, and Israeli officials now hope that beginning a better business relationship could also provide diplomatic fruits.

The office, located in Margalit Startup City Jerusalem, is designed to enable the countries to fulfill their bilateral economic potential, Tatjana Matic, Serbia’s minister of trade, tourism and telecommunications, told The Times of Israel during Wednesday’s ceremony.

“We have very good bilateral relations with Israel, and we think we need to improve our economic cooperation. We need to go much further. We need more investment, and it is very important to have the office here,” she said, adding that she also saw room for growth in the tourism, cybersecurity and tech fields.

“The level of our bilateral economic relations is not so satisfying. We need to and can do much more,” she said.

Serbia is also looking to learn from Israel’s experience in providing the infrastructure necessary to enable startups to thrive, said Marko Čadež, president of the Serbian Chamber of Commerce, to which the innovation office belongs.

“We are studying how to support startups,” he explained. “How to make the environment an ecosystem of education, of institutions like science and technological parks.”

Finance Minister Avigdor Lieberman (R) speaks next to Serbian Chamber of Commerce chief Marko Cadez at the opening of the Serbian Chamber of Commerce innovation office in Jerusalem, November 14, 2021 (Lazar Berman/Times of Israel)

The office, which began operations in August but delayed its opening because of COVID-19 restrictions, will seek to attract Israeli investment “in real estate, renewable energy, water management, the environment, infrastructure and transportation, with increasing Serbian exports to Israel,” said Aleksandar Nikolić, director of the office and Serbia’s honorary consul in Israel.

“All respectable, developed countries oriented toward innovation and high-tech have their representative offices in Israel,” said Nikolić. “Serbia recognized Israel as a natural partner for the cause. Serbia joined  the very best of the club in doing business with Israel.”

The economic relationship certainly has plenty of room to grow. Trade between the countries stands at around 73 million euros per year, with Serbian exports to Israel rising and Israelis exports to Serbia declining over the last fifteen years.

Serbia’s startup ecosystem, currently numbering between 200 and 400 companies, also could be far larger. It shows particular potential in gaming, blockchain, and agritech, and Belgrade hopes that reforms like mandatory coding courses for schoolchildren will unleash the country’s innovative potential.

‘They were a little upset’

The real drama lies in the political background behind the opening of the Serbian office in Jerusalem.

In his March 2020 speech at AIPAC in Washington, DC, Serbian President Aleksandar Vučić announced he would be opening the Chamber of Commerce office in Jerusalem, as well as an “official state office” to go along with the embassy in Tel Aviv.

Serbian President Aleksandar Vučić, right, speaking at the annual conference of the American Israel Public Affairs Committee, in Washington, DC, March 2, 2020 (Dimitrije Goll/Presidency of Serbia)

“That’s our way of showing respect to Jewish people,” he said at the conference.

Then came the September 2020 Washington Agreement in the Trump White House.

Serbia and Kosovo — regional rivals that don’t recognize each other — each signed separate agreements with the US regarding the normalization of economic relations between the two Balkan countries.

Belgrade, in its agreement with the US that made no mention of Kosovo, vowed to move its embassy from Tel Aviv to Jerusalem by July 1, 2021. The separate agreement with Pristina said that “Kosovo and Israel agree to mutually recognize each other.”

Kosovo declared independence from Serbia in 2008, and is recognized as an independent country by 97 UN states, including Israel.

Kosovo established diplomatic ties with Israel on February 1, and in March became the first European country and the first Muslim-majority one to establish an embassy in the western part of Jerusalem.

Senior Serbian officials made clear their displeasure, and the July 1 deadline for the embassy move came and went quietly.

At the Jerusalem event, Israeli officials expressed hope that bilateral relations were moving in the right direction again.

“We don’t know if it will happen but we are hoping. It’s a very good and very important start,” said Dan Oryan, head of the Balkan Division at the Foreign Ministry.

Prime Minister of Kosovo Avdullah Hoti sits at a desk as he attends a signing ceremony and meeting with US President Donald Trump and the President of Serbia Aleksandar Vucic in the Oval Office of the White House on September 4, 2020 in Washington, DC. (Anna Moneymaker-Pool/Getty Images/AFP)

“We see a path to solving the crisis,” he continued. “To us, this is a sign, and it has special significance to us because we  see it as a first sign on the way back.

“They were a little upset with us.”

A source close to the Serbian government stressed that the political disagreement over the recognition of Kosovo wouldn’t affect the deep relationship between Serbs and Jews.

“Serbia was the first to endorse the Balfour Declaration, the first to refer to the Jewish state as ‘Israel,’ and [father of modern political Zionism Theodor] Herzl’s grandparents are [buried] in Serbia,” he said. “Those ties won’t change.”

He did caution that Serbia was keeping a close eye on how Israel would vote if Kosovo applied again for membership in international organizations like Interpol and UNESCO.

Kosovo contains important Serbian heritage sites, which Belgrade is eager to protect.

“Kosovo and Metohija, with its 1,500 Serbian Orthodox Christian monasteries, churches, endowments and monuments of Serbian culture, represents an inalienable, central part of Serbia,” said a 2018 statement by the Serbian Orthodox Church.

The source added that Kosovo joining international organizations runs against Israel’s own interests, since it would support the campaign of the Palestinian Authority — who also seek recognition of an independent state without political agreement with Israel — to join such bodies.

The Israel-Kosovo recognition deal, he said, was also not in Israel’s interest, claiming that it was pushed by the Balkan policy community in Washington, who have a vested interest in an independent Kosovo.

A special triangle

While the political drama plays out, the burgeoning economic relationship between Israel and Serbia could pay some surprising dividends.

A car passes by a billboard reading: ”Kosovo is the heart and soul of Serbia” on a street in front of the government building in Belgrade, Serbia, Sept. 2, 2020. (AP Photo/Darko Vojinovic)

Though Serbia, with less than 7 million people, is not an especially large market, it can be a bridgehead for Israeli businesses to the entire western Balkan region. The Common Regional Market initiative seeks to more closely integrate the markets of Serbia and five other Balkan countries, with a population of nearly 18 million. These countries do not have innovation offices in Israel, and Serbia’s office intends to also help their companies do business in Israel.

Moreover, Serbia has free trade agreements with Russia, Turkey, and the European Union, giving Israeli investors and companies access to those markets through the country.

“We give the Balkans in general a lot of importance,” explained the Foreign Ministry’s Oryan. “It is a region that is close, between the east and west. Serbia has ties to Russia and to the EU, and free trade with both regions.”

Serbia can also help Israel continue to develop its trade relationship with the United Arab Emirates. The UAE is Serbia’s closest Arab ally, and the only one with which it has a strategic partnership agreement.

“Investments in agriculture and defense are a way for Abu Dhabi to invest in its food and military security,” explained an expert on the Balkans. “In doing so, the UAE gains a foothold in a region at the crossroads between the EU and the Middle East and has an opportunity to keep an eye on its rival Turkey, which is also active in the Balkans.”

Čadež told the Times of Israel that Serbia is looking to do a joint event with Israeli businessmen at the Dubai Expo 2020.

“We should unite regarding topics we can then present to a third market,” said Matic. “Serbia has very good relations with the UAE. This is the opportunity to take advantage of the political position and together with firms from Israel go to the third market.”

“I hope it will help all of us to make a special triangle,” said Oryan. “We are checking options, we are in talks.”

“The fact that they chose us means that they see real economic significance,” the diplomat concluded.

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