The defunding of USAID threw the international development community into turmoil, ending one of the strongest traditional mechanisms for development assistance. Foreign aid froze. Eight billion dollars in funding and 5,200 contracts were suddenly cut. Analysts immediately feared that this move would reflect a broader international shift away from development models and mark the onset of a global wave of isolationism. Yet, despite these concerns, a year and a half later, Western development assistance has not disappeared.
Instead, Western development assistance is taking a new form, one that is more straightforward and transparent in its financing aims. The U.S. EXIM Bank, for example, has become a major tool of U.S. foreign policy, moving development assistance from traditional models toward what is now being referred to as strategic financing. Having dubbed this shift “commercial diplomacy,” the current U.S. administration has focused on aligning development finance with private-sector expansion and investment facilitation. That paradigm shift reflects, in part, a response to China’s own financing campaign through the Export-Import Bank of China, established in 1994, an organization responsible for funding much of the Belt and Road Initiative. European nations and institutions are making a similar shift, with greater financing coming from European development initiatives, including the Western Balkans Growth Plan and the European Investment Bank (EIB). Assistance from the West and the East has inadvertently created new market orientations along an East-West divide.
Nowhere is that dynamic unfolding more clearly than in the Western Balkans, through the financing of regional telecommunications developer Telekom Srbija Group. The U.S. EXIM Bank recently approved a $50 million loan to the company for the rollout of its 5G network across Serbia. The loan included conditions from the Washington Agreement that the company not use Chinese Huawei products when building out its 5G infrastructure. The loan also implicitly signaled a counter to Russian disinformation campaigns across the Western Balkans: Telekom Srbija Group is a distribution partner for U.S.-based Newsmax, a favorite media outlet of President Donald Trump and his advisers.
By tying financing to specific infrastructure and market standards, development finance compels state-backed and private entities to choose between Western-integrated systems and Eastern alternatives, effectively serving as a counterweight to modern hybrid warfare. Although some claim Russian media has a fading role in the region, the war for influence is in full swing, with East and West both vying for the public’s attention.
Serbia in particular is a swing state between East and West, successfully maintaining its own version of diplomatic neutrality. Despite the war in Ukraine and the comprehensive sanctions on Russia imposed by the EU, Russia still maintains large oil assets in Serbia. President Aleksandar Vučić has sought to maintain a stance of neutrality, prioritizing the relationship with Russia as oil revenues continue to flow. Meanwhile, the state has also courted the West through its efforts to join the EU, attract US investment, and showcase itself through the upcoming EXPO 2027.
Financial and infrastructure agreements that anchor regional companies to Western capital flows have put those companies at the center of geopolitical friction. Cyberwarfare, for example, plays a central role in the competition over Serbia’s position in the Western Balkans. Cyberattacks, a central tool of Russian hybrid warfare, have become an increasingly common occurrence for Western-oriented companies. Telekom Srbija Group and its director general, Vladimir Lučić, for example, have been the targets of such a campaign, with company data exposed online alongside disinformation efforts blaming the company and its director for the breach. This attack was one among several recent incidents involving telecommunications and digital infrastructure providers, all attributed to broader influence operations. Such hybrid campaigns, combining disinformation and cyberwarfare, are direct attempts to disrupt alignment with Western markets and institutions. In today’s Europe, Serbia’s effort to maintain a balance between Russian energy dependence and Western market integration has become increasingly tenuous.
Beyond the Western Balkans, similar patterns have emerged in Washington’s reengagement with the new regime in Syria after the fall of longtime strongman Bashar al-Assad, a rapprochement that has included the easing of sanctions and an inflow of infrastructure investment, often supported by the private sector. Most recently, the Syrian Petroleum Company contracted with ConocoPhillips and Novaterra Energy to develop the country’s gas fields, a clear case of economic interests aligning across old geopolitical divisions, and yet another example of commercial diplomacy supporting political normalization and economic engagement, with capital employed as a tool to shape both geopolitical allegiances and post-conflict development.
The Telekom Srbija Group hack also draws an almost direct line between the new model of development finance and the risk of becoming a target for state-sponsored hybrid warfare. From Moscow’s perspective, investment from the EXIM Bank, the EIB, and the EBRD poses a threat almost equal to the deployment of foreign armed forces in the Western Balkans. The goal is no longer simply trade development, job creation, or economic growth. Instead, these institutions are seen as tools of international economic warfare, using strategic investments to combat Russian and Chinese influence while establishing long-term economic networks. In response to the normal course of such Western-led investment, Russian-led campaigns have sought to undermine public trust in these institutions, with the even more pernicious goal of weakening the viability of Western development finance partnerships.
Showing how significantly development has transformed, Western development models now function alongside broader stabilization efforts. Much as NATO counters hybrid threats at the security level, the new Western development model creates financing infrastructure that promotes transparency, Western market standards, and the secure exchange of capital and information. Moscow and Beijing have responded with their own models of competitive investment. This is a strategy visible not only in the Western Balkans, but also in strategic regions such as Uzbekistan and the Democratic Republic of Congo. Disrupting Western-supported market ventures in countries and regions that serve strategic purposes has become a form of economic guerrilla warfare, further exacerbating the East-West paradigm.
As Russia attempts to move Serbia closer to the East through media campaigns and cyberattacks, Western finance is acting as a counterweight, using a very different playbook. Development assistance has transformed into a market mechanism capable of waging international economic warfare. Cyberattacks and hybrid warfare are just one way this ongoing rivalry manifests itself. They are likely to remain a persistent feature of the geopolitical rivalry over the Western Balkans and other strategic geographies, with Western-led development models continuing to serve as a powerful tool for maintaining Western economic influence.
