EU sanctions cost Kosovo 600 million euros in stalled funds, says think tank

ATHENS (Reuters) -Kosovo has lost out on more than 600 million euros of external funding relating to environmental protection and energy projects among others, since the European Union imposed sanctions in 2023, according to a report by the GAP Institute think tank.

Kosovo's government disputes the sum, but the report, by a local body, gives one of the first independent assessments of the impact on one of Europe's poorest countries of sanctions for its role in stoking ethnic tensions in its Serb-majority north. 

"The measures ... have resulted in significant financial and developmental consequences, costing Kosovo around 613.4 million euros in suspended or indefinitely delayed projects," the GAP Institute said in its report. 

The affected funds relate to various financial instruments that have helped Kosovo's development since it gained independence from Serbia in 2008.

The most-hit sectors are environment and energy, where more than 460 million euros have been stalled, the report said. That represents a big blow for a country that desperately needs to reduce its reliance on coal-fired power generation. 

Earlier this year, Reuters identified at least 150 million euros in stalled funds. The EU has not publicly said how much is delayed. 

Kosovo's government disputes both figures. Apart from 7.1 million euros that it says have been lost due to contracts expiring, the funds "are neither lost nor at risk" because they will resume when sanctions are lifted, a spokesperson told Reuters on Tuesday. 

The EU's foreign policy chief Kaja Kallas said last week that the bloc would begin to "gradually" lift the sanctions, on the condition that Kosovo de-escalate tensions in the north.

A senior diplomat told Reuters that the EU would begin to provide technical assistance for EU-funded projects in the next few weeks but that there was currently no plan to disburse funds.

Kosovo is not recognised as a state by some EU members, which makes lifting the sanctions more difficult. 

The gradual lifting "is not very substantial and it is very unlikely that the EU can move forward with funding," the diplomat said. 

Kosovo has aspirations to join the EU. However, that process has also been hobbled by Prime Minister Albin Kurti's role in raising tensions in the north by systematically closing Serb-run institutions, banning the use of the Serbian dinar within its borders, and choking trade.

(Reporting by Edward McAllister and Fatos Bytyci; editing by Sophie Walker)