Bosnia’s peace envoy moves to unblock state finances, Serbs cry foul

Bosnia and Herzegovina’s international peace envoy, Christian Schmidt, issued a ruling on Thursday to resolve a long-standing state debt blocking the 2025 budget, exacerbating the country’s ongoing political crisis.

Serb leaders rejected the decision, accusing Schmidt of overstepping his authority and threatening the fragile balance of power established by the 1995 Dayton Accords.

The Dayton Accords, signed in December 1995, ended the 1992-95 Bosnian War, which killed over 100,000 people and displaced millions. The agreement created a complex constitutional framework, dividing Bosnia and Herzegovina into two autonomous entities: the Bosniak-Croat Federation and the Serb Republic (Republika Srpska), with a weak central government. The country’s governance is further complicated by a tripartite presidency, representing Bosniaks, Croats, and Serbs, and a parliamentary system requiring consensus among ethnic groups.

The Office of the High Representative (OHR), established under a separate annex of the Dayton Accords, grants an international envoy broad powers to intervene in laws, finances, and governance to maintain peace and stability. Christian Schmidt, a former German minister, currently holds this role, though Serb leaders dispute his legitimacy, claiming his appointment lacks approval from the U.N. Security Council.

Using his “Bonn Powers” – which allow the High Representative to impose decisions and remove officials – Schmidt ruled that a debt owed to Slovenia’s Viaduct company would be paid from the Serb Republic’s share of road toll revenues, effective immediately.

The debt, now approximately 120 million Bosnian marka (60 million euro), stems from a 2013 contract termination for a hydropower plant in the Serb Republic. The International Centre for Settlement of Investment Disputes in Washington ruled in April 2022 that Bosnia and Herzegovina must pay Viaduct nearly 80 million marka, with interest accruing since.

Serb leaders, including Republika Srpska President Milorad Dodik, a pro-Russian nationalist advocating for secession, condemned Schmidt’s decision. They argue the debt should be settled using profits from Bosnia’s national central bank, not the Serb Republic’s funds.

“Schmidt does not have the right to make decisions, and everything he does is breaking Bosnia and Herzegovina down,” Dodik said at a press conference. “This shows that European politics here has collapsed.”

Dodik has accused the European Union, which Bosnia aspires to join as a candidate country, of backing Schmidt’s interventions.

The dispute highlights the challenges of governing Bosnia under the Dayton framework, which requires consensus among ethnic groups but often leads to gridlock. The Bosniak and Croat members of the tripartite presidency have refused to approve the 2025 state budget until the debt issue is resolved, deepening the political stalemate.

This standoff is part of a broader crisis intensified by Dodik’s February conviction, where he was sentenced to one year in prison and banned from politics for six years for defying Schmidt’s decisions. Dodik has appealed the ruling.

In Thursday’s ruling, Schmidt allocated 120 million marka from the Serb Republic’s road toll revenues to the national treasury to settle the Viaduct debt, stating, “This approach is in line with the principle that one who incurs the debt must pay for it.” In a separate decision, he authorized the use of central bank profits to upgrade voting systems ahead of the 2026 general elections.

Serb Republic Prime Minister Radovan Viskovic announced that his government would urge Serb ministers in the national government to challenge Schmidt’s decisions. Zeljka Cvijanovic, a Serb member of Bosnia’s presidency and former Serb Republic premier during the hydropower contract termination, noted that the arbitration process had placed financial responsibility on the country as a whole.

The ongoing tensions underscore the fragility of Bosnia’s Dayton-structured governance, where ethnic divisions and competing visions for the country’s future continue to hinder stability and progress toward EU integration.

With agencies, edited by g.g.

Caption: President of Republika Srpska Milorad Dodik addresses his supporters in Banja Luka, Bosnia and Herzegovina, 26 February 2025. Dodik has been sentenced to one year in prison and barred from public office for six years in a first-instance verdict for disobeying the decisions of Bosnia and Herzegovina’s international envoy, High Representative Christian Schmidt. EPA/NIDAL SALJIC