Illicit financial flows have surged in the Western Balkans and the Black Sea region following Russia’s full-scale invasion of Ukraine. This increase is closely linked to the re-export of dual-use goods from the EU to Russia through established smuggling routes and trade misinvoicing practices. Armenia has emerged as a major transit hub, followed by Serbia, Georgia, Bosnia and Herzegovina, and Moldova, all countries also well-known for their links and vulnerabilities to Russia. These illicit financial flows severely undermine economic development by further corrupting institutions, eroding state legitimacy, enabling state capture, and discouraging investment.

This policy brief calls on the EU, UK, Norway and Switzerland to adapt their global development aid programs accordingly, acknowledging the rapidly shifting geopolitical environment. It also recommends the establishment of regional groups to monitor sanctions evasion and the use of advanced risk assessment and strategic planning mechanisms.