Few of Serbia’s bilateral economic relationships combine as much strategic opportunity and political sensitivity as the one with Israel. What was for years a relatively small but steadily growing trade partnership has, by 2024–2025, become both quantitatively more significant and qualitatively more controversial. For Serbia, Israel is simultaneously a promising technology and investment partner, a growing export market and a lightning rod in European debates about arms sales and the war in Gaza. Managing these contradictions intelligently will be one of Belgrade’s most delicate economic-diplomatic tasks going into 2026.
On the numbers, the relationship has clearly accelerated. Serbia’s exports to Israel reached about US$146 million in 2024, up sharply from earlier years, with total bilateral trade in goods approaching US$200 million and overall economic exchange including services estimated in the mid-hundreds of millions of dollars. A recent academic study estimates that Serbian exports to Israel increased by more than 60 percent over the 2021–2024 period, with imports from Israel projected to jump by over 70 percent, underscoring how rapidly the trade relationship has deepened.
The commodity structure is diverse. Serbia exports everything from rolled tobacco and gas turbines to machinery parts, agri-food products and increasingly complex manufactured goods. Israel sells back high-value technology, medical equipment, chemicals, ICT solutions, agricultural technologies and defence-related goods and systems. This bilateral profile fits each country’s strengths: Serbia as a cost-competitive industrial and agri-producer; Israel as a technology, defence and innovation powerhouse.
But the most visible and politically charged component of recent years has been arms exports. Serbia’s weapons and ammunition sales to Israel have risen sharply, with investigative reports indicating that Serbia exported more than €23 million worth of arms and ammunition in 2024 and around €47.9 million in total that year, then a record. Subsequent reporting shows that in just the first half of 2025 Serbia shipped roughly €55.5 million worth of ammunition to Israel, surpassing the entire 2024 total in six months.
These exports occur against the backdrop of Israel’s own record defence export boom, which reached nearly US$15 billion in 2024, and the ongoing war in Gaza. While Serbia is hardly the only country supplying arms and components, its position as a European aspirant state and its growing visibility in these trade flows have attracted increasing criticism from civil-society and parts of the European public sphere. For investors and policymakers, this controversy introduces a reputational risk variable into what is otherwise a commercially logical defence relationship between an arms-producing Balkan state and a high-tech military power in a volatile region.
Beyond defence, however, the Serbia–Israel story is one of under-exploited complementarity. When Israeli President Isaac Herzog visited Belgrade in 2024, both sides openly talked of “huge” economic potential and set a clear political target: a free-trade agreement as soon as possible. The Serbian government and the Chamber of Commerce have framed an FTA as the most concrete support for intensifying business ties in fields such as agriculture, high technology, artificial intelligence, science, tourism and real estate.
Israel has reasons to take this seriously. Serbia offers a cost-effective European manufacturing and services base with strong engineering talent, deep links to the EU market and a growing tech ecosystem. It is also strategically located for regional logistics across the Balkans, Central Europe and, via the Port of Bar and other corridors, towards the Eastern Mediterranean. For Israeli companies in cyber, agro-technology, medical devices, mobility tech and AI, Serbia offers a mix of skilled labour and cost advantages that is hard to replicate inside the EU core.
For Serbia, Israel is a template of what a small, highly skilled, innovation-driven country can become – and a potential partner in compressing its own development timeline. Israeli expertise in water management, desert agriculture, precision irrigation, cybersecurity, defence technologies, med-tech and start-up ecosystems aligns well with Serbian ambitions to move beyond low-cost manufacturing into higher-value knowledge-intensive sectors. Joint ventures, R&D partnerships, incubators, outsourcing contracts, venture-capital co-investment and public-private collaborations are all plausible avenues if the political framework remains supportive.
Tourism and real estate provide additional channels. Before recent regional turbulence, Israeli tourists were a growing presence in several Balkan markets. Belgrade and other Serbian cities are actively courting more Israeli visitors, while Serbian authorities explicitly mention attracting Israeli real-estate investors. In a scenario where security perceptions improve and connectivity strengthens, these flows could expand substantially.
Yet none of this future potential exists in a vacuum. The Gaza war and international scrutiny of arms flows into Israel have fundamentally complicated Serbia’s balancing act. On the one hand, defence exports bring hard currency, support Serbia’s domestic arms industry and maintain long-standing military-industrial links. On the other, they risk undermining Serbia’s image in parts of Europe, inviting legal and political challenges, and complicating its EU accession narrative at a time when Brussels is already more demanding on foreign-policy alignment and human-rights considerations.
Adding another layer of complexity, investigative reporting suggests that UAE investment into Serbian arms manufacturer Yugoimport has at times been indirectly linked to weapons reaching Israel, highlighting how Serbia’s Middle Eastern and Israeli vectors intersect in sensitive ways. In a multi-vector strategy where Serbia simultaneously courts the Gulf, maintains ties with Israel and seeks EU membership, such triangulations demand exceptional political and legal clarity.
Looking toward 2026, the base economic scenario is one of continued trade expansion, particularly if a Serbia–Israel free-trade agreement is concluded or at least substantially advanced. Goods trade could plausibly grow into the mid-hundreds of millions of euros annually, and services – especially ICT, tourism and various business services – could become an even more important part of the relationship. Israeli investment in Serbian tech, agri-processing, logistics and real estate is likely to deepen if macro-stability holds and domestic reforms progress.
But the risk scenario cannot be ignored. If arms exports remain high and the Gaza conflict or its political fallout intensify, Serbia will face sharper scrutiny from European institutions, NGOs and parts of its own public. EU partners may increase pressure on Belgrade to align more closely with EU Common Foreign and Security Policy positions, including possible restrictions on arms exports to active conflict zones. Israel’s own economic and political trajectory, shaped by security imperatives and domestic debates, will also influence how much attention it can realistically devote to developing a deeper economic partnership with Serbia beyond defence.
For investors and analysts, Serbia–Israel economic relations in 2025–2026 should therefore be read as a story of high potential and high sensitivity. The upside lies in technology, innovation, services and niche manufacturing collaborations that could significantly upgrade Serbia’s economic complexity. The downside lies in reputational risk, regulatory friction and the possibility that political shocks overshadow commercial logic.
Serbia’s task is not to choose between Israel and its other partners, but to bring its dealings with Israel – including in defence – firmly under a transparent, rules-based, EU-compatible framework, while simultaneously moving the centre of gravity of the relationship into civilian, tech and services domains. If it succeeds, by 2026 Serbia and Israel could stand as an example of how small and mid-sized states can leverage each other’s strengths in a volatile world without becoming trapped in each other’s controversies. If it fails, the relationship risks being defined far more by arms shipments and headlines than by the deeper economic value both sides are perfectly capable of creating.
