A planned EU-backed gas pipeline linking Bosnia & Herzegovina to Croatia could intensify political divisions within the country rather than easing its energy vulnerabilities, according to a new analysis by the Bloomsbury Intelligence and Security Institute (BISI), which also questions the transparency of the procurement process.

The Southern Interconnection pipeline, intended to connect Bosnia’s gas network to Croatia’s LNG terminal on Krk island, is “a politically critical node for Bosnia and Herzegovina,” BISI said, warning that energy infrastructure risks becoming a proxy for broader institutional fragmentation.

“The domestic political polarisation between the country’s federal units is likely to translate into parallel fragmentation in BiH’s energy policies,” the institute said in its report, adding that infrastructure decisions are increasingly shaped by competing geopolitical alignments.

In March 2026, Bosnia’s parliament awarded the construction contract to a newly established US-based firm, AAFS Infrastructure and Energy, which BISI notes “has no prior experience in infrastructure development” and “has links to individuals personally close to US President Donald Trump.”

The project, spanning 162 km in Bosnia and 74 km in Croatia, is designed to enable LNG imports via Croatia and reduce reliance on Russian gas, which currently accounts for about 96% of Bosnia’s supply.

While BISI described diversification as strategically important, it warned of long-term risks. “Reducing reliance on Russian gas is important for Bosnia to achieve energy independence,” the report said, but added that the country’s dependence on fossil fuels could deepen in the process.

Energy use is already politically sensitive, with gas playing a key role in Sarajevo’s district heating system. The think tank said Bosnia’s energy transition is also constrained by its fragmented governance structure and competing national priorities.

The report highlighted concerns over procurement, noting that “the fairness of the procurement process remains questionable and might hinder Bosnia's accession to the EU.” It added that “insufficient competition and transparency, with particular business and political benefits trumping the public interest,” had been flagged by EU representatives and Transparency International.

EU funding linked to reform compliance could also be affected, with BISI citing €374m in conditional assistance potentially at risk if standards are not met.

Domestically, the project has sharpened political divides. The report said Republika Srpska “opposes US involvement in this infrastructure,” while the Federation of BiH supports diversification but remains split over contractor selection.

BISI also warned that “energy policy represents a potential hybrid tool for national politics and foreign geopolitical strategies,” with US commercial interests in LNG exports increasingly shaping infrastructure decisions across the region.

On outlook, the institute said the EU is likely to increase pressure on Sarajevo to improve procurement standards in the next year, but cautioned that long-term diversification efforts may stall without political consensus.

“There is a realistic possibility that the two federal entities will instead move towards developing separate energy networks with different contractors and dependencies,” the report concluded, highlighting the risk of entrenched fragmentation in Bosnia’s energy landscape.