Serbia has put Chinese military technology transfer and Israeli defence localisation inside one defence industry. The firewall between them, if there is one, is invisible.
By Drizan Shala | 26 September 2026
On 23 September, leaving the General Assembly, Marco Rubio said Serbia was "tied up in some issues that are potentially problematic and explosive" and attracting international attention. He did not say which. Washington still intended to deepen its strategic partnership with Belgrade, he said, while managing the potential problems in which Serbia was involved. Rubio did not identify those problems publicly. Here is one candidate that is on nobody's public list.
Two factories opened near Belgrade in twenty days. On 29 August, in Šabac, a Chinese plant for humanoid robots, with Aleksandar Vučić promising that within two weeks they would be seen handling "very serious weapons". On 17 September, in Makiš, a plant assembling Israeli combat drones, opened with the Israeli ambassador at his side and the press kept outside the production hall. Both were covered as separate stories.
They are one story, because Serbia has built a place where Chinese military technology transfer and Israeli defence localisation meet inside the same state industry, in some cases in the same town, and nobody has shown where one ends and the other begins. The documents that raise the question are Belgrade's own.
In October 2019 the Ministry of Defence described what Serbian engineers were doing in China on the Pegaz drone: "The first phase of technology transfer is under way" ("U toku je prva faza transfera tehnologija"). All calculations, simulations and laboratory work were to be done jointly; the Serbian side would rebuild the airframe, the Chinese side would redesign part of the electronics and avionics; testing first in China, then in Serbia; serial production in Serbia "with the help of Chinese experts" ("uz pomoć kineskih stručnjaka"). In August 2020 the ministry stated the purpose: technology transfer that would let the Military Technical Institute (Vojnotehnički institut, VTI) design and develop drones of that class on its own. Pegaz is built today at Utva in Pančevo and sold as a Serbian drone.
In September 2025 the ministry went further. Receiving a delegation of the Equipment Development Department of China's Central Military Commission, it said China is Serbia's "main partner" ("glavni partner") in air defence and unmanned aircraft, that commercial procurement and joint development were "already implemented" ("već implementirani"), and that the next stage would be "transfers of production technologies and the strengthening of ties between the defence industries" ("transferima proizvodnih tehnologija i jačanju veza između odbrambenih industrija"). The delegation's programme included the VTI and expert talks with the ministry's Materiel Resources Sector (Sektor za materijalne resurse). SIPRI's figure for 2021 to 2025 is that China supplied 61 per cent of Serbia's arms imports. In November 2024 Utva signed with ALIT, a subsidiary of the state aerospace group CASC, to set up a maintenance centre in Pančevo for Chinese drones and for Pegaz and Vrabac.
The same season brought the Šabac robot plant, a €200 million robotics and drone park at Inđija, and a Chinese battery plant for drones and unmanned vehicles, signed seventeen days before the Israeli line opened. That money never has to touch an Elbit invoice to matter. It puts Chinese firms, engineers and components inside the industrial ecosystem that is about to absorb Israeli technology.
Elbit Systems announced a $1.635 billion five-year framework in August 2025 covering precision rockets, reconnaissance and loitering drones, SIGINT, electronic warfare, electro-optics and command systems, with "industrial cooperation" to build the customer's domestic capability. The customer was identified as Serbia within days. In March 2026 the plant was announced as a joint venture, Elbit 51 per cent, Yugoimport-SDPR 49, with technology transfer through joint development by SDPR engineers and Utva specialists. On 17 September Vučić opened it and told Bloomberg Adria: "In about a year, almost all drone parts will be produced in our country" ("Za nekih godinu dana, skoro svi delovi dronova će biti proizvedeni u našoj zemlji"). A month earlier he had given the export pitch: "They cannot take from Israel, but they can from Serbia" ("Ne mogu uzeti od Izraela, ali zato mogu od Srbije").
An export-control officer hears two different licences in those sentences. Assembly of imported kits needs an equipment licence. Near-total local production within a year needs drawings, process data, interface documentation and the right to re-source components, which is far closer to a know-how transfer, and Israel's 2007 Defense Export Control Law licenses the two separately. China was one of the principal reasons that regime was tightened, and the Harpy affair was the occasion. In 2004 Washington discovered that Israel was upgrading Harpy drones it had legally sold to Beijing in the 1990s. The upgrade was cancelled, the director-general of the Israeli MoD resigned, and the 2005 US-Israel memorandum bound Israel to consult Washington on sensitive transfers. China later fielded the ASN-301, a loitering munition widely assessed as Harpy-derived. The original sale had been legal. A proposed upgrade of systems already in Chinese hands was enough to cause a crisis with Washington.
Serbia is now that kind of customer, on both sides. The institutions that absorbed the Chinese design work sit inside the same state industry now absorbing the Israeli one. BIRN named Utva's aircraft specialists as participants in the Elbit line. Utva runs the Pegaz line and the ALIT maintenance centre. No source establishes whether the same people work both programmes.
Serbia is also outside the fence. It is not a participating state of the Wassenaar Arrangement; the MFA lists negotiations as ongoing since 2009. Its dual-use export law entered into force on 14 March 2025. It has no general screening of foreign investment; the one exception, a Government decision on foreign investors in arms production, is the procedure the Elbit venture should have passed, and no decision has been published. The Israeli line is wrapped in a bilateral agreement, provisionally applied since April on a committee vote, that forbids either party to disclose anything about its implementation and states that disputes will not be subject to "any national or international tribunal or court". The initiative for that agreement, BIRN reports, came from Israel.
The plant's registered operator is SDS Technologies, incorporated in April 2025 for satellite telecommunications and renamed hours after the opening. Its owner is a London company, majority-held by a Greek citizen; its director, appointed on opening day, is an Israeli lawyer, Zion Amir. Neither Elbit nor Yugoimport appears in the Serbian or British registers. On 24 September Elbit told Haaretz it "holds no ownership stake in, nor is it a partner in, any UAV manufacturing facility in the country", while confirming that it works with local companies in Europe on localisation. Vuk Vuksanović's phrase was "an enormous discrepancy" between what was announced and what is on file. Under Israeli law the licensed end user must be identifiable. The venture announced to the public was a state-linked Elbit-Yugoimport partnership. The company on the register has a different ownership structure, and nobody has said which of them holds the licence.
Washington's written record looks at Serbia from one direction only. The SRBIJA Act asks for a report on Chinese ties "in the fields of defense, telecommunications, and national security"; the NDAA mandates reporting on Chinese malign influence. All of it concerns what Chinese technology does when it enters Serbia. No public record I can find asks what leaves. Jerusalem has said nothing on the record about Serbia's Chinese partners, the plant's owners, or end use. The one Israeli voice is an outside expert telling N1 that the Israeli MoD, "in agreement with the Serbian authorities" ("u dogovoru sa srpskim vlastima"), decides where the technology may go.
Nothing in the open record shows Israeli technology reaching China through Serbia. The record does show a state that ran the licensed-partner absorption pattern once, with China, called the product its own, and then invited Israel's largest defence contractor to teach the same industry a better design, under a treaty that bars disclosure and excludes courts, through a company whose owners are not the ones announced. That is the kind of configuration the post-Harpy safeguards exist to control, and it stands twenty minutes from Belgrade. Washington has used the word explosive. It has not publicly put this question.
Five questions
Who is the licensed end user?
The Serbian MoD, Yugoimport-SDPR, or SDS Technologies d.o.o.? Elbit has now said in public that it is not a partner in the facility. Someone holds the end-use obligations, and Israeli law requires that someone to be identifiable.
Does the licence cover know-how, and what does it say about China?
A one-year path to near-total local production is not credible on an equipment licence alone. Whether the licence prohibits the People's Republic and entities it controls, and whether it addresses Chinese personnel or Chinese-origin components at Makiš, Pančevo or Inđija, is the single fact that decides whether a firewall exists.
Who works both lines?
Utva builds Pegaz, hosts the ALIT maintenance centre and supplies specialists to the Elbit line. Whether any Utva, VTI or SDPR engineer serves both programmes is a question Belgrade can answer in one sentence.
Was Washington consulted?
The 2005 memorandum commits Israel to consult on sensitive transfers. A localisation venture in a non-Wassenaar state that is a declared Chinese technology-transfer partner, with "at least three more factories" promised and an export pitch aimed at buyers who "cannot take from Israel", is exactly the sort of case in which that consultation mechanism would be expected to matter.
Who owns what Serbia learns?
Nobody has to hand Beijing an Elbit drawing if Serbian engineers acquire enough Israeli know-how to produce derivative work of their own, a new interface, a payload integration, a flight-control change, and then own or share that work under Serbia's joint-development relationship with China. Who holds the rights to what is created at Makiš, and whether the Serbia-Israel agreement restricts its onward use, is the route by which Israeli-derived technology could reach China without an Israeli drawing ever being handed to Beijing.
Each of these rests on a document already in public, and each is a question a counter-intelligence officer would have put in writing the day the second factory opened. The answers exist. Somebody has them. The question is who else does.
Drizan Shala is a security researcher and doctoral candidate at the University of Sarajevo. He writes on defense, private security, and the security architecture of the Western Balkans.
