Serbia and Kosovo announced that they have normalised economic ties as part of US-brokered discussions that also include Belgrade moving its Israeli embassy to Jerusalem and Pristina recognising Israel.
After two days of meetings with Trump administration officials, Serbian president Aleksandar Vucic and Kosovo's prime minister Avdullah Hoti agreed to cooperate on a range of economic fronts to attract investment and create jobs.
The accord marks a diplomatic success for US president Donald Trump ahead of the November presidential election, while furthering his administration's push to improve Israel's international standing.
"Truly, it is historic," Mr Trump said, standing alongside the two leaders in the Oval Office.
"I look forward to going to both countries in the not too distant future."
The decision to move Serbia’s embassy from Tel Aviv follows the Trump administration’s recognition of Jerusalem as Israel’s capital in 2017, and the movement of its own embassy to the city the following year.
And while the US has encouraged others to follow suit, the move has been widely criticised by Palestinians and many in Europe while the Israeli-Palestinian conflict remains unresolved.
Meanwhile the predominantly Muslim nation of Kosovo has never before recognised Israel, while Israel has never recognised Kosovo.
The Kosovan parliament declared its independence from Serbia in 2008, nine years on from the NATO operation in the region following Serbia’s bloody crackdown against ethnic Albanians in Kosovo.
And while most nations have recognised Kosovo's independence, Serbia and its allies Russia and China have not — keeping tensions simmering and preventing a full stabilisation of the Balkan region after the bloody wars in the 1990s.
"We haven't resolved all our problems. There are still differences," the Serbian leader said, adding that having a unified economic zone with Kosovo was a "huge step forward".
Mr Hoti also described the economic cooperation as a "huge step forward" in the relationship and said the two leaders were committed to working together.
While the two nations had previously forged agreements on air, rail and transit, the latest accord extended areas of economic cooperation following frustration from business leaders both sides of the border amid ongoing political talks brokered by the European Union.
On Monday, Mr Vucic and Mr Hoti are scheduled to go to Brussels to hold talks under EU foreign policy chief Josep Borrell and special envoy for the Belgrade-Pristina dialogue Miroslav Lajcak.
While the EU talks have run in parallel to those in the US, which are focussed on economic development, some officials in Brussels have not fully embraced the involvement of Washington.
The most recent White House summit had initially been scheduled for June, but it was cancelled after Kosovo President Hashim Thaci was indicted for war crimes by an international court.
Additional reporting by AP
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