The historic deal was brokered by former US President Donald Trump and sees Muslim-majority Kosovo recognize Jerusalem as the capital of Israel.
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Kosovo and Israel have formally established diplomatic relations, with a US-brokered agreement requiring Kosovo to set up an embassy in Jerusalem.
Kosovo Foreign Minister Meliza Haradinaj-Stublla and Israeli Foreign Minister Gabriel Ashkenazi celebrated the deal in a virtual ceremony on Monday, with both leaders signing documents in their respective countries.
"Today we are making history. We are establishing diplomatic relations between Israel and Kosovo," said Ashkenazi.
"We mark a new chapter in the historical bond between our countries," said Haradinaj-Stublla.
Trump's recognition of Jerusalem as Israel's capital - a timeline
As the opening date for the new US embassy approaches, DW takes a look at how Donald Trump's controversial decision came to fruition. His decision to recognize Jerusalem as Israel's capital sparked protests worldwide.
Image: Reuters/R. Zvulun
US Congress passes Jerusalem Embassy Act
Back in 1995, the US Congress passed the so-called Jerusalem Embassy Act, declaring that Jerusalem "should be recognized as the capital of the State of Israel." The act, however, also allowed the sitting president to delay the move by signing a waiver every six months. Bill Clinton, George W. Bush and Barack Obama all reissued the waiver throughout their presidencies, citing security concerns.
Image: picture alliance/AP Photo/O. Balilty
Trump makes campaign promise
During the 2016 US presidential campaign, Republican candidate Donald Trump promised that, if elected, he would relocate the US embassy from Tel Aviv to Jerusalem, describing the holy city as "the eternal capital of the Jewish people." Trump's declaration attracted a great deal of fervor within Israel and won over scores of Jewish and Evangelical voters in the US.
Image: Reuters/B. Ratner
Trump visits Jerusalem's Western Wall
In May 2017, Trump became the first sitting US president to visit the Western Wall. The site is located in Jerusalem's Old City, which Israel forces captured during the 1967 Six-Day War. According to reports, Trump considered fulfilling his Jerusalem pledge during the visit, but was advised against such a move by foreign policy officials who feared it would only stoke regional tensions.
Image: Reuters/J. Ernst
Trump formally recognizes Jerusalem as Israeli capital
During a speech at the White House on December 6, 2017, Trump said he had "determined it is time to officially recognize Jerusalem as the capital of Israel," adding that the move was a "recognition of reality." Trump cited the Jerusalem Embassy Act as one of the reasons behind his decision. "While previous presidents have made this a major campaign promise, they failed to deliver," he said.
Image: picture alliance/dpa/AP/E. Vucci
Arab world reacts with outrage
Following Trump's announcement, thousands of Muslims worldwide participated in demonstrations protesting his controversial decision. Protesters marched in the streets, burned flags and shouted anti-Israel slogans in countries including Iraq, Turkey, Egypt, Malaysia, Indonesia and Indian-controlled Kashmir.
Image: Getty Images/AFP/A. Gharabli
Protests break out in Europe
The protests soon reached Europe. In Germany, on December 8, 2017, mostly Muslim demonstrators attended a rally near the US embassy at Berlin's Brandenburg Gate, waving Palestinian flags. The German government was among those warning against Trump's move.
Image: Getty Images/S. Gallup
UN rejects Trump's Jerusalem declaration
On December 21, 2017, an emergency session of the United Nations General Assembly passed a resolution condemning US President Donald Trump's decision to name Jerusalem as the capital of Israel. A total of 128 countries voted in favor of the measure, while nine voted against it and 35 countries abstained. The vote came after the US vetoed a UN Security Council resolution on Jerusalem.
Image: picture alliance/dpa/AP/M. Lennihan
US doubles down on Jerusalem embassy promise
On February 23, the US State Department said it would hasten the relocation of the embassy to Jerusalem. "The opening will coincide with Israel's 70th anniversary," State Department spokeswoman Heather Nauert said. The anniversary falls on May 14. During a visit to Jerusalem in January, US Vice President Mike Pence had said he did not expect the move to be complete before the end of 2019.
Image: Reuters/A. Schalit
First road signs for new US embassy go up
On May 7, Israeli authorities put up the first road signs pointing to the US embassy in Jerusalem. The signs were put up on the southern side of the city by the US consulate. Jerusalem Mayor Nir Barkat hung the first sign. In a statement, he said: "This is not a dream, it's reality. Jerusalem is the eternal capital of the Jewish people, and the world is beginning to recognize this fact."
Image: Reuters/R. Zvulun
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A joint struggle for international recognition
Haradinaj-Stublla said that Kosovo and Israel have "witnessed a long and challenging path to existing as a people and becoming states."
Kosovo declared its independence from Serbia in 2008, with many countries still unwilling to recognize the southeastern European nation.
Israel has also struggled for international recognition since its independence in 1948, and faces a boycott from multiple Arab and Muslim-majority countries, such as Lebanon and Syria.
In Kosovo, finally being able to say goodbye
05:13
Which other Muslim-majority countries have ties with Israel?
The deal was brokered in September, when Kosovo Prime Minister Avdullah Hoti met Serbian President Aleksandar Vucic in the White House at the invitation of former President Donald Trump.
The Trump administration brokered multiple peace agreements between Israel and several Muslim-majority countries, known as the Abraham Accords, in its final months in office.
So far, Israel has normalized relations with the UAE and Bahrain, along with Sudan and Morocco.
Who owns Jerusalem?
28:30
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Will the new US administration continue the Trump policy?
New US President Joe Biden has indicated that he would like to build on the normalization deals brokered by his predecessor.
"We think that Israel normalizing relations with its neighbors and other countries in the region is a very positive development, and so we applauded them, and we hope that there may be an opportunity to build on them in the months and years ahead," said recently confirmed Secretary of State Antony Blinken.