The UN high representative for Bosnia and Herzegovina has warned about the possible destruction of the multi-ethnic state after he was forced to resign in a policy clash with the US, seemingly complicated by the commercial interests of a firm linked to Donald Trump Jr that is seeking to make investments in the region.

The German Christian Democrat politician Christian Schmidt spoke at a scheduled meeting with the UN security council in New York on Tuesday, where he warned about the fragility of Bosnia and Herzegovina. He has made clear he believes his post should be maintained, saying he will stay on until his successor is appointed.

The German chancellor, Friedrich Merz, already locked in a clash with Trump over the Iran war and the reduction of US troops stationed in Germany, has been unable to protect Schmidt from US pressure.

The role of the UN high representative was established as part of the 1995 Dayton peace agreement that ended a three-year ethnic war in which more than 100,000 people were killed. It was given wide powers for the interpretation of the agreement, including amending laws, but is subject to the decisions of a 55-strong multinational governing board.

Schmidt has served as high representative for five years, but his appointment has always been opposed by Russia and the largely autonomous Republika Srpska, the Serb-run part of Bosnia and Herzegovina.

He has clashed with the former Republika Srpska president Milorad Dodik, a close ally of Vladimir Putin who attended the 9 May Moscow Victory Day parade, and whom he disqualified from office for six months for failing to comply with his decisions. Dodik was until last year subject to US sanctions but, in a reversal not coordinated with the EU, they were lifted, in a move that signalled a shifting US approach to the western Balkans. There is no sign that Dodik has dropped his secessionist views.

Schmidt had acted against Dodik after the Republika Srpska national assembly voted to disregard the decisions of the Bosnian constitutional court. Since the end of the three-year war in 1995, Bosnia and Herzegovina has consisted of two entities: the Federation of Bosnia and Herzegovina, mainly inhabited by Bosniaks and Croats, and the Republika Srpska, primarily inhabited by Serbs.

Schmidt told the security council: “The persistent denial of the multi-ethnic character of the entities, particularly within Republika Srpska, has evolved into systematic exclusion.” He said it was “deeply concerning that narratives portraying Bosnia [and] Herzegovina as a stage for a so-called clash of civilisations have re-emerged”, and he singled out Dodic for using explicitly secessionist terms.

Dodik welcomed Schmidt’s resignation on Sunday. “He leaves Bosnia and Herzegovina the same way he arrived: with no legitimacy, no UN security council decision and no backing from international law,” he wrote.

The former leaders of Republika Srpska have been accused of slowly starving state institutions of cash in an attempt to break up the state. Diplomats fear the US will call either for the post of high representative to be abolished or for its preferred choice to be appointed.

The EU will resist the post’s abolition. The UK on Tuesday reiterated its “support for a fully empowered high representative as the cornerstone of civilian implementation of Dayton” and said Bosnia and Herzegovina’s future “cannot be held hostage by divisive politics”.

Schmidt’s resignation comes against the backdrop of a US-based firm, AAFS Infrastructure and Energy, winning a $1.5bn (£1.1bn) contract to build a pipeline from the Croatian coast into Bosnia through which US liquified natural gas would flow. Incorporated in November last year, it is fronted by Donald Trump’s personal lawyer, Jesse Binnall, and Joe Flynn, the brother of Trump’s former national security adviser in Trump’s first term, Michael Flynn, who resigned over unauthorised discussions with Russian officials over lifting US sanctions.

The contract was awarded without a tender after approval from the Bosnian parliament and has been criticised by the EU as possibly jeopardising Bosnia’s plan to join the bloc.

The EU and the former Biden administration had urged Bosnia to end its dependence on Russian energy supplied via Serbia through an extension of a pipeline from Turkey, the Turkstream pipeline. But the manner in which the AAFS contract was awarded, and the support for the pipeline from Dodik, has raised questions about the involvement of Trump’s allies.

According to his entry in the US lobby register, Michael Flynn’s duties include connecting Dodik with “decision-makers and influential figures in Washington”. The Gold Institute for International Strategy, run by Flynn, has also announced plans to host a European Economic and Security Summit at the end of May in Banja Luka, the main city of Republika Srpska.

In April Donald Trump Jr, who runs the family business empire, visited Banja Luka, appearing to be looking for investment opportunities in a region rich in critical minerals.

Binnall has said the pipeline is a “priority” for the Trump administration. Asked about the EU’s intervention, he said: “AAFS will never lose sight of what truly matters in this project: delivering energy security and fostering economic development for the people of Bosnia and Herzegovina. We are committed to working closely with all relevant authorities to develop the infrastructure needed to make this vision a reality.”