I don't think PayPal is the one to blame. There are international lists of blacklisted countries used by banks and other financial companies. Sometimes there can be strange reasons for being blacklisted or countries stay on the list too long.
I was a few years back on holiday in Croatia (former Yugoslavia). This was many years after their civil war ended and this is now a normal stable democratic country. On holiday i logged in to Paypal to check my balance. When logged in i got the message: Your account is being accessed from a blacklisted country, and you are now under investigation and we might close your account. What???? All i wanted to do is check my balance while on holiday, and now they want to close my account?
Account was never closed but when i looked into this later, i found Croatia was on a blacklist as "some war criminals might want to try and get money out of the country". So because a few people who might want to get money out of the country, noboby could use PayPal. I think it was only 10 years after the civil war that they where removed from the blacklist.