![[CRS Report to Congress]](crs_rpt.gif)
CRS Report for Congress: No. 97-688 F |
CRS Report for Congress: No. 97-688 F |
SUMMARY
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TABLE OF CONTENTS |
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ALTERNATIVE COST ESTIMATES
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ADDITIONAL CONSIDERATIONS
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FOOTNOTES
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The members of the North Atlantic Treaty Organization (NATO) have announced that, at their July 1997 summit meeting in Madrid, they will invite one or more countries to begin negotiations to enter the alliance. One major question that policymakers are taking into account as they deliberate the pros and cons of NATO enlargement is how much it might cost.
Early in 1997, the Clinton Administration sent to Congress a report detailing its rationale and cost estimates for NATO enlargement. The report noted that, with the collapse of the Soviet threat, NATO has reoriented itself from a static defense posture suitable during the Cold War to a more flexible and mobile set of capabilities to respond to different types of threats. The Administration maintains that this "new strategic concept" dovetails with the task of extending NATO membership to new entrants through measures that will permit them to defend themselves and integrate with NATO forces, and through enhancing the alliance's ability to project ground and air power. The report estimates the cost (between 1997 and 2009) of adding "a small group" of countries at $27-35 billion. Of this, the U.S. share is projected to be $1.5-2.0 billion. The Administration contends that, in addition compensation, expansion will confer several benefits. Enlargement, it is argued, will help foster political stability, consolidate democracy, improve intra-regional relations, strengthen collective defense, enhance burdensharing, and promote economic prosperity.
Two other organizations, RAND and, the Congressional Budget Office (CBO), also have estimated the costs of expansion, but have used a wider range of threat assumptions and come up with different results. These studies offer a menu of escalating threat scenarios, along with potential corresponding defense postures. The RAND cost estimates range from $10-110 billion, while the CBO costs extend from $21 billion to $125 billion. Although the RAND authors present a series of increasingly ambitious deployments, their report highlights a $42 billion, joint (air/ground) power projection program, similar to the type of defense posture outlined by the Clinton Administration (estimated at $27-35 billion). It appears that if the CBO were to use the same reduced threat assumption for its comparable defense posture, the cost estimate would be well over $60 billion. Part of the cost disparity may arise from different perceptions of what constitutes an "adequate" defense. In addition, it would appear that more micro-level assumptions--those regarding specific types of weapon systems and equipment necessary--can have a major effect on aggregate costs. A major issue will be to identify which costs might be incurred automatically by enlargement and which ones will be open in subsequent political decisions.
As they debate expansion, policymakers may encounter some longer-term issues that will affect costs, including: the timing of expenditures associated with expansion; possible economic benefits for the United States; the ability of Russia to rebuild its armed forces; future rounds of NATO expansion; alliance burdensharing, and political pressures.
NATO EXPANSION: COST ISSUES
INTRODUCTION
The North Atlantic Treaty Organization (NATO) has announced that,
at its July 1997 summit meeting in Madrid, it will invite one or
more countries to begin negotiations to enter the alliance.(1) Although nothing is official until that
meeting, the United States on June 12 announced its support for
Poland, the Czech Republic, and Hungary; Slovenia and Romania
also are being backed by several member states. (2)
Created in 1949, NATO is a mutual defense pact; under Article V
of the treaty, if one of the members is attacked, each member
For four decades after the treaty was signed, the most likely
aggressor was considered to be the former Soviet Union. With the
collapse of the Soviet Union and the Warsaw Pact, however, there
is general agreement today that the threat has greatly
diminished; accordingly, NATO's central mission has become less
urgent.
Twelve countries in Central and Eastern Europe have indicated a
desire to join NATO. They regard membership not only as an
important security guarantee, but also as a sign of acceptance
by, and means of political and economic integration with, the
West. Most current NATO countries believe that enlargement will
not only strengthen the alliance militarily, but also help
promote democracy and stability in the region.
The candidates for entry, however, are still grappling with the
difficult transition from command economies to market-based
systems. (4) Their militaries
use
out-of-date equipment that is not interoperable with NATO'S. To
integrate with NATO, these countries, over time, will need to
acquire and train with new weapons and equipment and conduct
joint exercises with the alliance--all of which costs money.
Current NATO members--including the United States--also face
budgetary and political constraints and have been reducing their
defense spending in recent years. Consequently, one major factor
that policymakers are taking into account as they deliberate the
pros and cons of enlargement is how much expansion may cost.
On February 24, 1997, the Clinton Administration sent to Congress
a report detailing its rationale and cost estimates for NATO
expansion. (5) The document,
which may be
viewed
as the President's statement of U.S. policy, outlines the defense
posture the administration believes is necessary, presents the
likely costs for its scenario, and estimates the share of costs
that would be assumed by the United States, its allies, and new
members. When the report was released, some Members of Congress
took issue with the Administration's conclusions; they were
particularly critical of the cost estimates, which, they
asserted, were unrealistically modest. Members have also
expressed concern that the United States will end up bearing a
disproportionate share of the cost of expansion. Other Members,
however, believe that the Administration's cost projections are
reasonable, and that the price would be moderate, particularly in
comparison to what the alliance and individual member countries
were spending before the Berlin Wall fell.
This report describes the Administration's proposal, and presents
the findings of two other studies that sought to estimate the
costs of expansion, but which used a wider range of threat
assumptions and came up with different results. It then discusses
some of the major factors that likely will affect the cost of
expansion, compares the assumptions of the three studies, and
presents some longer-term issues that policymakers may encounter.
THE CLINTON ADMINISTRATION'S COST ESTIMATES
At the outset of its report to Congress, the Administration
points out that NATO has been undergoing a transformation from a
defense posture suited to the Cold War, to one that is adaptable
to a new strategic environment. The alliance has shifted from a
static defense, mainly centered in former West Germany, to one
that entails maintaining a continuous capacity to project power,
both in the context of mutual defense commitments, as well as
non- Article V missions. The Administration describes NATO's New
Strategic Concept, adopted in 1991, as "[an] ability to respond
rapidly and flexibly by reinforcing areas where forces are
needed... ." (6) This new
focus is reflected
in Administration estimates of the costs of admitting new
members.
On balance, the Administration contends that adding members to
the alliance will confer several benefits, to the United States,
to Europe at large and to the central/eastern region in
particular. Enlargement, it is argued, will help foster political
stability, consolidate democracy, improve intra-regional
relations, strengthen collective defense, enhance burdensharing,
and promote economic prosperity.
In developing its cost estimates, the Administration assumes that
enlargement will take place in a European security environment in
which there is no current threat of large-scale conventional
aggression and where any such threat would take years to develop.
(7) With no significant
threat on the
horizon, NATO will extend Article V assurances to new members
through improving its ability to send reinforcements if
necessary, rather than through stationing substantial forces in
the new territories. NATO's task, in this plan, is to enable new
entrants "to be able to operate with NATO forces and for current
NATO allies to be able to provide and support such
reinforcements." (8)
Throughout the period 1997-2009, the Administration envisions two
phases to accommodate expanded membership under these terms.
During the first phase, to be completed by 2001, NATO will aim at
achieving an initial capability of ensuring that the
alliance
will continue to be able to meet Article V commitments. This
phase would focus on high-priority actions that will provide some
degree of interoperability and limited capabilities for new
members to defend themselves with the help of the alliance. These
measures are to be funded by NATO's common budget and by the new
members. Beginning with accession, NATO would also seek to
develop, over a 10 year period, a mature capability, which
will
further enhance interoperability through such steps as equipment
replacement, and force modernization and restructuring; this
process will involve expenditures by current and new members, as
well as common NATO funding.
The Administration lists several priorities for attaining
interoperability-- new members will need to train and exercise
with alliance forces to become familiar with NATO procedures;
they also will need to integrate with NATO's command, control,
communications and intelligence (C3I) network, be able to receive
and support NATO troops, operate with the alliance's air defense
system, and field combat and logistical support. The goal will be
not only to ensure that these countries can help NATO defend
their borders, but also to enable them to deploy their own forces
to assist NATO in both mutual defense and non-Article V missions.
The Administration notes some further assumptions for its
estimate: 1) it applies to "[a) small group of nonspecified
Central European countries;" (9) 2) it will be
unnecessary for NATO permanently to station a large number of
forces in the new countries; 3) standard burdensharing rules
would apply (members pay for their own forces and share the costs
of infrastructure improvements); and 4) some of the activities
(e.g., language training and air traffic control upgrades) are
already underway.
The Administration states that its estimates are based not on
total defense spending, but on two types of measures that are
associated with enlargement: the first, those that would take
place whether new members are added or not, and the second, those
that are tied directly to expansion. It breaks these measures
down into three categories: 1) new members' military
restructuring; 2) NATO regional reinforcement capabilities; and
3) direct enlargement measures.
To restructure and modernize new members armed forces, the
Administration estimates that, from 1997-2009, it would cost
between $800 million and $1 billion annually, or a total of
$10-13 billion. This will include such measures as modernization
of ground forces, including artillery, armor and ammunition;
procurement by each country of surface-to-air missiles and one
squadron of combat aircraft; and training. The cost of these
steps would be borne by the new countries." (10) The U.S. study reemphasizes the point that
many of these
measures would be undertaken with or without expansion.
For NATO regional reinforcement capabilities, the
Administration
estimates alliance costs of $600-800 million per year, or $8-10
billion total. This estimate is based on the stated goal of being
able to deploy and sustain "a notional force of four divisions
and six NATO fighter wings" to reinforce new members in the event
of a threat. Because the United States is already fully prepared
to deploy forces, these costs would fall largely on current NATO
allies, according to the Administration. Like restructuring and
modernization, most of these steps, it is reasoned, would take
place regardless of expansion plans, as they are applicable to
NATO's evolving strategy regarding non-Article V missions. They
are based on earlier allied commitments to force goals implied by
NATO's 1991 New Strategic Concept. (11)
Direct enlargement costs, according to U.S. calculations,
would
average $700-900 million per year, or a total of $9-12 billion to
attain "mature capability." These costs consist of upgrading
and/or ensuring interoperability of. command, control,
communications and intelligence (C31); air defense systems;
logistics support; reinforcement reception; infrastructure; and
exercise facilities and staging. The report estimates that about
40% of the costs for direct enlargement activities would be paid
for by individual member countries-- both current and new--to
improve their own forces, and the remaining 60%, would be
financed by NATO common funds for infrastructure. Divided in this
manner, the new countries would pay about 35% ($230-350 million
per year, or $3-4.5 billion total); current allies--other than
the United States--would contribute 50% ($350-425 million per
year, or $4.5-5.5 billion total); and the United States' share
would be 15% ($150-200 million annually, or $1.5-2.0 billion
total). Because common funding of NATO activities would commence
only after accession in 1999, the U.S. contribution is reckoned
over the 10-year period 2000-2009.
Total costs for the Administration's scenario consequently range
from $27 billion to $35 billion, of which new members would pay
$13-17.5 billion, current allies $12.5-15.5 billion, and the
United States $1.5-2.0 billion.
The Administration notes that its estimates exclude programs in
support of relations with eastern and Central European countries,
as well as U.S. funding for NATO's Partnership for Peace program,
since neither is directlrelated to NATO enlargement (12)
The Administration also concedes that enlargement costs could
increase or decrease considerably if one or more of its
assumptions were off. For example, although it is not
anticipated, a "direct territorial threat to NATO members" would
prompt "substantial" response costs." (13) In
addition, if more--or fewer--countries were to join in the first
enlargement tranche than assumed, costs would rise above or fall
below the estimates.
ALTERNATIVE COST ESTIMATES
Two other organizations, the Congressional Budget Office and the
RAND Corporation, have also attempted to assess the likely cost
of expansion. Their estimates run from a low of $10 billion to a
top figure of $125 billion. This enormous range is due to
differences in threat scenarios, as well as other fundamental
assumptions. It should also be noted that two of the
reports--those by the Administration and RAND--promote
enlargement of NATO, while the Congressional Budget Office study
is neutral on the question.
CONGRESSIONAL BUDGET OFFICE
In March 1996, the Congressional Budget Office (CBO) published
The Costs of Expanding the NATO Alliance, (14) a study that estimates the amounts that would
be necessary
to fund several possible expansion scenarios. The report opens
with a discussion of the pros and cons of a wide range of future
options for NATO, from disbanding the alliance, to expanding it
slowly or rapidly, to opening the door to admit Russia. The
subsequent cost analyses focus on expanding the alliance to
include the four countries considered most likely at the time the
analysis was written: Poland, Hungary, the Czech Republic and
Slovakia--often collectively referred to as the Visegrad
countries, after the Hungarian city where their leaders first met
in 1991 and agreed on measures for regional cooperation.
CBO states that, although the threat to the alliance has
diminished drastically since 1989, NATO's Article V--its mutual
defense provision--is still viewed as the core mission, and
expansion would necessarily extend the security guarantee to new
entrants. CBO assumes two levels of threat: regional dangers,
which are more likely, and a much less likely threat from
Russia--the only power with the potential to mount a significant
threat to the alliance. The varying perceptions among defense
analysts of these threats give rise to several possible defense
postures. The CBO study presents five scenarios, with cumulative
costs; that is, the cost of each is added to the previous ones.
Costs are for the period 1996-2010.
Option 1--Strengthen Visegrad Defense Forces and
Provide for NATO
Reinforcement ($60.6 billion). The most fundamental and least
costly single scenario, option I envisions current NATO members
assisting the four above- named countries in defending themselves
against "a border skirmish with a neighbor or a limited war with
a regional power." (15)
CBO notes that most defense analysts agree that three steps
should be considered key to enabling western NATO allies to
assist and send reinforcements in the event of an attack on one
of the new members. The first involves instruction in NATO
military doctrine and procedures, as well as large- scale
exercises with the alliance. The second consists of improvements
in and interoperability of new members C31 systems. Finally, the
new countries would need to upgrade their air defenses to enable
them, for example, to distinguish friendly from hostile aircraft.
CBO estimates total costs for such steps at $21.2 billion.
Given CBO's assumptions, various improvements in military
capability are presumed necessary under option 1. Nearly
one-third ($19.2 billion) of the cost of this option is dedicated
to upgrading equipment (of new members and current allies) and
acquiring new stocks, including such items as fighter aircraft
and anti-tank weaponry. In addition, CBO also includes $5 billion
for tanker aircraft for in-flight refueling of NATO tactical
fighters en route to assist a besieged new member, and nearly $7
billion for improving Poland's army and navy.
In order for the new members to receive supplies and
reinforcements from NATO, the alliance would also likely need to
upgrade infrastructure in the new member states, which would
consist of making improvements in transportation and fueling
systems, including roads, ports, airfields, railways, and
pipelines. CBO budgets $3 billion for such work. CBO also factors
in $4.7 billion for the construction of training facilities, and
$0.6 billion for purchase of fuel and ammunition stocks.
CBO estimates the total cost of option 1 at $60.6 billion over 15
years, of which the United States would contribute $4.8 billion,
the new members $42.0 billion, and other members $13.8 billion.
The report acknowledges that it might be politically infeasible
for some NATO members--old and new--to increase their defense
spending drastically, and that "with the current low levels of
threat to this region, ... this lower-cost approach might be
adequate." (16) However,
the study adds that,
if NATO chose simply to provide for a minimum defense
capability
by employing the first three initiatives (C3I, air defense, and
training), the estimated cost of expansion would fall to $21.2
billion, of which the U.S. share would be $1.9 billion.
Option 2--Project NATO Air Power East to Defend the
Visegrad
States ($79.2 billion). According to CBO, options 2-5 "would
attempt to provide an Article V defense against an aggressive and
militarily potent Russia." (17) Under CBO's
second scenario, NATO would project air power eastward by
creating prepared or co-located operating bases (COBs). This
would permit NATO aircraft from western states to fly into and
operate from new member states in time of crisis. Allowing NATO
aircraft to operate directly out of the eastern territories would
obviate the need for purchasing tankers cited in the first
option. Creating NATO-standard COBs--which would include staging
exercises and providing fuel and ammunition storage--would add
$18.6 billion to the first option.
Option 3--Project Power Eastward With Ground Forces
Based in
Germany ($109.3 billion). Option 3 adds ground forces to air
power by enabling nearly all of NATO's 11 divisions to move from
Germany to the Visegrad states in the event of an attack. This
option would not require a troop buildup, but would entail more
funding for: additional combat support (e.g., helicopters,
artillery, and air defenses); reception facilities in the new
member states; storage of ammunition and fuel; and large-scale
training exercises. Choosing this option would add about $30
billion to the above two options, with the U.S. share being $3.6
billion.
Option 4--Move Stocks of Prepositioned Equipment East
($110.5
billion). This option envisions storing equipment sufficient
for
5 brigades of U.S. troops, who would fly in directly from the
United States in the event of an emergency. Existing stocks of
equipment would be moved from their current west European
locations to newly built storage facilities in the Visegrad
countries at an additional cost of $1.2 billion, $290 million of
it funded by the United States.
Option 5--Station a Limited Number of Forces Forward
($124.7
billion). The last option entails moving nearly three
divisions
of U.S. and allied ground forces and two air wings from Germany
to renovated bases in the new member states, where they would be
permanently stationed. This option by itself would cost
approximately, $14 billion, with $5.5 billion paid by the United
States.
To review, the cumulative totals for the CBO scenarios are:
Option 1-- $60.6 billion; option 2--$79.2 billion; option
3--$109.3 billion; option 4--$110.5 billion; and option 5--$124.7
billion.
RAND
In the Autumn 1996 issue of Survival, three analysts at
RAND, a
non- governmental research organization, published another study
of the possible costs of NATO expansion (18)
They observe that some critics of enlargement have been arguing
that the costs of adding new members would be prohibitive, and
counter that expanding the alliance "is not just a financial
calculation, but also a political and strategic one." (19) They also note that some of the costs of
enlargement may be offset by savings in some areas, and that the
alternative of not adding new members might result in
higher
costs for individual member countries.
Like CBO, the RAND authors posit a series of enlargement options.
Rather than assigning a single cost estimate to each option,
however, RAND provides funding ranges for each, based on
different policy choices. RAND also assumes the Visegrad four to
be the most likely new members, though acknowledging that
Slovakia's chances had "clearly diminished." (20
)
The RAND study develops cost estimates based on a menu of policy
choices regarding the path to enlargement chosen by NATO, the
military strategy selected, and the accompanying defense posture.
The RAND authors discuss analytical frameworks for different
defense postures; political rationales and military requirements;
and the political and military tradeoffs and cost distribution.
In general, the RAND analysts contend that the cost of NATO
expansion would be relatively moderate. They do not envision the
need for a buildup of forces in the foreseeable future. In
addition, some of the expansion measures can be made to fit in
with changes that NATO aspirant states likely will be making,
regardless of whether they soon become members of the alliance.
Given the reduced threat environment, these countries will
continue to downsize and streamline their armed forces.
Importantly, as they restructure and modernize, they can do so in
consultation with the alliance so that any changes will ensure
eventual interoperability.
RAND attempts to place expansion costs in perspective by making
several points. First, the report argues, it costs less for a
country to act in concert with an alliance than for it to rely
solely on its own resources for defense. Secondly, the cost of
expansion is small relative to the total amount that the
alliance's wealthy member states already devote each
year--approximately $160 billion by the Europeans--to their
national defense budgets. Finally, the types of changes needed to
accommodate the Visegrad nations would dovetail with NATO's
changing strategy, which now aims at being able to project mobile
forces over distance, both within--and perhaps beyond--the
European continent.
RAND believes that four tasks will define what needs to be done
to accommodate NATO's old and new missions under expansion. First
of all, the new entrants' armed forces must be prepared for
merging with NATO; this will involve modernizing aging equipment
and purchasing new weapon systems, as well as taking other steps
that will ensure that the new members' forces are compatible with
NATO'S. Second, the infrastructure in the new territories must be
upgraded and configured for NATO needs. Third, provisions must be
made so that NATO forces--limited to command staff and support
troops--may be based in the new countries. And fourth, NATO's
current forces must be reconfigured to project power toward the
new countries.
The RAND study then posits four alternative defense postures,
somewhat similar to those constructed by CBO. RAND also develops
increasingly ambitious scenarios, but provides additional
flexibility within each option; for example, in the first option,
two types of surface-to-air missiles are considered, and under
option 2, costs vary according to the number of fighter wings
employed.
Option 1. The "self-defense support" option assumes that
new
member states will be responsible for defending their own
borders, and that western NATO member assistance might be limited
to aiding in such key areas as C3I and logistics; however, the
alliance might provide other forms of aid, such as assisting new
members develop better air defenses, infrastructure, munitions
reserves, and helping them improve their readiness. Option 1
costs range from $10-20 billion.
Option 2. As in the CBO study, RAND's second option adds
air
power, through such steps as the upgrading of European air wings
and the construction of co-located operating bases with munitions
storage facilities in the new member territories. Once more, the
cost of this option would depend on the extent of the forces
used. If 5 fighter wings were readied for eastward deployment in
the event of a crisis, costs would go up to $20 billion; if 10
fighter wings were equipped, costs would rise to $30 billion.
Option 3. The third option combines land forces with air
power.
Current NATO member forces would remain where they are presently
based, but would be prepared to "commit armored and mechanized
forces to perform a broad spectrum of missions in Eastern Europe,
ranging from border defense to peacekeeping and crisis
management." (21) RAND
estimated that
costs
for this option would range from $30-52 billion; the higher
estimate would combine 10 NATO divisions with 10 fighter wings. A
middle option with a $42 billion price tag is discussed in
detail.
Option 4. Under the fourth and final option, set up to
address a
"worst case scenario," NATO would move significant forces--both
land and air--eastward. Estimated costs for this option range
from $55 billion to $110 billion; the latter estimate arises from
forward deployment of the 10 divisions and air wings of option 3.
RAND points out, however, that because there is no imminent
threat, "such a posture is clearly not needed today."(22)
The RAND authors argue that the defense posture NATO ultimately
adopts will depend upon the interaction of the political and
strategic approaches chosen by the alliance. RAND identifies
three political approaches to enlargement: an evolutionary path
that assumes no imminent security threat in the area; a "promote
stability" track that sees NATO membership playing a key role in
fostering democracy and security in the region; and a "strategic
response" that would be appropriate only if Russia were to emerge
as a threat.
In accordance with these political considerations, policymakers
must decide which military threat to prepare for: low-intensity
local conflicts; regional dangers, which might be comprised of a
coalition of medium-size powers; or a theater threat, which could
be presented by Russia, allied with the Commonwealth of
Independent States. The RAND analysts believe that an assessment
of the political and military situation, as presented by these
six conditions, will help determine which defense posture would
be most consistent and effective.
RAND argues that if expansion is to proceed, it would be
preferable for NATO to make a decision early, so that the
alliance and those whom it invites to begin negotiations over
membership would have more preparation time; corollary to this,
earlier membership would mean that total enlargement costs would
be spread over a longer time period, thereby reducing the size of
annual payments.
On the topic of burdensharing, the authors note that member
states currently are responsible for funding their own forces,
and pay a share of the NATO common infrastructure costs. The
amount that any given country will contribute to expansion will
depend upon how large its share is of the common infrastructure
budget and upon how extensively its forces will be used. Thus,
under the first option (self-defense support), a larger share of
the burden would be borne by the new members, while projecting
air and/or ground forces would entail greater expenses by current
members. Under RAND's above-mentioned $42 billion "middle"
scenario, for example, current members would contribute
approximately $25.6 billion (61%), new members would pay $8.0
billion (19%), and the remaining $8.4 billion would come from the
NATO infrastructure funds. Of this amount, the U.S. share of the
total package could range from $420 million to $1.4 billion--an
estimate that appears to assume a redistribution of
contributions.
FACTORS AFFECTING THE COST OF EXPANSION
The three studies on the cost of expanding NATO provide three
different-- and quite disparate--cost ranges. The Clinton
Administration estimates the price of expansion at between $27
billion and $35 billion, the Congressional Budget Office puts it
at $21-126 billion, and RAND at $10-110 billion. Why are there
such enormous differences?
Part of the answer is that there are two fundamentally dissimilar
approaches: the CBO and RAND studies sketch several different
types of possible threat environment. They posit what they
believe would be the necessary steps to counter the various
threats, and then calculate the approximate costs for each step.
The Clinton Administration, on the other hand, more narrowly
defines the threat (based on intelligence projections and
political judgements) and the implied defense posture, leading to
a much narrower range of estimated costs.
Numerous factors will affect any study of the cost of enlarging
NATO. An understanding of the underlying assumptions is key at
this early stage, since the alliance as a whole has yet to decide
upon a large number of issues that will guide funding needs.
THREAT
The type of deployment NATO deems appropriate will be shaped by
the evolving perceptions of current and future threats to the
alliance: is a resurgent Russia the major power to be guarded
against? If so, then would an attack originate in the Kola
Peninsula, where a large share of the former Warsaw pact forces
and equipment were relocated, and then sweep down across the
plains of Poland? What kind of troops and armaments would the
Russians be able to muster if they launched an invasion; would
NATO face an endless wave of modern tanks, supported by
state-of-the-art fighter aircraft? If such a threat is not
imminent, when might Russia, which, according to many analysts,
is too weak to pose a serious threat today, be able to rebuild
its military? (23) Should
the alliance be
looking instead to its south? (24) Which are
the more likely scenarios--border clashes, or civil ethnic
strife, as in the former Yugoslavia? The greater and more
geographically dispersed the perceived threat, the more extensive
the likely deployment, and the steeper the cost.
None of the three studies specifies that Russia--or any other
country--will pose a significant threat to any members of the
alliance in the next few years. The Administration assumes an
environment devoid of a significant conventional threat for the
foreseeable future; it notes that if a serious threat to European
security were to emerge, the alliance would have sufficient time
to prepare an appropriate response. Moreover, the Administration
implies that expanding NATO will help avert a threat from
developing in the future. In a speech to graduating cadets at
West Point, President Clinton contended that "there is no
powerful threat in part because NATO is there. And enlargement
will help make it stronger. " (25)
The CBO authors declare that their defense plans assume "an
uncertain threat;"(26) as
noted earlier, the
longest chapter in the CBO report is devoted to the first option,
which would prepare the alliance's new members to defend against
"a border skirmish with a neighbor or a limited war with a
regional power"; in options 2 through 5, CBO analysts set up a
"resurgent Russia" as a potential threat, which substantially
raises costs. They add, however, that Russia's military has
suffered from deep troop cutbacks, low morale, obsolescent and
ill-maintained equipment, and reductions in training.
The authors of the RAND study maintain that the CBO work is aimed
mainly at defending against Russia, whereas their approach "is
not threat- but rather goal- and capability-based[,] ... anchored
in the premise of avoiding confrontation with Russia, not
preparing for a new Russian threat. (27) The
RAND cost estimates, not surprisingly, are lower than CBO'S. As
noted, RAND's escalated defense postures are designed to cope
with: low-intensity local conflicts; regional dangers--comprised
of a group of medium-size powers; and a theater threat, composed
of Russia in league with allies.
DEPLOYMENT
Perhaps the major immediate factor driving costs is the potential
deployment of forces: what kind of military support will be
offered by current members to the new countries, and what will be
expected of them in return? Does NATO intend simply to transport
reinforcements to any of the new members if they are attacked? At
the opposite end of the spectrum, would NATO, in a changed
security environment, envision stationing a significant number of
troops and aircraft in the new territory.? The more troops and
equipment involved in defending the new entrants, the more
expensive the expansion.
Because the CBO and RAND studies offer a menu of choices for
threat scenarios, they also provide a variety of different
possible deployments. There is an apparent consensus on two
matters: 1) at a minimum, the alliance should help the new
members prepare to defend themselves, with NATO reinforcements if
necessary; and 2) the first steps to be taken should include
ensuring interoperability through providing C3I, air defense, and
training.
CBO admits at the outset that "[it] is difficult to determine
what NATO would need to do to provide an adequate defense for the
Visegrad nations." (28) If
NATO
policymakers
agree that the threat is--and will remain--low, then the first
option--strengthening Visegrad defense forces and providing for
NATO reinforcement--might be considered sufficient; the $21
billion subset of this option, however, would "only marginally
improve the defenses" of the Visegrad countries. (29) CBO's four additional options are geared
toward an
increasingly formidable threat; the addition of first air power
and then ground forces, of prepositioning equipment, and of
stationing troops, each boosts costs considerably.
Although the RAND authors also present a series of increasingly
ambitious deployments, their report highlights a $42 billion,
joint (air/ground) power projection program, similar to the type
of defense posture outlined by the Clinton Administration
(estimated to cost $27-35 billion).
This points up an important difference among the studies: the CBO
study's roughly comparable joint power projection scenario (the
third option, assessed at $109 billion), would still likely cost
significantly more than the "self-defense support" option, set at
about $61 billion, even if similar threat assumptions were used.
Why are there such large differences for a similar defense
posture? Part of the cost disparity may arise from different
perceptions among defense analysts of what constitutes an
"adequate" defense. It would appear that more micro-level
assumptions--those regarding the specific types of weapon systems
and equipment that would be necessary--can have a major effect on
aggregate costs. For example, CBO assumes that, for an
appropriate air defense, new members would need to acquire modern
Patriot surface-to-air missiles, whereas the Administration
assumes the use of older--and cheaper--I-HAWK type missiles. The
RAND study contrasts the costs of Patriots versus a far less
expensive Russian air defense system.
NEW MEMBERS
Other factors affecting cost include the number of new
states to
be added, who will join, where they are located,
how large they
are, and when they will become members. Generally
speaking, the
more countries that are added, the higher the initial cost of
providing mutual security. Also, it would cost less to add a
country if it is in closer proximity to existing NATO members, is
smaller in size, has a stronger economy and a better trained and
equipped military, and, arguably, joins sooner rather than
later--financing direct enlargement measures over a longer period
would mean smaller annual payments. (30)
Concerning the new states to be added, CBO and RAND assume that
Poland, the Czech Republic, Slovakia and Hungary will be the new
members, while the Pentagon simply states that it assumes a
"small group of ... countries." According to one defense budget
analyst, removing Slovakia from the equation would not change the
numbers "significantly;" the RAND report notes that "[the
marginal cost of including Slovakia ... would be small[.] (31)
BURDENSHARING
A particularly thorny issue is the distribution of costs among
members. Nearly all of the current member states have been paring
back their defense spending since the end of the Cold War. And
the prospective members are busy repairing the economic damage
wrought by four decades of communism, and will be hard-pressed to
undertake large increases in their defense budgets. If a member
state perceives that it is bearing a disproportionate share of
the burden, its legislature may be less likely to ratify the
agreement.
In general, all three studies (and, according to CBO, NATO staff
as well) assume that the incoming countries will bear a large
share of the costs of enlargement, that infrastructure
improvements will be paid for, in part, out of one of NATO's
common funds--the Security Investment Program (SIP), and that
current member countries will be responsible for financing the
use of their own forces. There are some differences, however,
among the three reports on the distribution of costs.
The Clinton Administration, as noted above, assumes that
"standard NATO cost-sharing rules would be applied for new
defense arrangements--i.e., individual NATO nations pay for ...
their own ... forces while costs for infrastructure are shared
where they qualify for common funding." (32)
The executive branch report concedes that "these costs would, of
course, increase if there were a dramatic increase in the threat
or a decision by the United States to bear a larger share of the
costs than would otherwise fall on our current allies or the new
members." (33) The
Administration assumes
that, for total enlargement costs, new nations would pay
approximately 50%, current non-U.S. allies roughly 44%, and the
United States about 6%.
CBO notes that Central European defense budgets have been
declining, and cites Western defense officials who state that
"key allied nations are reluctant to increase their contributions
to the SIP." (34) These
factors, CBO analysts
believe, raise serious questions about both the ability of new
members and the willingness of current members to meet the
necessary expenses of expansion. CBO therefore assumed that,
since the United States and Germany have been the most ardent
proponents of expansion, the two countries would shoulder a
larger portion of the burden. Accordingly, CBO projects that the
new states would pay for 70% of their infrastructure
improvements, and that the remaining 30% would be divided into
10% increments, paid equally by the United States, Germany, and
the SIP. CBO also makes the "somewhat arbitrary" assumption that
the United States and Germany would pay 20% of the cost of
upgrading and training the Visegrad nations' forces. The study
concludes that the U.S. share of SIP would fall from 28% to 22%,
as some current members increase their shares and new members
begin to add to the fund. For total expansion costs--using, for
purposes of illustration, the $60.6 billion option 1--the new
members would pay 69%, non-U.S. allies 23%, and the United States
8%.
The RAND study reasons that shares will be determined in part by
the defense posture that NATO adopts. For purposes of
illustration, they break down cost shares for their $42 billion,
joint (air/ground) power projection posture; their calculations
yielded 19% of the costs accruing to new members, 20% to the
common fund (which would have to increase considerably in size),
and 61% to current members. RAND notes further that "the burden
on the US can be reduced if the number of participating countries
extends beyond the core group of the US, the UK, France and
Germany" (35) RAND
concludes that "the
US
annual share could range from $420m to $1.4bn, depending on how
... decisions are made (36)
NATO'S NEW MISSIONS
The engagement of NATO forces in the former Yugoslavia marks a
change in the role of NATO, and the alliance may continue to
undertake new missions. Traditionally, the alliance has had the
treaty's Article V (an attack on one is regarded as an attack on
all) as its defining mission. With the dissolution of the Soviet
Union and the Warsaw Pact, however, increasing emphasis has been
placed on what Danish Foreign Minister Niels Helveg Peterssen has
termed the soft instruments of security --peacekeeping and peace
enforcement, search and rescue, drug interdiction, anti-terrorist
activities, and humanitarian assistance. (37)
Unanticipated contingencies such as the Bosnia deployment may be
expensive for
participating nations. A more proactive NATO will be a more
costly NATO. (38)
According to RAND, the self-defense option alone "does not
provide for ... NATO combat forces to carry out new Article 5
commitments." (39) Both
RAND and the
Administration believe that a deployment involving a combination
of self-defense and air/ground power projection would mesh well,
not only with NATO s task of extending its security guarantee to
the new states, but also with whatever new, non-Article V
missions that NATO may undertake. Power projection would be
suitable both for confronting a conventional attack, as well as
for crisis management, both within and, if necessary, beyond the
European continent.
Some have cautioned that if expansion proceeds without a
carefully articulated mission and a roster of requirements,
member states will be essentially giving NATO a blank check that
current allies must fill in. Others maintain that costs will
emerge through subsequent negotiations--and decisions- -over the
types of missions and defense posture the alliance will adopt. As
the RAND authors argue, the defense posture--and implied
deployment and budget-- that NATO ultimately adopts will depend
upon the interaction of the political and strategic approaches
chosen.
ADDITIONAL CONSIDERATIONS
A number of other issues may be raised as policymakers assess the
likely future costs of NATO expansion:
TIMING
When will the bills come due--will they be spread out fairly
evenly over the transition period to "mature capability," or will
they be heavily front loaded? Member countries may spend less on
their own armed forces because they are members of NATO. Once the
alliance has expanded and been made interoperable, national
defense spending by individual countries may not need to be as
high as would be the case if they were not a part of NATO,
because missions and responsibilities are rationalized through
specialization. Is it possible that alliance costs could actually
fall off in the out years, as the new nations' militaries
modernize and become interoperable and their economies grow
stronger?
SAVINGS
Will there be any offsetting savings for the United States or
other members states? It is likely that a portion of the costs of
joining NATO paid by the new entrants would flow back into the
U.S. economy. For example, as they upgrade their air defenses,
new members will need to buy electronic systems, surface-to- air
missiles and fighter aircraft. Some of these will likely be
procured from American manufacturers, which would indirectly
offset the economic impact of increased U.S. defense
expenditures. Also, as the economies of the new entrants continue
to grow, their private sectors are expected to contribute to the
development of national transportation and communications
systems, which should augment the alliance's defense capability.
RUSSIA
Seeing NATO expand to include former Soviet allies, how likely is
it that Russia would want to or be able to institute a
substantial program to build up its armed forces? (40) Because Russia's economy is in worse
condition than
the economies of most central and eastern European countries, and
because Russia would have to rearm without foreign assistance, a
military buildup and modernization would involve great economic
and social sacrifice.
ALTERNATIVE PERSPECTIVES
The three studies discussed in this report reflect primarily a
U.S. view on NATO enlargement. No official estimates of expansion
costs have been issued by non-U.S. member governments to date. Do
current NATO allies and prospective new members share these
assessments--particularly the Administration's--of reduced threat
and the consequent defense posture and costs?
FURTHER EXPANSION
NATO has expanded four times since the alliance was formed.
(41) Regarding the current
accessions, the
Administration has declared repeatedly that "the first shall not
be the last." When might NATO next add new members? Would the
next entrants come in on another "wave," or would individual
countries be let through the turnstile one by one? Who might the
next members be--Slovenia and Romania? If so, the cost estimates
might need to be revised upward. On the other hand, if one of the
former neutral countries, such as, Austria, Finland, or Sweden
were to join, per-country costs might actually decline. (42)
BURDENSHARING
How will the costs be shared; will standard burdensharing rules
continue to apply, or will members seek to renegotiate their
shares? Will the entire NATO common fund need to grow in size?
How realistic are the three studies' burdensharing assumptions?
CBO assumed that, since the United States and Germany are the
most avid proponents of expansion, they will take on a larger
part of the burden, but some analysts question whether either
country would be willing to contribute a disproportionate amount.
Also, must contributions be made as costs are incurred (for
example, as large weapons systems are purchased) or might they be
financed and redistributed over time, so that new entrants'
shares would rise as their economies developed, perhaps by
pegging their share to growth of GDP? On the other hand, if the
economic performance of one or more of the new states began to
falter, would other NATO members be willing to pick up the slack,
either through bilateral lending or grants, or more extensive use
of NATO's Security Investment Program? (43)
Could costs instead be stretched into the future?
POLITICAL PRESSURES
National office holders in the United States and Canada are under
considerable political pressure to eliminate their budget
deficits, while most of the European members of NATO are also
attempting to reduce spending in order to meet the rigorous
fiscal qualifications for entry into the European Monetary Union.
At the same time, many Central and Eastern European countries are
facing budgetary constraints under the International Monetary
Fund's economic reform programs. In addition, once they have been
accepted into NATO, the new entrants will likely set their sights
on--and adjust their budget priorities for--joining the European
Union. In short, most members of the enlarged NATO will be
reluctant to increase defense spending. What are the likely
future interactions between budget and policy--will the former
come to drive the latter? The CBO report notes that "if the
parliaments of the 16 member nations actually voted to expand
NATO, the current low-threat environment would probably allow
those legislative bodies to spend as much or as little as they
chose to carry out the expansion. (44)
(1) See: U.S. Library of Congress. Congressional
Research Service. NATO: July 1997 Madrid Summit Agenda. By
Stanley R. Sloan. CRS Rpt. No. 97-443 F. Updated June 5, 1997. Back to text
(2) For additional background, see: NATO:
Congress Addresses Expansion of the Alliance. By Paul Gallis.
IB95076. Updated regularly. Back to text
(3) Appendix VIII. The North Atlantic Treaty.
Article 5. NATO Handbook . NATO Office of Information and
Press. Brussels. October, 1995. p. 232. Back to
text
(4) For additional background, see: Poland,
Czech Republic, Slovakia, and Hungary: Recent Developments.
By Julie Mm. IB92051. Updated regularly. And: Romania's New
Government: Politics, Policies, and Relations with the United
States. By Carl Ek. 97-451 F. April 10, 1997. Back
to text
(5) U.S. Department of State. Bureau of European
and Canadian Affairs.
Report
to the Congress on the Enlargement of the North Atlantic Treaty
Organization: Rationale,
Benefits, Costs and Implications
(6) Report to Congress on NATO Enlargement
. p. 8. Back to
text
(7) Report to Congress on NATO Enlargement
. p.
10. Back to
text
(8) Report to Congress on NATO Enlargement
. p.
12. Back to
text
(9) Report to Congress on NATO Enlargement
. p. 12. Back to
text
(10) However, the report does suggest that the
United States might help out with "an undetermined portion of the
cost of restructuring the militaries of new members, contingent
on decisions by NATO, new member states, and the United States
Congress." See: Report to Congress on NATO Enlargement.
p. 15. Back to
text
(11) One analyst has noted that the costs for
strengthening regional reinforcement capabilities are steep for
the allies because they have been somewhat slow to implement the
New Strategic Concept. Back to
text
(12) For further information, see: U.S. Library
of
Congress. Congressional Research Service. Partnership for
Peace.
By Paul E. Gallis. CRS Rpt. No. 94-351 F. Updated Aug. 9, 1994.
Back to
text
(13) Report to Congress on NATO
Enlargement. p. 15. Back to
text
(14) U.S. Congressional Budget Office. CBO
Papers. The Costs of Expanding the NATO Alliance. March,
1996.
Washington, D.C. Back to
text
(15) Costs of Expanding the NATO
Alliance. p. xv. Excluding current NATO and Visegrad
countries, Poland has
borders with Russia (Kaliningrad Oblast), Lithuania, Belarus, and
Ukraine; Slovakia touches Ukraine and Austria; the Czech Republic
shares a border with Austria; and Hungary has common frontiers
with Ukraine, Romania, Serbia, Croatia, Slovenia, and Austria. Back to
text
(16) Costs of Expanding the NATO
Alliance. p. xv. Back to
text
(17) Costs of Expanding the NATO
Alliance. p. 41. Back to text
(18) What Will NATO Enlargement Cost? By Ronald
D. Asmus, Richard L. Kugler, and F. Stephen Larrabee. Survival
. Vol. 38, No. 3. Autumn, 1996. pp. 5-26. Back to text
(19) What Will NATO Enlargement Cost? p.
5. Back to text
(20) What Will NATO Enlargement Cost? p.
5. Back to text
(21) What Will NATO Enlargement Cost?
p. 15. Back to text
(22) What Will NATO Enlargement Cost?
p. 16. Back to text
(23) See, for example: Russia's Dilapidated
Army.The Economist. Vol. 343, No. 8019. May 31, 1997. p.
49. Back to text
(24) See, for example: Instability to the South
Worries U.S. Forces in Europe. By William Drozdiak. Washington
Post. May 19, 1997. p. Al. Back to
text
(25) NATO plan Draws Some Salutes at West
Point. By Peter Baker. The Washington Post. June 1, 1997.
p. A9. Back to text
(26) Costs of Expanding the NATO
Alliance. p. 13. Back to text
(27) What Will NATO Enlargement Cost? p.
7. Back to text
(28) The Costs of Expanding the NATO
Alliance. p.xii. Back to text
(29) The Costs of Expanding the NATO
Alliance. p. xvi. Back to text
(30) However, some analysts note that this
argument ignores the economic concept of the time value of money,
while others maintain NATO actually might pay less for a later
entrant, which presumably would have been developing economically
and modernizing its military unilaterally. Back
to text
(31) What Will NATO Enlargement Cost? p.
18. Back to text
(32) Report to Congress on NATO
Enlargement. p. 13. Back to text
(33) Report to Congress on NATO
Enlargement. p. 9. Back to text
(34) The Costs of Expanding the NATO
Alliance. p. 21. Back to text
(35) What Will NATO Enlargement Cost? p.
24. Back to text
(36) What Will NATO Enlargement Cost? p.
26. Back to text
(37) U.S. Library of Congress. Congressional
Research Service. NATO Adapts for New Missions: The Berlin
Accord and Combined joint Task Forces. By Stanley R. Sloan.
CRS Report No. 96-561 F. June 19, 1996. Also see: U.S. Library of
Congress. Congressional Research Service. NATO Future: Beyond
Collective Defense. By Stanley R. Sloan. CRS Report No.
95-979 S. Sept. 15, 1995. Back to text
(38) Other analysts, however, argue that using
NATO to support such missions could promote more effective
burdensharing than if missions were conducted unilaterally or on
an ad hoc basis. Back to text
(39) What Will NATO Enlargement Cost? p.
13. Back to text
(40) See: U.S. Library of Congress.
Congressional Research Service. NATO Enlargement and Russia.
By Steven Woehrel . CRS Rpt. No. 97-477 F. Updated May 28,
1997. Back to text
(41) NATO added members on four previous
occasions. Because these earlier expansions all occurred during
the Cold War, when the threat environment was drastically
different, defense budget analysts believe that comparing the
cost of past expansions would not be useful for policymakers
today. Greece and Turkey were added in 1952, when Stalin was
still head of the Soviet Union, which had recently detonated its
first atomic weapon. In 1955, West Germany, still under allied
occupation, was permitted to create armed forces and join NATO.
Much of the weaponry and equipment it subsequently acquired were
American; in addition, as troops were added to the Bundeswehr
, it is possible that fewer American soldiers had to be
stationed in Europe. Spain, which joined in 1982, was, in the
words of one analyst, "a geostrategic bargain"-- NATO gained
control of the western entry to the Mediterranean, air and naval
bases, and fallback territory. Finally, in 1990 former East
Germany became a part of NATO; the costs were absorbed by the
united Germany. Until the fall of the Berlin Wall, NATO allies
were constantly attempting to strengthen the alliance's defense
capability. Back to text
(42) See: U.S. Library of Congress.
Congressional Research Service. NATO Enlargement and the
Former European Neutrals. By Stanley R. Sloan. CRS Report No.
97-249F. February 18, 1997. Back to text
(43) See: U.S. Library of Congress.
Congressional Research Service. NATO: Alliance Expansion,
Partnership for Peace, and U.S. Security Assistance. By
Richard F. Grimmett, Paul E. Gallis, and Larry Nowels. CRS Rpt.
No. 97-531 F. May 9, 1997. Back to text
(44) The Costs of Expanding the NATO
Alliance. p. 41 Back to text
will assist the Party or Parties so attacked by taking forthwith,
individually and in concert with the other Parties, such action
as it deems necessary, including the use of armed force, to
restore and maintain the security of the North Atlantic Area. (3)
