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NATO Burdensharing After Enlargement August 2001

In planning for the common defense of the alliance, NATO mainly relies on the national military capabilities of its members. But some common costs of the alliance must be apportioned among the allies, such as maintaining a professional civilian staff, a joint military headquarters, and pipeline systems to ensure the distribution of petroleum products needed for military use in times of crisis or war. To pay those costs, NATO has created three common budgets and has set shares that each member is to pay:

• The civil budget pays the cost of the civil headquarters and personnel in Brussels.
  
  
• The military budget pays for the alliance's military headquarters and activities, including the Supreme Headquarters Allied Powers Europe in Mons, Belgium, as well as the NATO Airborne Early Warning and Control program.
  
  
• The infrastructure budget, known as the NATO Security Investment Program (NSIP), allows the alliance to underwrite the cost of support facilities, including command, control, communications, and intelligence facilities; transportation; and storage facilities.

Compared with the nearly $470 billion that the NATO countries spend on defense each year, the common budgets represent a relatively minor expenditure. In 1999, the civil budget was $161 million; the military budget, $496 million; and the NSIP budget, $458 million (see Table 5).
 

The cost shares that each member pays are determined by consensus among the allies and typically change only after the addition of members or as a result of new contingencies. The civil budget cost shares have remained relatively constant since 1955 and the military budget cost shares since 1966. The NSIP cost shares, however, have been reviewed more frequently because those funds are used for specific construction projects.

France, which does not participate in NATO's integrated military command, opts out of many activities funded through the common budgets. When France does not participate, other countries pay a prorated larger share of the military and the NSIP budgets. Spain joined the integrated command in 1998 and now pays more toward the common budgets. Countries can also negotiate changes in their shares. For example, in 1994 Canada persuaded several allies to assume half of its NSIP share.

The U.S. share of the civil and military budgets has stayed around 25 percent since the budgets were established in 1951. The addition of Poland, Hungary, and the Czech Republic to NATO reduced the U.S. share of the civil budget from 23.3 percent to 22.5 percent and the military budget from 28.0 percent to 26.2 percent. The U.S. share of the NSIP budget fell from 28.3 percent to 25.2 percent.
 

DETERMINING NATO'S INFRASTRUCTURE BUDGET

Whereas the military and civil budgets pay for the maintenance of NATO's bureaucracy and infrastructure, the NSIP budget may be spent on a variety of projects. The NSIP planning process begins with the head of one of NATO's two force commands, always an American flag officer, deciding what projects are needed for a given "capability package" to carry out a particular mission. The proposed projects are screened by NATO's senior resource board, which reviews the financial aspects. The program is then authorized by the North Atlantic Council, NATO's top decisionmaking body.

The size of the NSIP budget is proposed by NATO's military and civilian staff, but ultimately its scope is determined by the amount that the alliance members appropriate to it. In that regard, the U.S. Congress and its two appropriations subcommittees on military construction are significant players. In most years, the Congress appropriates less in NSIP funding than the President requests.

The NSIP funds operational facilities that fulfill a commitment to NATO that is beyond a country's national requirements for defense--for example, a radar facility that is part of NATO's common air-defense system. Because all U.S. operational facilities in Europe are part of the American contribution to NATO, they all are eligible for NSIP funding; many European countries' facilities are considered national requirements and hence are ineligible.
 

COMMON BUDGETS AFTER ENLARGEMENT

The addition of three new members to NATO in 1999 slightly reduced the financial burden for most of the allies. Of the new allies, Poland paid 1.3 percent of the common costs; Hungary, 0.3 percent; and the Czech Republic, 0.5 percent. NATO's senior resource board determined those shares largely on the basis of each country's gross domestic product. As a result of that reapportionment, most allies--including the United States, the United Kingdom, and Germany--saw a slight reduction in their cost shares.

The common costs of enlargement--which NATO has estimated at $1.5 billion over 10 years--will be shared by the allies through the military budget and the NSIP. Of those costs, $1.3 billion is for infrastructure improvements that are to be paid by the NSIP. The U.S. share of that cost will be approximately $400 million--or roughly one-fourth--over 10 years.

The commonly funded improvements fall into four broad categories:

• Communication links to the new allies. Those links are needed to connect the defense ministries and military headquarters in the Central European countries with one another and with those in the other allied capitals. Those links include fiber-optic cables and satellite links, the latter being particularly necessary in the case of Hungary, which does not border any other NATO member.
  
  
• Air-defense systems, including radars on the ground and links to NATO's integrated air-defense system. Those improvements will help the alliance gain a complete picture of the skies over the enlarged NATO territory.
  
  
• Airfield improvements so that bases in the three new allied countries can accommodate other allies' aircraft. Improvements include lengthening runways and constructing reception areas so that transport aircraft can reinforce a new ally in a crisis. They also will enable the new allies, relying on other countries' lift capabilities, to move their forces to reinforce another ally facing a threat. In addition, some improvements--such as water pipe connectors and electrical sockets--are needed at Polish naval facilities to install compatible equipment that will allow them to unload and resupply NATO ships while they are in port.
  
  
• Training ranges, to enable the new allies to conduct exercises with other NATO members.

The Clinton Administration's budget for fiscal year 2001 requested $12 million for NATO's enlargement. The DoD enlargement study anticipated a request of $32 million for enlargement costs in 2002, with those costs peaking in 2005 at about $70 million and then decreasing through 2008. The Congress appropriates funding for the NSIP out of the Military Construction Appropriations Act and funding for the military budget out of the Army Operations and Maintenance account in the Defense Appropriations Act. The Congress appropriated $172 million for the NSIP and $119 million for the NATO military budget in fiscal year 2001.

Although enlargement is expected to cost $1.5 billion over the next 10 years, it is not yet clear what its net effect will be on the overall common budgets. U.S. officials at the Pentagon and in Brussels have indicated that the NATO infrastructure budget could remain fairly constant over the next several years at about $800 million a year. In 1993, NATO redirected NSIP funding toward projects that increase force mobility and flexibility, reducing the amount it spends on other projects. Because of that adjustment, it is unlikely that U.S. payments to the NSIP will increase in the near term.
 

NSIP FUNDING OF U.S. INSTALLATIONS IN EUROPE

As noted earlier, nearly all U.S. operational installations in Europe are eligible for NSIP funding because they are used to carry out the U.S. commitment to NATO rather than purely national military operations. The U.S. Mission to NATO estimates that in most years the United States receives greater funding for its activities in Europe than it pays into the infrastructure fund. For instance, the NSIP spent roughly $685 million in 1999 on activities that benefited U.S. forces, compared with the American contribution of $400 million. Over the 10 years ending in 1999, U.S. facilities received approximately $4.1 billion from the NSIP, while the United States contributed $2.7 billion to the program. U.S. officials calculate that this country received more money for its installations than it paid into the NSIP in every year of the past decade except 1994.

An example of the benefit the United States receives from the NSIP is improvements to the air base at Aviano, Italy, the main base for air operations over Kosovo and Serbia during the Kosovo conflict. NATO opted to pay for some nonoperational facilities that support U.S. forces and their families at the base that would not normally be eligible. American officials estimate that securing NSIP funding for those projects ultimately saved American taxpayers about $190 million.
 

NATO'S AIRBORNE EARLY WARNING AND CONTROL PROGRAM

In addition to covering the cost of the alliance's military headquarters, the common NATO military budget funds the operation and modernization of the NATO Airborne Early Warning and Control program. Through this program, NATO jointly owns and operates a fleet of 18 E-3A airborne warning and control system (AWACS) planes and two Boeing 707 trainers. The main operating base for the program is at Geilenkirchen, Germany, with some planes stationed at bases in Italy, Turkey, Greece, and Norway. Those aircraft, which were used to support NATO operations in Bosnia and Kosovo, provide an early-warning system against low-level aircraft, manage air traffic, and assist close air support as well as search and rescue operations. The operation of the AWACS program is funded out of an annual common NATO budget that is divided among the participating countries; in 2000, the U.S. share was 40 percent ($66 million) of the total $166 million.

Proponents of the AWACS program point to it as a successful example of burdensharing within the alliance; the operating crews and support personnel are perhaps NATO's best-integrated international unit. Some U.S. and allied officials believe that it provides a possible template for coordinating other common assets.

Common assets could save money by avoiding unnecessary overlap in national capabilities, especially in support functions. That could prove particularly advantageous to the United States, which provides much of NATO's airlift; intelligence; and command, control, and communications capabilities. If the alliance as a whole provided those capabilities, the United States could realize some cost savings without diminishing NATO's capabilities.

Despite the potential cost savings, the United States may prefer to maintain a national capability in support functions. Common assets would require consensus in the alliance before they could be deployed, which could limit the United States' ability to act unilaterally. Under the Combined Joint Task Force (CJTF) concept, a "coalition of the willing," comprising a subset of NATO members, can use alliance assets for out-of-area missions with the consensus of all 19 member countries. While the CJTF concept dates only to 1996 and remains in large part theoretical, it appears that one ally could block use of alliance assets for a given mission. So even though common capabilities offer the benefit of cost savings, forgoing national capabilities could result in this country's ability to act being constricted by allied opposition.

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