NATO Funding Shortfalls Likely to Continue

The latest Russian military intervention in Ukraine is forcing NATO to refocus its attention on its eastern flank. But concerns about a resurgent Russia will not prompt a large boost in alliance procurement, according to analysts.

Last year, Russia annexed the Crimea region of Ukraine and sent troops and equipment to aid pro-Moscow separatists in the country’s east, where fighting continues.

“That has really upended security in Europe,” said John R. Deni, a research professor at the U.S. Army War College. “It has been a fundamental change in the challenges facing the U.S. and its European allies in how and where we best protect Western and U.S. interests.”

Analysts noted that Russian military forces have also been violating other European countries’ airspace and territorial waters and flying strategic bombers near the coast of California.

“The new Russian aggression is not limited just to Crimea and Ukraine. Russia is acting much more aggressively all across the board,” said Jorge Benitez, a NATO expert at the Atlantic Council, a Washington, D.C.-based think tank.

Concerns about Moscow’s intentions have elicited calls by U.S. and NATO leaders for European countries to increase their defense spending, especially when it comes to procurement. Currently only five of the 28 NATO countries — Estonia, Britain, Poland, Greece and the United States — meet the alliance’s goal for spending 2 percent of GDP on their militaries, according to NATO.

Secretary of Defense Ash Carter said the United States currently provides 70 percent of all defense spending within the alliance. “We must all accept our fair share of security responsibility,” he said at a forum in Berlin in June. “We must all choose to invest in, develop and field new capabilities now and in the future.”

Although 18 members have made at least nominal increases in their military budgets this year, overall alliance spending is expected to decrease by 1.5 percent, to $893 billion, said NATO Secretary General Jens Stoltenberg at a June press conference in Brussels.

Giri Rajendran, a defense and economics analyst at the U.K.-based International Institute for Strategic Studies said, “You’ve got a $100 billion differential between the aspiration and the actuality” of Europe’s contribution to NATO defense spending.

Only seven countries are expected to meet the NATO benchmark of allocating 20 percent of their military budgets to major equipment expenditures and R&D, he added.

Stoltenberg is pushing the alliance to spend more.

“We need to redouble our efforts to reverse this trend,” he said. “We are facing more challenges, and we cannot do more with less indefinitely.”

But analysts don’t expect to see major bumps in spending in the coming years from most alliance members, with the vast majority of countries still falling short of the 2 percent threshold.

One reason is the economic situation in Europe.

“The NATO targets are not binding,” noted Sam Perlo-Freeman, the director of the military expenditure program at the Stockholm International Peace Research Institute. “There is … stronger pressure on countries to try to meet them than there has been in the past, but countries’ budgetary considerations are still going to be a limitation on that, especially in the climate of austerity that’s still holding sway across Europe.

“So for the most part countries aren’t going to be able to afford — or to feel that they can afford — major increases in military spending in total.”

U.S. companies are disadvantaged by the existing economic and political conditions in Europe because there is pressure on governments to buy military equipment from native companies rather than from foreign suppliers, analysts said.

“Where they can, they’re going to try and spend that money at home in order to improve their economic growth,” Deni said.

Rajendran said the state of the defense industrial base in Europe will also create incentives for political leaders to buy European items. “This is all happening in an environment where there is in large measure industrial overcapacity in Europe and a lack of consolidation in the defense industrial base. So there is not much money going around, and [if there are] any increases I think there will be strong political pressure … for that to be spent domestically to bolster what already is an industrial base that is already struggling for funding.”

Across the Atlantic, U.S. defense spending is constrained by the looming return of sequestration and the possibility of a series of continuing resolutions in Congress that freeze military spending. That could make it more challenging for the Pentagon to ramp up procurement in response to a resurgent Russia.

“It’s hard to see how they can change because right now the acquisitions that are in progress were all based on the 2014 [quadrennial defense review] or the 2012 strategic review, and none of those things foresaw the very different security environment that we have now in 2015 with a much more aggressive and militant Russia,” Benitez said. “They see the problem and there’s a desire to change it but … it’s going to be difficult, especially under the fiscal and budgetary constraints that they’re in.”

Meanwhile, the leading military powers in Western Europe are modestly increasing or maintaining current spending levels, analysts said.

German officials recently announced that the country would spend an additional $9 billion over the next five years, partly to beef up its land forces. A sizeable chunk of the money will likely go toward bringing back battle tanks that had been mothballed, experts said.

“That sort of [new spending] level isn’t going to allow for significant new major systems that they had not already been planning,” Perlo-Freeman said.

Niels Annen, a German parliamentarian and foreign affairs spokesman for the Social Democratic Party, said spending increases would be limited going forward.

“Of course [meeting the 2 percent target] is not going to happen, at least where Germany is concerned,” he said in June during a panel discussion at the Center for Strategic and International Studies, a Washington, D.C.-based think tank.

France announced that it would boost defense spending by about $4 billion over the next four years. French leaders indicated that money would be spent on counterterrorism and domestic security forces, rather than new procurement programs.

“The additional funding would be going … to ensure that planned reductions in personnel would not be as severe as initially intended,” Rajendran said. “That’s a direct result of the Charlie Hebdo attacks in January, which has meant that they’ve had to deploy personnel to protect key installations and so on.”

The British government announced in July that the U.K. would maintain defense spending above 2 percent of GDP through 2020, with expenditures growing slightly above the rate of inflation. The move surprised many observers who expected spending to fall below the 2 percent mark. Still, the move does not constitute a significant budget increase.

“They’re spending broadly the similar amounts as they were before,” Rajendran said.

Another factor keeping overall NATO spending down is differing threat perceptions among alliance members. Experts said many countries in Western and Southern Europe are more concerned about terrorism and the influx of migrants and refugees from North Africa and the Middle East.

“Amongst the major Western European spenders, it’s a much more muted response [to Russian actions] in so far as there’s been a response at all,” Perlo-Freeman said.

By contrast, countries in Eastern Europe, such as Poland and the Baltic States, are ramping up their defense budgets, analysts said.

“I think the biggest splash is probably Poland, which is one of the biggest increases in defense spending proportionally relative to its economy,” Benitez said.

Before the Ukraine crisis, Poland was already pursuing a 10-year, $42 billion military modernization effort. Poland plans to buy a host of equipment, including missile defense systems, unmanned aerial vehicles, armored personnel carriers, helicopters and missiles.

Countries in the Baltics are also increasing their defense budgets in higher percentages, although their total budgets remain small — less than $1 billion, respectively — compared to the bigger powers.

Another factor complicating decisions about procurement is the unconventional tactics that Russia has been employing. Western defense officials have labeled Moscow’s strategy “hybrid warfare,” which combines sophisticated attack methods like electronic interference and cyber attacks, with paramilitary and insurgent activities.

Greg Sanders, a defense industry expert at CSIS, noted that Russia has sent unidentified paramilitary personnel — so-called “little green men” — and weapons into Ukraine to support Moscow-backed separatist forces.

“I don’t think the question of how you handle elements like subversion really has an immediate procurement answer at the moment,” he said.

NATO has so far focused on conducting more training and exercises as a way to counter Russia, rather than spending a lot of money on big-ticket weapons. Last year, the Obama administration launched Operation Atlantic Resolve, a mission designed to calm allies’ fears and deter Russia from further adventurism. The U.S. effort entails force rotations and high-profile training exercises with European partners, bankrolled by a $1 billion “European Reassurance Initiative” contingency fund approved by Congress. In addition, European members of NATO have stepped up their Baltic air policing operations and nearly doubled the number of multinational exercises relative to pre-crisis levels.

“It’s not only about equipment when countries are increasing their budgets. It’s also about operational spending. So increased military exercises is something that a lot of countries are looking to spend more money on,” Perlo-Freeman said.

NATO members are in the process of forward deploying assets to Eastern Europe and boosting the readiness of rapid reaction forces.

“I think a fair amount [of the NATO strategy is] just focusing on making sure that forces can actually respond” to Russian aggression, Sanders said.

When it comes to new procurements to counter Russia, analysts expect to see a greater focus on unconventional capabilities, such as missile and air defense, cyber, special operations forces and UAVs, as opposed to new orders of expensive items such as the joint strike fighter.

The U.K. and Poland have indicated that acquiring more drones will be a high priority.

“The demand is so immediate and so hungry,” Benitez said. “Whether the mission is a conventional threat in Eastern Europe or an unconventional threat in the Middle East, you want intelligence [and] you want to know what the other guy is doing. And that’s what drones are giving you right now. … They are also relatively cheaper than fighter aircraft. … They’re seen as sort of a great force multiplier and a cheap way to add capability to your forces.”

Countries worried about Russian incursions into their airspace are looking for potential countermeasures. Warsaw announced earlier this year that it would buy the Patriot missile defense system. Latvian leaders, meanwhile, have expressed an interest in purchasing from the United States Stinger anti-aircraft missiles — the shoulder-fired weapons famous for shooting down Russian aircraft in Afghanistan during the 1980s.

Keir Giles, a defense analyst at Chatham House, a U.K.-based think tank, believes that focusing on the unconventional challenges posed by Russia is myopic and ignores Russia’s conventional capabilities. “One of the dangers of calling it hybrid warfare … [is] in some cases it provides an excuse for neglecting conventional capability. … If you focus on the irregular elements and all the aspects of hybrid warfare, as some people are now doing, then you neglect the high-end warfighting capability, which is actually still a very important component of dealing with Russia.”

Sufficiently beefing up NATO’s conventional capabilities “is going to take a lot of work still, and the money is simply not being made available. … In many cases you just do not see the will to do it,” he said.

Topics: Counterinsurgency, International