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NATO Expansion: Cost Issues

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During their December 1997 summit in Brussels, members of the North Atlantic Treaty Organization (NATO) signed protocols that would add three countries — Poland, the Czech Republic and Hungary — to the alliance; the national legislatures of the current 16 current member countries must now approve the enlargement; one major question being considered is how much expansion 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 estimated enlargement costs (between 1997 and 2009) at $27-35 billion. Of this, the U.S. share is projected to be $1.5-2.0 billion.

Two other U.S. organizations, RAND and the Congressional Budget Office (CBO), also estimated expansion costs, but used a wider range of threat assumptions and scenarios and came up with different results. The RAND cost estimates ranged from $10-110 billion, while CBO costs were 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. It appears that if the CBO had used the same reduced threat assumption for its comparable defense posture, its estimate would have been over $60 billion. Part of the cost disparity may arise from different perceptions of what constitutes an “adequate” defense. Also, 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.

In December 1997, NATO announced that its staff had estimated the 10-year cost of enlargement at $1.5 billion. Unlike the other studies, this one did not include the aggregate deployment expenses of individual member countries, but focused strictly on increased costs for NATO’s common budget to fund programs for new members. The U.S. Department of Defense reportedly has concurred with the new NATO estimate.

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.