Procurement: NATO Countries Prepare For War


July 3, 2024: For over two years, invading Russian forces have been fighting in Ukraine. One reason Russia gave for invading was Ukrainian efforts to join NATO and gain the protection of the NATO alliance, which includes the United States in addition to well-armed nearby states like Poland, Germany and France. Russia did not want to fight the NATO alliance. While NATO could not justify sending troops to Ukraine, they could and did send over $100 billion worth of weapons. The Americans were the largest contributor but as the war continued, European contributions increased while U.S. shipments declined.

NATO continues to support Ukraine because that was what NATO was established in 1949 to do. The threat then was the aggressive Soviet Union, which never attacked. When the Soviet Union dissolved in 1991, the largest and most aggressive successor state was the Russian Federation, led by men who wanted to rebuild the Soviet empire and decided in 2021 to start with Ukraine.

The Russian invasion reminded other NATO states that the Russian threat still existed and that is was very real. At the same time, Russia is aware that NATO countries can muster more military forces than Russia and possess far larger economic resources than Russia. NATO nations are planning to increase the number of soldiers in their peacetime forces and that means a return of conscription. Without the Ukraine War, European voters would not have approved the return of conscription as a necessary step to increase the size of their armed forces. NATO nations have large enough populations of military age men to do this, in addition to enormous economic resources.

NATO members accounted for 45 percent of $2.24 billion in global defense spending in 2022. NATO spending continued increasing faster than global spending because of the war in Ukraine. For example Denmark announced that it would gradually increase defense spending over the next ten years until it reached about $21 billion. At that point defense spending would be three times what it was in 2022 and would meet the NATO suggested two percent of GDP. Denmark had long spent much less, safe in the knowledge that the United States and larger NATO members met or exceeded the spending goal applicable to all NATO members. This annoyed the United States, but America had the largest economy in the world and military commitments worldwide.

The U.S. has long had the largest defense budget in the world. During the Cold War (1948-91), European NATO members believed their job was to keep the Americans in, the Germans down and the Russians out. After 1945 Germany was divided, with West German eventually joining NATO and prospering economically while East Germany stagnated economically and was controlled by Russia. Germans had had enough of militarism and preparing for war. West Germany joined NATO in order to keep the Russians out and spent what was necessary to meet NATO goals. West Germans knew that if Russia attacked, they would be the main target. West Germany was where other NATO members stationed most of their troops assigned to defend Europe. After the Soviet Union collapsed and a much smaller Russia became a democracy, defense spending by NATO members plummeted. The newly reunified Germany had huge costs associated with the merger of West and East Germany and even more reason to reduce defense spending.

This was the peace bonus and it turned out to be temporary. By 2000 Russia was rearming and becoming more aggressive. One thing led to another and now we have the Ukraine War. This is the largest conflict NATO has ever had to deal with. Russia accused Ukraine of planning to join NATO. That wasn’t true, at least until 2014 when Russia seized Crimea and portions of two eastern Ukraine provinces. Not content with that, Russia invaded in 2022, seeking to absorb Ukraine back into a Greater Russia. Despite all the previous Russian defense spending and military reorganization, the invasion failed. This was due to Russian incompetence and corruption, huge reforms in the Ukrainian military, a spike in Ukrainian patriotism, ferocious Ukrainian resistance, and over $100 billion in military and economic aid sent to Ukraine by NATO members. This means that 28 months after the invasion, Russian forces are significantly outnumbered, on the defensive and the Ukrainians are attacking.

All that aid to Ukraine caused most NATO members to reconsider their own annual defense spending. This was nothing new. After Russia’s first invasion of Ukraine in 2014, NATO members realized that the Cold War threat was back and Cold War level defense spending would be required to deal with it. In September 2014 NATO members met and set specific commitments regarding defense spending. These commitments were to force NATO members to halt any decline in defense expenditure and keep spending in line with GDP growth. Members who currently spend less than two percent of their GDP on defense, were supposed to reach two percent within the next decade, preferably in ways that improved their ability to meet NATO obligations.

The 2015 budgets of many countries told a different story, often in contrast to what politicians are saying about recent events in Ukraine being a game changer in NATO military thinking about all threats, continuing military action against ISIL (Islamic State in Iraq and the Levant) in the Middle East.

U.S. military spending was the only one consistently above the 2 percent mark with the 2015 budget being at 2.7 percent GDP, which was stable in inflation-adjusted real terms but lagged behind GDP growth and slowly became a lower GDP percentage. America, Greece, Estonia and Canada were the only four NATO countries meeting or exceeding the two percent GDP recommendation, representing more than 75 percent of NATO military spending. An examination of military budget changes for 14 select NATO member countries does not look good for NATO.

The three most powerful, in military and economic terms, European NATO members of France, Germany and Britain, despite all their talk about necessity to deal with recent events in Ukraine and Middle East, instead reduced their defense spending even though they were already spending less than two percent GDP on defense.

The Germans spent $41.72 billion in 2015, six percent less than in 2014. The 2105 spending was 1.09 percent of GDP versus 1.3 percent in 2013. Such a state of affairs resulted in severe readiness issues for the German military, including cuts in training, equipment shortages, maintenance issues and generally low readiness level.

France was better off, at $41.2 billion, or 1.5 percent GDP in 2015. This was the same as in 2014. France did make big cuts earlier but its role in dealing with ISIL and sentiment after a recent major Islamic terrorist attack in France didn't seem to have much effect on its NATO-related spending.

Britain also faced defense spending cuts, from $55 billion in 2014 to $54 billion in 2015. This was even worse in GDP percentage terms, in part due to changes in GDP calculations by adding narcotics, prostitution and charitable spending to the definition of GDP. This produced a decrease in defense spending as a percentage of Britain’s GDP, from 2.07 percent to 1.88 percent of GDP. That was the lowest British defense spending as a GDP percentage in the previous 25 years.

Canada and Italy, two other NATO members with rather large economies, also decreased their defense spending. Canada spent $14.2 billion in 2014 which was just one percent of its GDP and planned to reduce it by $2.1 billion in coming years, to an extremely low 0.85 percent of GDP.

Italy's already low 2014 defense spending of 1.2 percent GDP amounted to $13.68 billion but fell to $12.91 billion in the 2015 defense budget.

Some smaller countries did take their military situation and NATO commitments seriously. The Baltic States (Estonia, Latvia and Lithuania) were the most rattled by the Ukraine crisis among NATO countries because of their borders with Russia, small size, and often issues with a large Russian minority. Estonia, one of the very few NATO countries that reach the 2 percent GDP defense spending target, has decided to exceed it by 0.05 percent GDP in 2015. Lithuania, which spent just 0.9 percent of its GDP on defense in 2014, reached 1 percent in 2015, and has committed to increase it by 0.2 percent of GDP every year, until it reaches the recommended 2 percent GDP mark. Latvia, much like Lithuania, has decided on a quick expansion of its military, its defense spending rising from 0.78 percent GDP in 2014 to 1.11 percent GDP in 2015. Unfortunately, the significant increases in military spending of Baltic countries is not a big one in real terms. Their economies are small, and as such, the biggest military budget of those three, Lithuania's, is just barely above $0.5 billion.

Poland, one of few NATO countries taking the Ukraine crisis as seriously as the Baltics, spent $10.4 billion (1.95 percent of GDP) in 2014 and got it up to the required 2 percent of GDP in 2016, with a specific focus on procurement of modern equipment. Romania followed Poland's example, with its military spending rising from 1.4 percent in 2014 to 1.7 percent in 2015 and reached 2 percent in 2017.

It is different elsewhere in Central Europe. Bulgaria and Hungary, despite promises to increase their relatively small military budgets in 2015, actually reduced them as a portion of GDP share, by 0.15 percent and 0.04. Norway and Netherlands slightly increased their defense budgets, both of them reversing long running downwards trends.

The 2022 Russian invasion was not a surprise to many east European NATO members. Less than a year before the invasion, Poland announced it was doubling the size of its military to 300,000 troops, giving it the largest active-duty force among the European NATO nations. The Polish military currently consists of 185,000 troops. Poland already spends more on defense, at 2.2 percent of GDP, than most NATO members. The goal for NATO nations is two percent of GDP but even in 2021 only a few had reached or exceeded that, including the United States (3.7 percent), Britain (2.2 percent) and France (2.1 percent). Russia was spending 4.3 percent. Elsewhere in the world Saudi Arabia spent 8.4 percent, Israel 5.6 percent, India 2.9 percent, South Korea 2.8 percent, Australia 2.1 percent and China somewhere between two and three percent. North Korea spends about a quarter of GDP on the military but has a GDP that is only about five percent the size of South Korea’s. Global defense spending is about two trillion dollars and 2.4 percent of global GDP. U.S. spending accounts for 39 percent of that, which is equal to the next fourteen nations combined.

Polish defense spending has increased enormously since it joined NATO in 1999, when it was spending $3.2 billion a year. To be a NATO member they had to bring all their military equipment up to NATO standards. While some of the Cold War era Russian equipment qualified, or could do so with some modifications, Poland wanted to replace most of the Cold War gear with modern Western weapons and equipment. Fortunately for Poland and other East European nations that joined NATO after 1991, the Cold War era NATO nations were reducing their armed forces and offered a lot of modern NATO weapons to the new members at very low cost or for free. Poland was able to upgrade its forces with German and American tanks and is also buying F-35 fighters, guided rockets, more effective electronics and modern military logistical equipment. Poland was a major manufacturer of ships, aircraft, and military vehicles while part of the Russian Warsaw Pact that dissolved in 1991. At the same time the Soviet Union was disintegrating. Poland is now producing NATO standard ships, aircraft, vehicles, and all manner of modern weapons. For that reason, most of the cost for expanding the military will be spent in Poland and make it possible to complete the expansion by the end of the decade or sooner.

After 2014 many East European nations feared Russia had gone from former occupier to current threat and all decided to speed upgrades to their armed forces, as quickly as limited budgets allowed. For example, in 2015 Lithuania increased the 2016 defense budget by 35 percent. This made defense spending 1.48 percent of GDP. All this is eerily like what happened after World War I when France and Britain tried to help equip newly created, from the wreckage of the Russian and Austrian empires, countries like Poland and the Baltic States with cheap World War I surplus weapons and promises of aid if Russia should seek to rebuild its fractured empire. The Russians did attack in 1939, and now that bit of history repeated itself in Ukraine. In 1989 the newly liberated nations of East Europe sought some solutions to avoid repeating old history. What is happening in Ukraine demonstrates that NATO itself is one solution because Ukraine was considering NATO membership before the invasion and now will definitely join once the fighting with Russia is over. The NATO rules do not allow a nation at war to join. That has not stopped NATO members from sending Ukraine over $100 billion in assistance since the invasion and continuing to send more. NATO nations also suffered economically by enforcing the economic sanctions imposed on Russia. This has cost some NATO members billions of dollars because they could no longer trade with Russia.

The war has made it clear to Russia, NATO and Ukraine that Russia could not handle a war with the NATO alliance that involved NATO troops as well as large quantities of NATO weapons. The fighting so far has provided NATO nations with a growing list of improvements needed for their weapons and equipment. NATO weapons have generally outperformed their Russian equivalents and modifications are being made to address any problems encountered. Russia has a more extensive list of needed fixes and upgrades but lacks sufficient money to deal with more than a few of them.




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