At a time when the North Atlantic Council’s session in Brussels was still a distant prospect, an overwhelming majority of the security community believed it unlikely to generate real thrills, and thought the political debate would be largely confined to the continued implementation of the 2016 Warsaw Summit decisions. Only later it turned out, the atmosphere among Allies was thickening every single day despite the fact that most European countries got used to Washington’s traditional rumblings about defence spending. Actually, the North Atlantic Alliance has never been a gentlemen’s club avoiding money talks. The question of burden sharing – or, perhaps more accurately, the sharing of responsibility – was regularly raised up back in the time of the Cold War, when the menace of a large-scale conventional war was so much probable, and when successive U.S. administrations and Congresses regularly rebuked the Europeans for insufficient investments in their own military capabilities. This time, too, European leaders expected a ritual diatribe that Donald Trump had spared them from the very beginning of his term at the White House. It looked as if he had exhausted all instruments of pressure on partners in the Alliance, the more so as he had not been given too many pretexts for using such instruments. Over the past two years, NATO has worked intensely and effectively on adapting its capabilities to address the latest threats – and the results are quite satisfactory, considering the growing pressure on the Alliance from the new (or resurfacing) conflicts and the armaments dynamics in countries such as China, India and Russia. This is particularly true when it comes to the trend of implementation of new technologies, which is difficult to follow by namby-pamby European bureaucracies.
The Allies’ hopes for a calm, matter-of-factly discussion proved futile, though. The U.S. president, just before boarding Air Force One for a visit to several European capitals that preceded the summit, made no bones about what he considered a key topic of the forthcoming get-together. “The United States must pay less” Trump fulminated, using Twiplomacy to clarify that this time the issue of defence spending would not no longer fizzle out. The whole situation gained momentum with Trump lambasting European countries at Brussels and publicly proclaiming that the era of “free riding” , would now be finally closed. He went on to demand an increase in defence budgets to 4% GDP, thus adjusting the atmosphere of political debate to the heat wave that had been sweeping over Europe for quite a few weeks. Previously he threatened Europe with a reduced U.S. contribution to the defence of the continent, and even suggested – in a conversation with Chancellor Angela Merkel – that Germany should reimburse the American taxpayers for the amounts spent on protecting Allies.
Military expenditures have for years been a bone of contention among the Allies, but the discussions contain little substance and much juggling with numbers (sometimes referred to as creative accounting). These numbers tell us very little about the actual spending on defence, its effects and how it translates into the capability targets, which determine the level at which the Alliance can deter its adversaries resorting nowadays to a mixture of military and non-military instruments. Given the growing temperature of debate about finances, NATO is indeed in need of an in-depth analysis, to answer the question of whether the European Allies’ spending on defence is too small or it rather reflects a rational and prudential approach to expenditure and resource allocation. Or could it be that the Europeans still suffer from a years’ long spending-on-defence phobia that makes them very careful with money devoted to military projects?
De we really spend too little?
The Alliance’s general budget comprises funds for joint military and civilian operations, and for the maintenance of shared assets (e.g. the AWACS fleet). As demonstrated by statistical data, the United States still contributes 22% to NATO budget (commensurate with the size of its GDP, as in the case with other states). Other Allies tend to take a nonchalant approach to the Newport commitment of assigning 2% GDP to defence. Over the past year, only five of them took that pledge seriously (including the Eastern flank countries, Poland and Estonia), while quite many still oscillate around the discrediting 1% GDP – or even stay below that figure (Belgium, Spain, Slovenia and Luxembourg). According to data for 2008–2014, the combined defence spending by NATO’s European member states and Canada dropped by almost 12%, but the trend was reversed in recent years – spending went up 4.8%, translating into $45.8 billion, since 2015 – and it should also be borne in mind that the 2% GDP target is to be reached by 2024, which leaves enough time to steadily work towards its attainment. Nor is it fair to publicly discredit Germany, which contributes 14% to the Allied budget (followed by France, with 11%), which has been progressively increasing its expenditure on armaments, and which has committed itself to reach 1.5% GDP ratio by 2025. As noted by RAND Corporation expert James Dobbins, in the U.S. budget – which indeed exceeds the expenditure by all European Allies combined – some 75% of spending goes to the defence of the territory of the U.S. and non-European Allies (Japan, South Korea, Israel, Saudi Arabia, etc.), which puts Donald Trump’s accusation in entirely different light.
In the context of defence spending and the burden-sharing pattern – contested by the Americans – the numbers in and by themselves are not the biggest cause to worry, nor should they be treated dogmatically. First, the GDP percentage is a misleading indicator, remembering that a member state with low overall revenue and a high declared defence spending in terms of the GDP ratio (such as the bankrupt Greece) will contribute less, in real terms, than a country with a higher national budget and a lower defence-spending-to-GDP ratio. Other important considerations include the purchasing power of a given country’s currency (how much equipment and weaponry can be bought, especially from foreign suppliers), the way the defence spending is presented in the national budget (it may be contained in other rubrics, such as homeland security, and especially border protection, which is highly important in terms of conventional threats), etc. And finally, the expenditure level and the resulting capabilities are entirely unconnected with the political will for their use, as demonstrated by the example of Afghanistan, where some Allies proved highly resistant to pleas for deploying battle-ready contingents or contributing required amounts of equipment (especially combat helicopters) to that operation.
Furthermore, when it comes to acquiring certain capabilities, much bigger problems are linked to NATO’s guideline on allocating at least 20% of defence budget to major new equipment, which has been followed by just a handful of member states. This, coupled with alarming reports about the reduction or outright disappearance of many capabilities in some European states, has given rise to understandable concern – especially about certain affluent allies who have problems acquiring modern armaments and equipment. In 2017, four member states actually stayed below 10%, as a ratio of spending on new major equipment to defence budget (with record low figures registered in Belgium, 5.3%, and Slovenia, 6.09%), and more than a half failed to reach the recommended 20% (the 2017 leaders were: Romania, which topped 50%, thus making up for previous years’ delays, followed by Luxembourg, Lithuania and Turkey).
Meanwhile, countries like China – with the overall defence budget at $145 billion, and 2.3 million people in the armed forces – have made great strides in acquiring new weapons, including submarine-launched ballistic missiles, fifth-generation stealth fighter aircraft (emulating the F-35, and scheduled for deployment in 2019), the first aircraft carrier (launched in 2012, capable of accommodating 2,000 troops), fourth-generation tanks, unmanned aerial vehicle, bombers, etc. China has been reducing its dependence on foreign weapons purchases by the year, while simultaneously enhancing its own production potential and increasing exports, especially to markets where U.S. and European armaments are not present (due to sanctions and higher prices). This is achieved through foreign investments, joint ventures with foreign entities, and a wide-ranged programme of technology purchases on the U.S. market, involving artificial intelligence (AI), robotics, and augmented reality (AR). In a gradual process, the country is becoming less of a place for assembly plants and an imitator of foreign solutions, and more of a provider of its own products and technology. This is, in part, forced by objective factors – such as the growing environmental degradation after decades of operating as “the world’s factory” with cheap labour, coupled with the emergence of still lower-cost countries, and the greying of Chinese society – but it also reflects China’s striving for technological supremacy over opponents (the country already comes second in the world in terms of the number of patented inventions).
But what prompts still more strongly a serious thinking about NATO’s military spending is the pace of armed forces modernisation by the Alliance’s most powerful adversary, the Russian Federation. Unlike European countries, despite periodic budgetary problems, it has since 2008 steadfastly implemented military reforms – prompted by sober reflections in the aftermath of the military campaign against Georgia – which focus on the army’s professionalization and re-arming with modern equipment (some 60% at present). Even though the post-Crimea sanctions have greatly weakened Russia’s spending potential, it nevertheless managed to spend some $70 billion on defence in 2016, thus gaining an edge over those countries which feel most threatened by hypothetical Russian military operations, i.e., NATO’s eastern flank states. Over the past decade (2006–2016) Russia doubled its defence expenditure, with outside sanctions only temporarily slowing, but not halting, the ongoing modernisation of its armed forces. The main thrust in this modernisation – which the country gives a priority treatment – is on air defence systems, self-guided missiles, bombers, radar networks, anti-ship systems, and even nuclear-propelled drones. The widespread belief that the Russian quantitative advantage in equipment (whose unit cost is on average lower by a third compared to the West) could be easily offset by technological supremacy has been weakening of late, in step with a slowing of the good pace of modernisation and technology in European countries (Russia currently holds a high, 8th place on the world’s armaments innovation ranking list). Even allowing for the fact that some of the declared modernisation programmes are pure propaganda, there can be no doubt that Russia has put in an intense effort to narrow the technology gap from the West.
Disruptive technologies in the service of the military
In a situation where personnel spending (soldiers’ pay, pensions, welfare) absorb 60-70% of NATO countries’ defence budgets, and given the high costs of out-of-area operations (especially in Afghanistan), there can be only a small amount left for research and development (a recommended 2% of defence budget) and for the implementation of new disruptive technologies that would guarantee a decisive advantage in the future battlefield operations. Even in the United States, which remains the innovation leader, spending on research, development, test, and evaluation (RDT&E), having peaked in 2009 (at $92,6 billion), was on downward trend in successive years (to $67.6 billion in 2015), and only later returned to a stable pace of growth. This year’s growth in the U.S. was put by Trump at 16%, but in Europe the situation remains dramatic. R&D spending in the EU countries (without Denmark), which in 2006 was a mere $9.8 billion, fell by almost a third over 2006–2013, most pronouncedly in Spain (by half!), Italy and the United Kingdom. The EDA countries in 2007 finally agreed to a 2% R&D target, but at present such spending only slightly exceeds 1%. The disruptive technologies, which in the next several years may thoroughly change the conduct or armed operations – e.g. by increasing the situational awareness or changing the system of control and command (C2) – are largely AI-driven. According to computations by McKinsey consultancy experts, spending by tech giants on AI-based technology in 2016 reached $20-30 billion, with U.S. and Asian companies the biggest spenders, and the Europeans trailing far behind. Judging by the plethora of reports recommending major increases in this line of expenditure in various countries, the next decade is going to see players such as China or India fast narrowing their technology distance to NATO in certain areas – air force, cyber defence, land systems, sensor networks – precisely by embracing innovation in these fields. The same holds for non-state actors, who can access advanced technology solutions right now, especially so under the present pattern where innovations are the domain of the civilian sector (small to medium enterprises, startups), whence they are “sucked” and adapted by the military for its own purposes. Successive countries have been adopting institutional and financial arrangements (e.g. public-private partnership) facilitating the AI launches in the military arena, and the leader here is China, setting the tone for new regulatory formulas in this sector (e.g. storing various kinds of data on China-controlled servers, and deploying the so-called Digital Silk Road, where a major goal is to break dependence on the U.S. as the global supplier of online services and information content). In June 2018, China Electronics Technology Group Corporation trialled a shared flight by a record drone swarm of some 120 units.
According to Tomaš Valašek, the disrupting technologies are only beginning to gain importance within the Alliance. The Allies are slowly realising – primarily the ACT command, with no discussions yet held at the level of the North Atlantic Council – that AI, which will impact multiple processes (military planning, coordination of operations, ISR, missiles guidance), may pose a major threat to Allied forces, e.g. in the conduct of out-of-area operations, through disinformation, interference in information exchange, etc.
Among NATO member states, only the United States, Canada, the United Kingdom and France have been making quick adjustments in this field. In the U.S., the Defence Innovation Board was established in 2016, with the task of advising the Defence Department on new technology (previously, in 2012, a secret Strategic Capabilities Office was set up to work on the so-called third offset strategy, seeking to keep the U.S. technological supremacy over opponents through absorption of innovative inventions and their deployment in military projects). Based on recommendations from the Board members, a Joint Artificial Intelligence Center was formed at the Department, to speed up the deployment of AI-linked technologies in Defence Department projects, with account taken of ethical and humanitarian questions. In September 2016, the U.S. agency DARPA announced a $2 billion investment in AI technologies, where priorities include systems to enhance contextual awareness, increase energy efficiency, etc. Canada, too, has made great strides, with Toronto hosting the biggest number of AI-dedicated startups among all cities in the world. In 2016–2017, the country allocated some $1.3 billion to research in the field. In Europe, ambitions to take the leadership position on the AI front – and outpace both China and the NATO ally, the U.S. – were declared last March by French President Emmanuel Macron, who announced setting aside $1.5 billion for AI research, development and application. In addition to gaining particular capabilities (e.g., under France’s FELIN future infantry soldier system), these funds are intended to counter the massive outflow of highly-qualified French specialists to U.S. companies (Google, Facebook), promote government laboratories’ collaboration with private forms and startups, and also to recruit experts to the French armaments agency DGA. The focus so far has been on AI use in combat aircraft – e.g. the DGA-commissioned MMT project on joint fighter aircraft/drone missions (to escape anti-aircraft defence, with AI algorithms identifying the trajectories of anti-aircraft missiles) – but other fields are expected to be soon covered as well (electronic war, intelligence gathering, face recognition, automated navigation robotics, etc.). Germany has expressed readiness to join forces with France. An AI Lab was also opened in the British city of Salisbury, where researchers’ responsibilities will include countering fake news and using information to deescalate conflicts.
Alliance spending vs. capabilities
There can be no doubt that NATO countries’ technological edge over main adversaries has been diminishing by the year, with conventional war projections indicating that in the event of Russia’s hypothetical attack on the Eastern flank the Alliance would find it very difficult to defend the territories of the attacked countries or regain territories lost to the enemy. Even if the unit cost of Russia military equipment still runs at a third of the corresponding U.S. cost, the advantages of the West’s technological primacy (capabilities based on a smaller number of much more technologically advanced equipment units) have been continually diminishing, reflecting the Russian armed forces’ strong modernisation push. Given the possibility of a conventional war breaking out in this part of Europe – rendered more acute by the four-year conflict in eastern Ukraine – the Alliance has taken steps to protect the Baltic states and other countries in the region. As a result, NATO developed Graduated Response Plans (GRP) for Poland, Estonia, Lithuania and Estonia – but their implementation requires stable financing. In addition to investments in indispensable equipment, infrastructure improvements will be needed in order to achieve force mobility (construction of bridges, roads, railway lines, etc.) and readiness for rapid deployment. Thus, from this point of view, the most important development will be the implementation of NATO Readiness Initiative (4x30), expected to increase the Alliance’s capacity for rapid reaction.
On the investment front, the most important move – especially for Eastern flank countries – is the U.S.-proposed European Deterrence Initiative (EDI, formerly the European Reassurance Initiative), which is currently assigned some $4.8 billion (up $1 billion on the previous year). In 2007–2016, the number of U.S. troops stationed in Europe dropped by more than 30,000 (from 98,000 to 62,000); and in the period to 2013 two armoured brigades were pulled out, the number of commands was reduced (to seven), and important exercises were scaled down. Thanks to the funds released under EDI, there are at present some 70,000 troops stationed in Europe – the deployments in Central and Eastern Europe are rotational, involving some 4,500 troops in battalion-size battlegroups, as part of Enhanced Forward Presence (EFP) – additional war games and exercises are held in CEE, Baltic and Nordic countries, and the numbers are rising of NATO Response Force (NRF), which includes the Very High Readiness Joint Task Force (VJTF). The new funding was also instrumental in strengthening the command structure (e.g. Multinational Corps Northeast, MNC NE); forming NATO Force Integration Units (NFIU), whose task is to facilitate rapid deployment of allied forces, building new storage facilities and modernising some of the old ones (e.g. in Norway), improving force mobility, etc. The latest draft budget for 2019 provides for a continued increase in EDI spending from $4.7 billion to $6.5 billion, thus marking a steady trend towards eastern flank strengthening. Some countries, such as Poland, also benefit from NATO Security and Investment Programme (NSIP) and its so-called Capability Packages involving infrastructure projects (expansion of sea- and airports, roads, repaid of military infrastructure, modernisation of fuel storage facilities, etc.), expansion of radar, communication and command systems, etc. Last year alone the NSIP budget stood at some €950 million, and in the period to 2017 Poland carried out some 3.8 billion zloty’s worth of investments under several NSIP packages.
Even despite the criticism being levied on the premise that the 2% GDP target is the main yardstick of the Alliance’s potential to acquire effective capabilities to deter and combat threats, NATO’s approach in this respect is unlikely to change in near future. The pressure on spending a certain amount – defined as 2% of the GDP – will continue to be kept as the simplest indicator of Allies’ readiness to contribute to the defence effort. But when assessing the capabilities building potential, one would be well advised to examine other parameters, too – armaments procurement as a percentage of the defence budget, spending on innovative technology development, etc. – which reflect member states’ actual will and real capacity to contribute to shared defence projects.
Leaving aside the reservations expressed primarily by Germany (is true security contingent exclusively on armaments expenditure?), there is also one important factor slowing the defence spending growth in recent years, both in Europe and in the United States, namely utter waste. It comes from the absence of not so much proper control mechanisms, as of the political will to implement supervisors’ recommendations. A discussion of whether European countries really need separate armaments programme, each devouring enormous amounts of money, has been going on in Europe for years, looking into the pros and cons of armaments programmes’ internationalisation. While an upward trends continues in cross-border collaboration involving particular technology solutions (as manifested in increasing numbers of joint ventures), the quality of this collaboration still leaves something to be desired.
The scale of wastefulness in military-related spending has been noticed by the U.S. Defense Office of Inspector General (DoD OIG). As pointed out by its auditors in a March 2018 report, savings of more than $30 billion could have been achieved if just one-third of their almost 1,300 recommendations for better financial management, formulated in the preceding year, had been implemented. The DoD OIG recommendations deal with areas such as potential cooperation with Allies, settlements with arms producers (which not always properly fulfil their commitments) and spending on out-of-area military operations. A colossal waste (coupled with a certain degree of corruption) was found, in particular, in the Afghanistan operation, where another inspectorate (SIGAR) identified losses of over $15 billion in the years 2008–2017. In NATO itself, too, auditors examining NSIP spending have found many irregularities (mostly delays, incorrect cost calculations, cost overruns, lack of supervision, etc.). Thus a closer, more detailed look at the way defence appropriations are allocated reveals a great deal of waste, sometimes on a mass scale, resulting e.g. from poor organisation. The same goes for the system of armaments procurement and many other areas, in urgent need for rationalisation and reform.
Such findings by oversight bodies are hardly a cause for optimism, and can potentially weaken arguments for increased defence budgets – even despite the recent strengthening of NATO’s positive image, whether in the United States (up 10% among those questioned) or in Europe (up 11% in France, up 9% in Poland and up 8% in Germany, although on the other extreme, a negative view of the Alliance was declared by 58% in Turkey and 67% in Greece). Without sensible defence-finance recovery programmes, it seems, it will be a tall order indeed to elicit backing for increased defence budgets from the public, and especially from the younger generations of Europeans, who were brought up after the end of the Cold War (thus being less aware of conventional threats) and who increasingly demand greater transparency in budget spending, especially with regard to military expenditure. In Germany alone, compliance with NATO’s recommended 2% GDP spending target would inflate the military budget in 2024 to some €70 billion, an amount which German society is certainly unprepared to accept today (hence the proposals to include other items to the defence spending aggregate, such as development aid, post-conflict nation building, etc.). Furthermore, it is not infrequently that government agencies misinform the public on the outcomes of military operations – e.g., the U.S. Army’s alleged successes in Afghanistan – which in the long run may only fuel opposition to allocating resources to military operations, armaments, etc., and result in a situation where taxpayers refuse to accept high costs of defence projects even if these are urgently needed.
On the other hand, though, only 15 Allies are projected to meet the 2% GDP target by 2024. See NATO Says More Members Plan to Reach Spending Goal by 2024, Radio Free Europe/Radio Liberty, 14 February 2018, www.rferl.org.
It should be noted, though, that the German proposals to count development aid as a defence spending item are unconvincing, posing the threat that the defence budget concept will be totally watered down and that assessing the actual military expenditure of a member state will become absolutely impossible.
Poland, for example, announced in September 2018 that a National Defence Fund would be set up, to be suppliedwith extra-budgetary appropriations. Its expenditure would largely go to modernisation programmes.
For more see, e.g., D. Clark, “China is shaping the future of global tech”, Financial Times, 12 January 2018, www.ft.com; “US plans to stop China buying American companies”, Business Insider, 25 June 2018, www.businessinsider.com.
See, e.g., A.M. Dyner, “Nowe kierunki transformacji rosyjskich sił zbrojnych”, Polska Zbrojna, 13 January 2015, http://polska-zbrojna.pl; A.M. Dyner, “Nowy rosyjski program zbrojeniowy na lata 2018–2027 – znaczenie dla Polski i NATO”, Komentarz PISM, No. 7/2018, 29 January 2018, www.pism.pl.
Quoted from Th. Marino, Maintaining NATO’s Technological Edge: Strategic Adaptation and Defence Research & Development. General Report, NATO Parliamentary Assembly. Science and Technology Committee, October 2017, www.nato-pa.int.
China announced a 7% increase in defence spending this year, with the figure estimated to rise to $260 billion by 2022. Some experts expect the country to overtake the U.S. in terms of R&D budget by 2020. In the international market for AI deployment, China now comes second and has plans for reaching global leadership, and generating $150 billion worth of business, by 2023 (“Made in China” project). In February 2018 some Chinese police units were outfitted with cameras to identify the faces of wanted criminals. Similarly, Russia wants to reach a 30% ratio of AI-run robotised military equipment by 2025.
This is important, remembering that the recently launched project Maven (Algorithmic Warfare Cross-Function Team), providing for certain innovative Silicon Valley-developed technologies (mostly AI algorithms) to be put to military uses, has provoked controversy among Google employees and prodded some 4,000 of them to protest against the company’s involvement in military projects. In response to employee protests, Google in June 2018 announced an end to collaboration with the Pentagon, as from March 2019, but it is not clear whether or not this collaboration will be continued in other forms. In all, some 20 companies cooperate with the Pentagon within the Maven project. See “Tajemniczy Projekt Maven zostanie zakończony. Google zrywa współpracę z Pentagonem”, Forsal.pl, 4 June 2018, http://forsal.pl.
See the extensive report by Cedric Villani, a mathematician and member of the French Parliament, For a meaningful Artificial Intelligence. Towards a French and European strategy, www.aiforhumanity.fr. The European Commission has plans to spend a similar amount on AI research across the EU over the next two years.
See, e.g., W. Pawłuszko, “Jak NATO inwestuje w Polsce. Szansa dla przedsiębiorców”, Defence24, 14 July 2017, www.defence24.pl; M. Kowalska-Sendek, “NATO inwestuje w Polsce miliardy”, Polska Zbrojna, 12 March 2017, www.polskzbrojna.pl.