NETHERLANDS: DEFENSE BUDGET WOES -- PRICE FOR

C O N F I D E N T I A L THE HAGUE 000063 SIPDIS SIPDIS STATE FOR EUR/UBI E.O. 12958: DECL: 01/12/2017 TAGS: MARR PGOV PREL NL SUBJECT: NETHERLANDS: DEFENSE BUDGET WOES -- PRICE FOR AFGHANISTAN? Classified By: CDA Chat Blkeman, r... 92463,1/12/2007 17:19,07THEHAGUE63,"Embassy The Hague",CONFIDENTIAL,,"VZCZCXYZ0000 OO RUEHWEB DE RUEHTC #0063/01 0121719 ZNY CCCCC ZZH O 121719Z JAN 07 FM AMEMBASSY THE HAGUE TO RUEHC/SECSTATE WASHDC IMMEDIATE 7848 INFO RUEHZG/NATO EU COLLECTIVE PRIORITY RUEKJCS/CJCS WASHDC PRIORITY RHEHNSC/NSC WASHDC PRIORITY RUEKJCS/SECDEF WASHDC PRIORITY ","C O N F I D E N T I A L THE HAGUE 000063 SIPDIS SIPDIS STATE FOR EUR/UBI E.O. 12958: DECL: 01/12/2017 TAGS: MARR PGOV PREL NL SUBJECT: NETHERLANDS: DEFENSE BUDGET WOES -- PRICE FOR AFGHANISTAN? Classified By: CDA Chat Blkeman, reasons 1.4 (b,d) ¶1. (C) Summary: The cost of the Dutch deployment in Afghanistan and probems related to the Dutch Ministry of Defense reoganization -- coupled with negotiations on defene issues during coalition formation talks of the nw Dutch government -- could jeopardize several key projects for the 2007 defense budget. While ""al options are still on the table,"" possible projct options include postponing or withdrawing fro the NATO C-17 Strategic Airlift Initiative, as ell as new Chinook helicopter, Tactical Tomahawk (TACTOM) missile, and unmanned aerial vehicle (UAVs acquisition. Defense Minister Henk Kamp and MODState Secretary Cees van der Knaap will discuss ptions January 16. End summary. ¶2. (C) MOD conacts tell us the rising cost of the Dutch deployment to Afghanistan -- already half a billion euros - is severely restricting Dutch defense investmets. A number of defense projects slated for 200 and 2008 are likely to be cut or delayed as a rsult. In addition, an on-going defense ministry reorganization is compounding the problem. Previously, Dutch services jealously guarded their own budgets. With the reorganization, the army, navy and air force for the first time are working from a combined budget -- oversight has been lax. As a result, project costs have run higher than anticipated. MOD Director of General Policy Affairs Lo Casteleijn told Charge January 12 that the GONL often funds projects up to 130 percent in case of cost overruns -- in this case, most 2006 projects are running at about 120-130 percent, which is cutting into 2007 project financing. ¶3. (C) MOD contacts stressed ""all options are still on the table"" regarding defense-related projects. DM Kamp and MOD State Secretary van der Knaap will discuss various options on January 16, and shortly thereafter send a letter to Parliament presenting the ""finalized"" budget. Kamp will then appear before the parliamentary Defense Committee for further discussion. Major projects include: -- Joint Strike Fighter (JSF): The GONL initially expressed interest in purchasing three early JSF aircraft in order to participate in the test and evaluation phase. MOD contacts suggest the Dutch will now purchase two -- which still qualifies them for the test and evaluation program. Casteleijn told Charge January 11 that JSF will be a topic of coalition formation talks, especially as the Labor Party (PvdA) opposes JSF program participation. Casteleijn said the Christian Democrats (CDA) and PvdA need to ""define the boundaries"" for discussion on JSF. He suggested program participation will remain intact while the number of aircraft purchased will become a topic of negotiation. Casteleijn also expected PvdA to push for an independent, non-partisan review of JSF to determine whether it is the ""best plane for the best price."" -- NATO C-17 Strategic Airlift Initiative: MOD and defense consultant contacts note the price for ""leasing"" C-17s per hour has nearly doubled from earlier estimates, while Boeing insists participating NATO allies purchase planes in advance to leasing them -- this may force the Dutch to withdraw from the initiative. Casteleijn expressed disappointment over the revised terms of reference, and confirmed that the Dutch delegation at NATO has received instructions to push back -- if the initial terms are not possible, then the Dutch will have to pull out. He said strategic airlift remains a priority -- he would not be surprised if the number of JSF aircraft acquired was reduced to support C-130 or C-17 acquisition. -- CH-47 Chinook Helicopters: The Dutch are relying heavily on their Chinooks in Afghanistan, and have requested six new Chinooks with specialized -- and expensive -- Honeywell cockpits in addition to refurbishing the rest of their Chinook fleet. While postponing the new Chinook acquisition is a possibility, MOD and defense consultant contacts say the MOD leadership is ready to go ahead with the purchase. Refurbishing the fleet will most likely be delayed. -- Tactical Tomahawk (TACTOM) missiles: TACTOM was considered a key part of DM Kamp's plan to improve the Dutch navy; equipped with TACTOM, the relatively new Dutch LCF frigates would become a force to be reckoned with. The Dutch MOD had received parliamentary support to become the third country after the United States and the UK to acquire TACTOM. However, PvdA vociferously opposed TACTOM acquisition, while the GONL was panned in the Dutch press for attempting to acquire a weapon viewed as ""aggressive and offensive"" in nature. MOD Deputy Director for General Policy Affairs Jan Geerts Siccama told polmiloff January 5 that while DM Kamp may continue to push TACTOM, he would not be surprised if the almost USD 60 million acquisition becomes a casualty of coalition formation talks with PvdA. Casteleijn agreed; he believed TACTOM was ""dead"". -- Unmanned Aerial Vehicles (UAVs): The Dutch have informally walked away from their MALE UAV program with the French, and expressed keen interest in the U.S. Predator B UAV program. However, MOD working level and defense consultant contacts suggest pursuit of Predator B will be suspended indefinitely due to financial constraints. Casteleijn noted that UAV is ""still on the agenda,"" but funding it in 2007 will be difficult given budget constraints. Comment -------------- ¶4. (C) The Dutch pride themselves on ""doing more"" with a limited defense budget. While Dutch spending on defense as a percentage of GDP is well below NATO's two percent target, the Dutch have invested generously -- over 20 percent of its defense budget -- on new defense-related projects in recent years. The Dutch are now over-committed and looking to prioritize ongoing operations and big ticket acquisitions with smaller investments -- while keeping Afghanistan and JSF at the top of the list. The Ambassador will engage further with CHOD Gen. Berlijn and senior MOD leadership next week. BLAKEMAN