NATO'S CIVIL BUDGET: AN EVEN HOLLOWER ALLIANCE

C O N F I D E N T I A L USNATO 000100

NOFORN
SIPDIS

E.O. 12958: DECL: 03/15/2019
TAGS: NATO PREL AFIN ABUD AMGT
SUBJECT: NATO'S CIVIL BUDGET: AN EVEN HOLLOWER ALLIANCE
THAN IS RECOGNIZED

REF: A. BC-D(2009)0004

B. SG(2009)0146

Classified By: CDA Walter Andrusyszyn. Reasons: 1.4 (b) and (d).


1. (C/NF) SUMMARY: The NATO International Staff is
projecting a shortfall of Euros 70 million in the NATO Civil
Budget over the next five years. This shortfall is the
result of the Alliance taking on an ever increasing number of
activities--often at the urging of the U.S.--while also
trying to adhere to a Zero Real Growth policy for the Civil
Budget. In addition, Allies have been unwilling/unable to
agree on sufficient cuts to existing programs in order to
balance the budget. U.S. political leadership will be
required to get Allies to agree to the painful changes needed
to turn this situation around. We recommend that the
Department authorize the Ambassador to lay down markers in
upcoming budget discussions. In addition, we believe that
NATO Foreign Ministers need to begin addressing this issue as
a part of NATO Transformation and HQ reform, in the same way
that Defense Ministers discuss the lack of military
resources. END SUMMARY.


2. (C/NF) The NATO International Staff (IS) has circulated a
five-year planning document for the NATO Civil Budget which
underscores the need for the U.S. and other Allies to take a
policy/strategic look at how to address priorities and
current projected shortfalls. With anemic European defense
budgets and the related lack of Allied political will to use
military force, NATO has been characterized recently as a
"hollow alliance." While this military hollowing out has
naturally taken center stage, it has drawn our attention from
the equally troubling lack of resources available to the
civilian budget of the Alliance. If the U.S. hopes to
continue to use the Alliance as a primary method of
addressing "political-military" issues, we will have to lead
Allies in addressing this deficit.

We Are in a Hole
--------------


3. (C/NF) The Chairman of NATO's Civil Budget Committee just
released NATO's draft Medium Term Financial Plan (MTFP) for
the five year period running from 2010 to 2014 (ref A). For
that period, assessed national contributions to the core
civil budget total Euros 885,499,000. The NATO International
Staff, however, estimates that Euros 954,972,400 would be
required to carry out the tasks covered by the civilian
budget, including all the programs which have already been
agreed by nations and the operating, maintenance, and
security costs for the NATO Headquarters building. In other
words, there is an approximately Euro 70 million hole in the
civilian budget over the next five years.

How We Got Here
--------------


4. (C/NF) While there are a variety of causes for this
deficit, we believe that three stand out:

-- First, NATO has been operating in a very constrained Civil
Budget environment. Beginning in 2004, NATO has operated on
a policy of Zero Real Growth (ZRG) for the Civil Budget.
France has been the leading proponent maintaining the ZRG
policy;

-- Second, despite this obvious budget constraint, the
Alliance has continued to take on additional new tasks.
Without providing the additional resources to carry out these
new missions, Allies have effectively saddled the Alliance
with "unfunded mandates." Many Allies would argue that the
U.S. bears much of the responsibility in this regard, driving
the Alliance to take on an ever-increasing number of roles
without due consideration for the resource implications; and

-- Finally, Allies have been unwilling/unable to agree to
"sunset" or significantly cut back existing programs. Civil
Budget discussions have grown increasingly contentious, with
most Allies doing little more than protecting their "pet
rocks." The NATO Science for Peace and Security program, for

example, chews up a disproportionately large portion of the
civilian budget (Euros 11.8 million out of the Euros 176.957
million 2009 Civil Budget),but its supporters--led by
Turkey--have fought tooth-and-nail our efforts to pare it
back. Arguing that it would send an unwelcome "political
signal," the NATO-Russia supporters (including Germany,
France, Italy, Norway, and Luxembourg) fought efforts to
reduce those portions of the NATO-Russia Council funded by
the civil budget--even though we were in a period of "no
business as usual" from the August war in Georgia until the
Foreign Ministers' meeting in early March. Similarly, Spain
and Italy refuse to countenance any significant reductions in
spending for NATO's Mediterranean Dialogue partnership.

The Implications
--------------


5. (C/NF) The Chairman of the Civil Budget Committee makes
clear that from his perspective the Alliance is in a position
where it will not be able to carry out programs agreed at the
political level. In other words, the Alliance's commitments
are ringing increasingly hollow, and NATO may well find
itself in the position of having to take decisions on what to
stop doing, rather than simply reducing activities.


6. (C/NF) A good example is the decision at the December 2008
Foreign Ministerial to create a NATO Liaison Office in
Tbilisi. Recognizing that there were virtually no funds to
carry out this mandate, the MTFP makes the assumption that
the office would be staffed by five or six Voluntary National
Contributions (VNCs) by nations, not by the NATO
International Staff. Nations would also be expected to cover
the VNCs' accommodation costs. Unfortunately, nations have
not yet stepped forward to offer the "assumed" VNCs or the
costs associated with them. While Georgia has a sufficiently
high profile with some Allies that one or more of them will
likely eventually step forward, we should not take for
granted that this will be the case.

How We Get Out Of This Hole
--------------


7. (C/NF) Getting out of this hole will require Allies to
take several very hard steps:

-- First, stop digging. Allies need to more carefully
consider the resource implications of proposed new tasks for
the Alliance. While this will be true for all Allies, it
will be particularly important for the U.S. We have
traditionally been the driver for moving NATO into new areas
or expanding existing programs; unfortunately, we have not
done so in a budget-conscious manner. Over the short-term at
least, the U.S. will likely have to be satisfied with
consolidating and implementing existing programs, rather than
creating whole new ones. For those new projects Washington
still finds important enough to push, it will likely need to
provide resources for it outside the Civil Budget, such as
through Voluntary National Contributions. Projects that
Washington considers of insufficient importance to warrant
additional U.S. funding should not be hoisted on NATO as yet
another unfunded mandate;


-- Second, Allies will eventually have to come to terms with
the need to end--or at least significantly cut back--programs
that have run their course or are clearly of lower priority.
The NATO Science budget, in particular, will need to be
reduced in order that those funds can be freed up for higher
priority projects. Achieving this will likely require
high-level interventions with Ankara; and

-- Finally, the Alliance must abandon the Zero Real Growth
policy or at a minimum attach funding commitments to new
programs. Doing so will be difficult, particularly in a time
of economic crisis. France, in particular, will fight
attempts to reverse this policy. Nevertheless, it must be
done. We can no longer expect the Alliance to do more
without also increasing the resources available to it.

The Need For Political Level Attention
--------------



8. (C/NF) The Civil Budget process is being reviewed by
budget officers and, as in years past, is moving its way up
the decision chain at NATO without adequate political
supervision. The issue of Strategic Guidance for the Civil
Budget (ref B) is on the agenda of the Secretary General's
agenda for upcoming meetings and is not likely to be resolved
easily. We seek Department endorsement of the following way
forward:

-- the Ambassador will draw attention to the Euro 70 million
shortfall in the present budget plans, arguing that the gap
needs to be closed either by new funding or by cutting
existing programs;

-- simultaneously, the Ambassador will propose that the
Allies engage in a thorough review of the Civil Budget to
determine strategic priorities of the Alliance through review
of the budget to determine strategic priorities of the
Alliance;

-- the Ambassador will lay down a marker that new budget
items will need dedicated funding commitments. No new
programs can or should be approved without adequate funding
being identified from the start.
ANDRUSYSZYN