NATO CIVIL BUDGET: MEDIUM TERM FINANCIAL PLAN

C O N F I D E N T I A L USNATO 000109 NOFORN SIPDIS E.O. 12958: DECL: 03/18/2019 TAGS: NATO PREL AFIN ABUD AMGT SUBJECT: NATO CIVIL BUDGET: MEDIUM TERM FINANCIAL PLAN 2010-2014 REF: A. USNATO 100 ¶B. BC-D(2009)0004 ¶C. SG(2009)0146 Classified By: Deputy Chief of Mission Walter Andrusyszyn for reason 1. 4 (b) and (d). ¶1. (U) This is a request for guidance. See paras 5 and 6. ¶2. (C/NF) NATO is in the process of planning its civil budget expenditures over the next five years. As a part of this process the NATO International Staff has developed a draft Medium Term Financial Plan for 2010 to 2014 (MTFP). The NATO civil budget is to be frozen at Euro 177 million as calculated in 2009 constant Euro per annum. Inflation decisions will be made during annual budget preparations. The NATO International Staff (IS),based upon decisions at various summits and ministerials, is proposing in the MTFP a set of new funding requirements that will require additional budget resources of Euro 70 million spread over the next five years. ¶3. (C/NF) As the budget is frozen at 177 million per annum for a five-year total of Euro 885 million, there is no funding available for an additional 70 million unless an equivalent off-set of Euro 70 million can be found, primarily through the cutting of existing programs. ¶4. (C/NF) The Secretary-General has outlined three strategic budget imperatives: Operations, Preparing for the Future, and Sustaining the Alliance Decision-Making Capacity. Operations encompasses the theatres where NATO deploys forces and assets. Future preparations will position NATO to deal with defense transformation, HQ reform, partnerships, strategic outreach, and the wider spectrum of security challenges. Lastly, the SYG states that it is essential that the core decision-making capacity is sustained in light of new threats and technologies. The (MTFP) will provide resources to meet the essential security, business continuity, information management, and new headquarters transition requirements. Request for Guidance -------------- ¶5. (C/NF) We request Washington guidance on the overall approach and priorities for NATO Civil Budget over the next five years. Please see Ref A for post,s views on the wider strategic aspects of the NATO budgetary problems. ¶6. (C/NF) We also request detailed guidance on the priorities to be pursued within the MTFP global categories of spending and specific projects described below. 
 Background -------------- ¶7. (C/NF) NATO is writing a five-year financial plan, which is conceived as a strategic document meant to outline the goals of NATO within the constraints of a financial document. It is intended to cover the years 2010 through 2014. The basic work is being performed within NATO,s Civil Budget Committee with advice and direction from the NAC. In initiating the exercise, the international staff has issued a report detailing the additional funding needs over the next five years. The report from the international staff is reftel B) titled "Medium Term Financial Plan 2010-2014" (MTFP). The Secretary-General,s political guidance is reftel C) titled "Strategic Guidance 2010-2014." Copies are being e-mailed to EUR/RPM. ¶8. (C/NF) The MTFP, consolidates, but does not prioritize, the new requirements proposed by all NATO divisions. The total cost of the proposals, expressed in constant 2009 Euros, is Euro 70,188,423 to be spread over the five-year term. Each of the requirements is listed below with a Euro cost and a short summary. All Euro figures, within this message, are stated in constant 2009 Euros without any inflation assumptions. The requirements also include the establishment of 47.5 new positions at NATO. In drafting the MTFP, the NATO International Staff relied on the following principles/assumptions: -- that the highest budgetary priority will continue to be accorded to respond to operations and the Strategic Communications Plan, as will completion of the ICT Revitalization Program; -- that the requirement for transition and planning associated with the move to the new HQ will be addressed separately; -- that the establishment of the NATO-UN and other Liaison Officers are provided for in the plan; -- that the implementation of the Security enhancement program is included in the plan. ¶9. (C/NF) Under the current NATO policy of zero real growth (ZRG),the NATO budget will not increase beyond the 2009 budget figure of Euro 177,099,800 for the core budget (which excludes the pensions budget). Although inflation will be accepted, several nations are demanding that during the five year plan, the budget will remain at Euro 177,099,800, expressed in constant Euro. ¶10. (C/NF) There is very little hope in increasing total budget expenditures beyond inflation, currently estimated at about two per cent. France has vigorously led a movement against NATO budget increases. Britain and Germany quietly support France to varying degrees, and several poorer nations have recently joined in supporting France due to the serious economic problems now besetting them. ¶11. (C/NF) Funding political activities and public diplomacy programs goals by raiding the administrative support structure is no longer a realistic option. ZRG, which has been NATO policy since 2004, has thus far been largely accomplished by constraining the administrative support budgets to the point where support offices have difficulty operating. ¶12. (C/NF) Over 80 percent of the administrative support budget spending is in four areas: 1) building maintenance, which is again being reduced as stated below, 2) Information Management which has major new requirements as stated below, 3) translating and interpreting, which employees 120 permanent staff, 4) NATO Office of Security (NOS),which has new funding needs due to new and expanding threats. Other basic services in human resources, the comptroller, auditing, supply, and logistics are now &bare-bone8 services. ¶13. (C/NF) As a result, most program increases will have to be off-set by decreases in other programs. This will require Allies to set priorities across the spectrum of activities supported by the Civil Budget. For example, will we protect activities and programs related to Active Operations and Alliance Capabilities at the expense of most of our Partnership programs? Do we agree with the MTFP principle that the NATO Strategic Communication Plan is of the highest importance, ranking as equivalent to operations. (Note: Drawing from the Alliance tasks agreed in the 1999 Strategic Concept, Active Operations and Alliance Capabilities support the fundamental security tasks of the Alliance; partnerships fulfill the task of enhancing the security and stability of the Euro-Atlantic area.) ¶14. (C/NF) Similarly, we will also have to set priorities within the broad budget categories. For example, Allies will have to reach agreement on how to budget across the Alliance,s various partnerships. The 2009 Euro Civil Budget costs of these programs are: NATO-Russia (5,264,829), NATO-Ukraine (2,903,325),Partnership for Peace (15,332,775), Mediterranean Dialogue and ICI (3,506,508),International Organizations and NATO (2,079,258),Contact Countries (338,894). ¶15. (C/NF) NATO uses seven global objectives to categorize all funding within its system of objective based budgeting. Below is a listing of the specific projects that require new funding. They are grouped according to the seven global objectives. At the end of each group of requirements there is a summary for that global objective. Within the summary, the four elements are 1) the global objective name, 2) the 2009 budget expenditure by objective, 3) the total amount of changes (additions or decreases) requested in the five-year plan, and 4) number of new personnel positions requested. All funding figures are in constant 2009 Euros. Following Are the Proposed New Requirements: -------------- ¶16. (C/NF) Office of the SCR (Kabul) ) Armored Cars. Euro 250,000 one-time cost. Replacement of the current armored cars used by SCR (Kabul). ¶17. (C/NF) Afghan Tailored Co-operation Program. Euro 750,000 spending over 5 years. Cooperation between NATO and Afghan authorities related to the defense reform aspects of the Tailored Cooperation for Afghanistan program. ¶18. (C/NF) Kosovo ) In Theatre Operations and Activities. Euro 2,850,000 spending over 5 years. The Military Advisory Team in Pristina currently comprises 11 VNCs who must be replaced with consultants paid by NATO. ¶19. (C/NF) Secure Communications Equipment (Secure Voice Infrastructure) ) SITCEN. Euro 240,000 for the one-time purchase of new secure phones, including the set-up and user card costs. (C/NF) Summary: Active Operations Global Objective. 2009 budget of 14,703,429 would be increased by 5,699,200 over 5 years. Three positions added. ¶20. (C/NF) Special Fund for Co-operative Planning. Euro 760,000 spending over 5 years. This represents an increase in the fund that NATO/DI uses to subsidize national efforts to develop and field needed capabilities. It is currently being used to support work on helicopter capability shortfalls. ¶21. (C/NF) Defense Against Terrorism ) Program of Work. Euro 760,000 spending over 5 years. An increase of funding for this program as there is currently a euro two million gap between available funding and the demand from nations for the exploration and development of new collaborative initiatives in this field. ¶22. (C/NF) NIAG studies. Euro 1,600,000 spending over 5 years. An increase in the NIAG budget, which is the key mechanism for NATO,s cooperation with industry. The NIAG &seed-money8 leverages industry resources and expertise to develop or contribute to solutions to critical capability needs. (C/NF) Summary: Alliance Capabilities Global Objective. 2009 budget of 20,493,536 would be increased by 5,505,500 over 5 years. Four positions added. ¶23. (C/NF) Partners, Mediterranean Dialogue, Istanbul Cooperation Initiative, and Contact Countries. Euro 700,000 spending over 5 years. An increase in funding for these partnership programs to increase the levels of defense cooperation. ¶24. (C/NF) Normalization of NATO-Russia Relations and Re-settlement Center. Euro 200,000 increase for two years to complete the funding of the resettlement center through 2011, and then a decrease of Euro 400,000 for the 3 years of 2012 ) 2014 as the recurrent costs for NATO-Russia Council activities are decreased and NATO funding for the resettlement center ends. ¶25. (C/NF) NATO ) Ukraine Retraining Program. Decrease of Euro 500,000 per year after the program is ended at the end of 2012. ¶26. (C/NF) NATO ) Georgia Commission and Liaison Office. Euro 875,000 spending over 5 years. It is assumed that the liaison office would be manned by VNCs provided by nations, but that NATO would cover support costs. ¶27. (C/NF) Energy Security. Euro 250,000 spending over 5 years. To finance seminars and workshops on regional aspects of energy security. ¶28. (C/NF) NATO Liaison Offices ) United Nations, Caucasus, Central Asia. Euro 318,000 spending over 5 years. For support costs at the UN office, housing of the international staff member assigned to the UN office, and hiring of local staff for the Caucasus and Central Asia offices. ¶29. (C/NF) Science for Peace and Security Program. Euro 1,500,000 in 2010 and 2011 each so as to bring the program back up to its original levels of Euro 13.3 million per year. This program had been reduced in 2009 to accommodate other needs and the program,s proponents now propose that those cuts be reinstated. Program funding in constant 2009 Euros is now Euro 11.8 million per annum. Approximately 20 million Euros are already committed in multi-year projects over the 2010 ) 2112 period for network infrastructure grants such as Melange and the Virtual Silk Highway. ¶30. (C/NF) Kyrgyzstan Resettlement Program. Euro 375,000 over 5 years to finance expert visits, train-the-trainers, and acquire computers and pedagogical equipment. Summary: Partnership Global Objective. 2009 budget of 30,875,201 would be increased by 9,974,450 over 5 years. Fourteen and a half positions added. ¶31. (C/NF) NATO Strategic Communications Plan. Euro 11,120,000 over 5 years. To upgrade the media monitoring capability at NATO HQ, increase the scope of news monitoring, modernize the process of news collation and dissemination, and improve the distribution and access of news and information to end-users. To fund support costs for staff in Afghanistan, satellite transmissions, video conferencing, licenses and maintenance. To establish new journalism and camera teams with related support costs. ¶32. (C/NF) Press Tours in Afghanistan. Euro 100,000 over 5 years. ¶33. (C/NF) Mediterranean Dialogue and Istanbul Cooperation Initiative ) Public Diplomacy Support. Euro 675,000 over 5 years. To provide for public diplomacy growth in this area with three additional staff and program support costs. ¶34. (C/NF) Summits and Ministerials. Euro 2,500,000 over 5 years. To enable the Public Diplomacy Division to continue supporting these high profile events. ¶35. (C/NF) International Organizations and Contact Countries. Euro 250,000 spent over 5 years. For activities targeting Pakistan, the African Union, and UN/NATO cooperation. (C/NF) Summary: Public Relations Global Objective. 2009 budget of 22,984,336 would be increased by 21,424,000 over 5 years. Eighteen positions added. ¶36. (C/NF) Graduate Training Program. Euro 480,000 over 5 years. A program to attract talent to NATO by funding short term graduate research posts at HQ. ¶37. (C/NF) Vocational Trainee Training Program. Euro 600,000 over 5 years. A program to attract talent to NATO by funding internships in technical and support activities at NATO HQ. ¶38. (C/NF) IT Training ) ICT and New HQ Preparation. Euro 527,000 over 5 years. To restore the IT training budget to appropriate levels and provide training in the new programs being develop for the new HQ building. ¶39. (C/NF) NATO Archives ) Migration to Digital Format. Euro 250,000 over 2 years. A legacy project that has been continuously deferred, but must now be performed as the floppy discs currently being used are no longer manufactured. ¶40. (C/NF) ICT Revitalization Program. Euro 19,958,623 spent at varying rates over the next 5 years. Current ICT hardware and software are obsolete and must be replaced, particularly with the view of migrating to a new HQ building. ¶41. (C/NF) Documentation and Digital Printer. Euro 487,000. Includes the one-time purchase of Euro 300,000 plus recurring operating expenses for 5 years. ¶42. (C/NF) Telecommunications, Licenses and Miscellaneous ICT Costs. Euro 569,000 over 5 years. ¶43. (C/NF) IBAN. Euro 185,000 over 5 years. For ICT training for IBAN staff, to review and audit plans for the transition to the new HQ, to introduce risk-based audit system within IBAN, and add 2 auditors. (C/NF) Summary: NATO and IS Support Global Objective. 2009 budget of 54,253,350 would be increased by 24,081,523 over 5 years. Five positions deleted. ¶44. (C/NF) Headquarters Maintenance. Decrease funding of Euro 2,000,000 over 5 years by assuming the increasing risks of not replacing core infrastructure items such as heating, cooling, electrical, and water systems in the old building as we prepare to migrate to a new HQ building. The risk is significant as the building is in very poor condition. (C/NF) Summary: Headquarters Operating and Maintenance Global Objective. 2009 budget of 14,778,766 would be decreased by 2,000,000 over 5 years. No change of positions. ¶45. (C/NF) Security. Euro 5,503,750 spending over 5 years. Primarily to improve our capacity in the areas of cyber defense, counter-terrorism, and counter-intelligence, and to plan for the transition to the new HQ. Savings of over a million euro have been identified by extending the lifespan of security equipment at the old HQ. (C/NF) Summary: Headquarters Security Global Objective. 2009 budget of 18,868,193 would be increased by 5,503,750 over 5 years. Thirteen posts added. Recommendations -------------- ¶46. (C/NF) There are thirty proposals in paragraphs 16 though ¶45. Some of these clearly fall within the strategic guidance of the Secretary-General and must be seen as essential. Post believes that the following items are in this strategic category and requests guidance that they be funded: They are listed in paragraphs 16, 17, 18, 19, 20, 26, 31, 40, 42, 45. The funding totals would be Euro 42,876,373 and would require savings off-sets elsewhere in the budget. Post requests that Department concur with post analysis and welcomes additional specific items that the Department would include in this set of strategic priorities. ¶47. (C/NF) While we continue to believe that all NATO,s partnerships are vitally important and should be maintained, economies will have to be found in this category, as well. For example, we question whether the Alliance should agree to a Euro 200,000 increase in NRC funding over each of the next two years in order to complete funding of the NRC Re-Settlement Center. Discussion of the resettlement center during this year,s budget discussions was extremely contentious, with supporters of the NRC arguing for continuing funding in order to not send a &negative political signal to Moscow.8 On the other hand, we believe that the NRC cannot be exempted from the budget cuts that will hit other programs, especially during a time of a &phased and measured8 Alliance approach to Russia. Post requests guidance on this, as well as to the Department,s more general priorities in the partnership programs. Taken together, these programs now constitute Euro 30,875,201 in the 2009 budget. ¶48. (C/NF) Post recommends that the budget allocation for Science for Peace and Security programs be significantly reduced. Those programs represent the largest non-discretionary portion of the civil budget, constituting Euro 11,800,000 in the 2009 budget, and are summarized in paragraph 29 above. The programs are mostly in the Partnership Global Objective. While some monies are already committed, a significant reduction in this funding would go some way to freeing up resources for programs that are of a higher priority for the U.S. Over the longer term, Allies need to seriously discuss whether the Science for Peace program can continue to be justified at all, given competing priorities and the financial crisis. ¶49. (C/NF) Post notices that the MTFP does not include funding for the Strategic Cooperation Framework with Iraq. As this is a partnership program designed to complement an ongoing operation, the NATO Training Mission in Iraq, we recommend that we be instructed to ask that this be included as a high priority item. VOLKER