oversight

NATO-Warsaw Pact: Issues Related to Implementation of a Conventional Forces Treaty

Published by the Government Accountability Office on 1990-04-16.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

               .

                    United   States   General   Accounting   Office
        I-

GiO                 Report to Chgressional Committees



April        1990
                    NAm-WARSAW PACT
                    Issues Related to
                    Implementation of a
                    Conventional Forces
                    Treaty




GAO/NSIAD-90430
      united
        states
GAO   General Accounting  Office
      Washington, D.C. 20648

      National Security and
      International Mfairs Division

      B-230646
      April 16,199O
      The Honorable Robert C. Byrd
      Chairman, Committee on Appropriations
      United States Senate
      The Honorable Sam Nunn
      Chairman, Committee on Armed Services
      United States Senate
      The Honorable Claiborne Pell
      Chairman, Committee on Foreign Relations
      United States Senate
      The Honorable Jamie L. Whitten
      Chairman, Committee on Appropriations
      House of Representatives
      The Honorable Les Aspin
      Chairman, Committee on kmed Services
      House of Representatives        l




      The Honorable Dante B. Fascell
      Chairman, Committee on Foreign Affairs
      House of Representatives
      The proposals to reduce conventional forces and equipment in Europe, if
      adopted, will greatly affect relations between the North Atlantic Treaty
      Organization (NA?D) and the Warsaw Pact by moving each party to more
      balanced levels of military forces. The proposed massive Soviet cuts
      have prompted the question: what “peace dividend,” or defensesavings,
      will the United States and its NATU allies be able to reap? Although pre
      cise cost estimates are not yet available, in this report we discusspoten-
      tial cost and savings issuesassociatedwith a conventional forces
      reduction treaty and raise a number of other alliance-wide issuesrelated
      to its implementation. Becauseof the rapid pace at which treaty negotia-
      tions are proceeding and becauseno final agreement has been reached
      on a number of treaty-related issues,someof the information in this
      report, in particular that related to equipment inventory estimates and
      limits, is subject to change.




      Plrge 1                             GAO/N8IAD90-180 CF’ETrerrty ImPlemmmtion
                       In terms of defensesavings, only a limited NAP peacedividend will
Resuks in Brief        result directly from the treaty proposals. This dividend will not be
                       shared equally among all NAPI allies. Under the treaty, only the United
                       States and the Soviet Union are required to make troop reductions. U.S.
                       savings would result from the Department of Defense(DOD) decision to
                       reduce the total number of its forces rather than simply relocate person-
                       nel removed from Europe.
                       Implementing a Conventional Armed Forcesin Europe (CFE)treaty will
                       be a complex task that will result in certain costs to be incurred by all
                       NAID allies. For example, verifying compliance with the treaty may
                       require extensive NAKIinspection and monitoring of Warsaw Pact force
                       levels and treaty-limited equipment.’ NAVIwill incur additional costs in
                       complying with treaty provisions that require the destruction of numer-
                       ous conventional weapons. The United States and its NA?Dallies are cur-
                       rently discussing how best to ensure the equitable distribution of both
                       the costs and benefits of implementing a conventional forces treaty.

                       The United States will likely achieve savings through the proposal to
Many Issues Involved   limit U.S.-stationedground and air forces in Europe to 226,000. To com-
in Assessing CFE       ply with this limit, the United States will have to reduce the number of
Impact on NATlo        ground and air forces stationed in Europe by about 80,000. According to
                       DOD officials, while the treaty requires removal of these forces from
                       Europe, it doesnot require that total U.S. forces be reduced by 80,000;
                       that is, these forces could be removed from Europe and placed in the
                       United States or other theaters where U.S. forces are stationed.2These
                       officials pointed out, however, that total U.S. forces will be reduced by
                       80,000 personnel even though not required by the CFEtreaty proposals.
                       DODnoted that its decision was driven by defensebudget cuts, not CFE.
                       Such budget cuts will require DOD to reduce its military personnel.
                       Although other NATO  allies are not required to make troop reductions
                       under the treaty, DODofficials told us that NATOallies will make some
                       troop reductions to accommodaterequired equipment reductions.
                       Neither the required equipment reductions nor the resulting troop

                       ‘Treaty-limited equipment refers to numerical restrictions placed on the five m*r categories of
                       equipment-tanks, artillery, armored combat vehicles, aircraft, and helicopters-that are being nege
                       tiated under CFE.

                       2The President, in his original troop reduction proposal, noted that troops removed from Europe
                       would be demobilized. According to State Department officials, the term “demobilized” has not yet
                       been defied.




                       Pnge 2                                           GAO/NSWlSO            CFE Treaty Implementhion
                      reductions are likely to produce savings for the other NATO allies compar-
                      able to those which the United States is expected to experience from its
                      decision to reduce total U.S. military personnel.

                      CFEproposals made by NATO and the Warsaw Pact (as of April 1990)
                      would require massive equipment cuts by the Warsaw Pact. NATO force
                      cuts are significantly less (seetable I. 1 in app. I). While NATO may realize
                      someoperations and maintenance savings associatedwith cuts of
                      treaty-limited equipment, those potential savings will be at least par-
                      tially offset by the costs of implementing the treaty.

                      NAIU  hopes to achieve the most capable forces possible within treaty lim-
                      itations by transferring modern equipment from someNATO countries to
                      other alliance membersthat would destroy older equipment to meet
                      treaty requirements. U.S. participation in a transfer program is cur-
                      rently limited by legislative restrictions on the transfer of equipment
                      that is excessto U.S. worldwide requirements. Other benefits could be
                      realized if alliance memberswere allowed to use their excessequipment
                      to meet non-NA’IDrequirements or to sell it to other non-NAmallies.
                      Under the proposed terms of the treaty, however, this would not be
                      permitted.
                      The issuesrelated to implementation of a conventional forces treaty are
                      discussedin appendix I.

                      According to DOD officials, becauseproposals for further reductions are
Impact of a Reduced   still being made and becausepolitical developments affecting the cohe-
Soviet Threat         sion of Eastern Europe continue to unfold, NATO has not completed a
                      reassessmentof the Warsaw Pact threat. Even so, it is clear that the
                      conventional threat to NATD has already decreasedas a result of changes
                      in Eastern Europe and the unilateral Soviet reductions that are now in
                      progress. If agreementis reachedon most of the proposals being dis-
                      cussed,the Soviets’ required force reductions will decreasethe threat to
                      NA?D even further.

                      Most of the NATO allies, including the United States, face domestic bud-
                      getary problems and are examining defenseas an area in which spend-
                      ing cuts could be made. SomeNATO allies have announcedprojected uni-
                      lateral reductions in their defenseforces to be made after the CFE
                      agreementis signed. Although the fiscal year 1991 budget proposed by
                      the President reducesreal defensespending by 2 percent, even deeper
                      cuts appear inevitable.


                      Page3
    The United States and its NATO  allies will be addressing a number of
    issuesthat will affect the level of future defensespending. Among those
    issuesare
. the extent to which U.S. and allied commitments to NATO    are maintained
  or modified,
l the extent to which NATO  nations make unilateral budget cuts in defense
  either as a result of reassessingthe threat or in concert with further
  Warsaw Pact reductions, and
. the extent to which the defenseestablishments within allied countries
  can persuade their governments that it is necessaryto keep pace with
  Soviet modernization efforts.
    Regarding the first issue-maintenance of commitments-although the
    United States has proposed withdrawing 80,000 ground and air forces
    stationed in Europe, it has not changed its commitment to provide 10
    divisions to Europe within 10 days from the time mobilization is called.
    Unless the United States modifies its commitment by decreasingthe
    number of U.S. troops promised and/or the time period promised for
    their delivery, the decreaseof U.S. forces in Europe could result in much
    greater requirements for U.S. strategic lift and prepositioning
    capabilities.
    The level of future defenseexpenditures may also depend on whether
    NATO  allies believe that the Warsaw Pact’s force reductions would change
    the threat so dramatically that substantial unilateral reductions are also
    possible. Individual nations might take the position that the alliance
    will-by maintaining the maximum level of forces proposed in the CFE
    talks-finally reach an asymmetrical advantage over Soviet forces in
    the Central Region and might therefore argue that further cuts should
    be made even if there are no further cuts in Soviet forces. It also seems
    highly probable that other NATO   allies would like a greater share of the
    “peace dividend” in the form of decreaseddefenseexpenditures.

    According to U.S. officials at the U.S. Mission to NATO
                                                          and several Euro-
    pean embassies,after NATO   and the Warsaw Pact forces are reduced,
    both sideswill emphasizemodernization and technological advance-
    ments. If more significant equipment reductions are not agreedto during
    the CFEtalks and if NATO  and the Warsaw Pact move to an arms moderni-
    zation competition, other NAmcountries may realize few benefits from
    the CFEtreaty, and the United States may realize significantly lessthan
    expected. Past defensespending trends of many NATO    allies, coupled
    with the decreasedWarsaw Pact threat, indicate that NATO’S    defense


    Page 4                              GAO/NSL4DBO-13O
                                                      CPJ3Treaty Implementation
ministers may find it difficult to convince their governments to maintain
current force levels and devote greater resourcesto modernization
programs.
We discussedthe information in this report with Defenseand State
Department officials and incorporated their comments, as appropriate.
We plan to continue monitoring developments associatedwith CFEnego-
tiations and the anticipated treaty implementation.
Appendix II includes a discussionof our objectives, scope,and method-
ology. We are sending copies of this report to the Secretariesof Defense
and State; the Director, Office of Managementand Budget; and other
interested parties.

This report was prepared under the direction of Joseph E. Kelley, Direc-
tor, Security and International Relations Issues,who can be reached on
(202) 276-4128 should you or your staff have any questions. Other
major contributors are listed in appendix III.




Frank C. Conahan
Assistant Comptroller General




Page 6                              GAO/NSIADBO-130CFE Treaty Implementation
Contents


Letter                                                                                          1

Appendix I                                                                                     8
IssuesRelated to        CFE Implementation Will Entail Certain Costs
                        Potential Cost SavingsFrom a CFE Treaty
                                                                                              10
                                                                                              16
Reducing
Conventional Forces
and Equipment in
Europe
Appendix II                                                                                   19
Objectives, Scope,and
Methodology
Appendix III                                                                                  20
Major Contributors to
This Report
Tables                  Table I. 1: NATOand Warsaw Pact Force Reductions                        9
                            Proposedby NATO
                        Table 1.2:Elements of the INF Treaty and ProposedCFE                  11
                            Treaty




                        Abbreviations

                        CFE       Conventional Armed Forces in Europe
                        DOD       Department of Defense
                        INF       Intermediate-RangeNuclear Forces
                        NATO      North Atlantic Treaty Organization


                        Page0                             GAO/NSIAD-!@130CPETreaty Implementation
Page 7   GAO/N8IhD9olW Cl% Treaty Implementation
IssuesRelatedto ReducingConventionalForces
and Equipment in Europe

               In March 1989, the 23 nations in the North Atlantic Treaty Organization
               (NATO) and the Warsaw Pact began negotiations to reduce the level of
               conventional armed forces in Europe (CFE).During the NAIDsummit in
               May 1989, NAKI announcedits intention to acceleratethe timetable for
               implementing a treaty and expanded its original proposa1.lAt the Malta
               summit in December1989, President Bush and President Gorbachevcon-
               firmed their commitment to complete a CFE treaty during 1990. They
               also agreedto consider discussionsfor even further force reductions
               after the initial CFEtreaty is signed. In recognition of the dramatic politi-
               cal reforms in Eastern Europe and in responseto calIs to increase force
               reductions, in January 1990, President Bush proposed that U.S. and
               Soviet ground and air forces in Central Europe be reduced to 196,009.
               NATO  and the Warsaw Pact agreedto this proposal in Ottawa in February
                1090 and further allowed the United States to retain an additional
               30,000 U.S. troops elsewhere in Europe while limiting the Soviet Union
               to 196,000 troops.

               The objectives of the CFEnegotiations, as mutually agreed upon by NAP
               and the Warsaw Pact, are to

             . establish a secure and stable balance of conventional forces at lower
               levels;
             . eliminate disparities in military capability that are prejudicial to stabil-
               ity and security; and
             . eliminate, as a matter of high priority, the capability for launching a
               surprise attack and for initiating large-scaleoffensive actions.

               The current CFEnegotiations include U.S. and Soviet ground and air
               forces stationed within the European zone and five major categoriesof
               conventional land-basedarmaments and equipment.2
               To reach relative parity, the Warsaw Pact wilI have to make signifi-
               cantly greater reductions than NAITI. The Soviets would have to reduce
               their forces located west of the Ural Mountains by about 68 percent,
               while the United States would reduce its ground and air forces in
               Europe by about 26 percent. Similarly, NAPIreductions of treaty-limited
               equipment would be significantly less than those of the Warsaw Pact.
                ’ NATO’s expanded proposal is based on President Bush’s proposal to limit U.S. and Soviet air and
                ground forces to 276,000 for each party. The President’s proposal alsu set limits on two additional
                categories of weapons-helicopters and land-based combat akcraft.

                *The European zone refers to the land or territory within Europe that extends from the Atlantic
                Ocean to the Ural Mountains. Current CFE proposals identify conventional equipment and forces that
                will be subject to treaty limitations according to their bcation within the zone.



                Page 8                                             GAO/NSIhD90-130 CF’ETreaty h@ementation
                                        Appendix I
                                        Iames Related to Reducing Conventional
                                        Forceaand Equipment in Europe




                                        The treaty would not preclude modernization of the remaining equip-
                                        ment. Table I.1 illustrates the magnitude of equipment and troop reduc-
                                        tions currently proposed under CFE.
Table 1.1: NATO and Warsaw Pact Force Reductions Proposed by NATO

                                                                                                   NATO
                                                                                                   estimate                 Number
                                                     NATO                                          of current               to be
    Category                                         Proposed        limitsa                       forces                   eliminated

    Tanks                                            NATO                       20,000              22,224                    2,224
                                                     Warsaw Pact                20,000              51,500                   31,500

    Artilleryb                                       NATO                       16,500              17,328                      828
                                                     Warsaw Pact                16,500              43,400                   26,900

    Armored                                          NATO                       30,000              28,800                         0
    Combat                                           Warsaw Pact                30,000              53,500                   23,500
    Vehicles

    AircraftC                                        NATO                          5,700             6,700                      1,000
                                                     Warsaw Pact                   5,700            13,500                      7,800

    Helicopters                                      NATO                         1,900               2,200                       300
                                                     Warsaw Pact                  1,900               3,500                     1,600

    Manpowerd                                        U.S. and Soviet ground and air stationed manpower
                                                     levels in Central Europe are to be limited to 195,000
                             K                       each. The United States is permitted up to an
                                                     additional 30,000 outside this area.

                                        Note: Ftgures In the table will change as NATO and the Warsaw Pact contmue to negotiate equrpment
                                        defrnitrons and kmits.
                                        aNATO and the Warsaw Pact agree on limits for marn battle tanks and combat heltcopters. For the
                                        remainrng equipment categories, the Warsaw Pact has proposed the followrng lrmits for each srde: artil-
                                        lery-20,000; armored combat vehicles-28,000;     and, aircraft-7,700
                                        bArtillery is the only category for whtch a definition has been reached by both sides

                                        CAccording to the State Department, NATO and the Warsaw Pact are far apart in agreerng on aircraft
                                        definitions and limits Both srdes have recently offered alternatives on limits to be placed on thus cate-
                                        gory of equipment.
                                        dTo achieve these troop levels, the United States will have to reduce its European forces by 80,OCO;the
                                        Soviets by 405,ooO.




                                        Page 9                                               GAO/NSIAIMW130 CFE Treaty Implementation
                                Appendix I
                                I.WU~SRelated to Redudng Conventioxml
                                Forceau\d Equipment in Jhuope




                                US. and NATO officials note that, by any measurement, a CFEtreaty
                                would be beneficial to the alliance, primarily becauseit is designedto
                                eliminate the numerical imbalance of forces in Europe. In our view, the
                                equitable distribution of both the costs and benefits of a CFXtreaty will
                                be one of the major issuesfacing the United States and its NARIallies.

                                U.S. officials acknowledge that implementing the proposed treaty wilI
CFE Implementation              be a complex task and will result in additional costs to the NATOallies.
Will Entail Certain             These costs are primarily related to verifying compliance with the
costs                           treaty limits and destroying and transferring treaty-limited equipment.
                                DODand State Department officials were not able to provide implementa-
                                tion cost estimates becausesuch costs are dependent on the outcome of
                                the negotiations. The costs to the United States will depend on intra-
                                alliance agreementsto share the burden of implementation.


Treaty Verification Costs       The mandate for CFEnegotiations requires that any treaty contain “an
                                effective and strict verification regime” to provide the means for moni-
                                toring treaty obligations, including on-site inspections and exchangesof
                                information. To this extent, CFEverification objectives are similar to
                                those of the Intermediate-Range Nuclear Forces(INF)treaty. However,
                                according to DODand State Department officials, verifying a CFE treaty
                                will be much more complex and difficult than verifying the INFtreaty.

                                The INFtreaty, signed in December1987, eliminated an entire class of
                                nuclear weapons. The treaty required a variety of verification mecha-
                                nisms, including
                            . on-site inspections at missile sites and production facilities,
                            . monitoring of missile destruction, and
                            . National Technical Means (electronic/satellite surveillance techniques
                              used to monitor compliance with the provisions of the treaty).

                                CFEverification will be more demanding than that required for the INF
                                treaty for a number of reasons.The INFtreaty requires verification of
                                the complete elimination of one class of nuclear weapons. On the other
                                hand, the CFEtreaty would require each side to inspect and monitor
                                destruction of numerous classesand large numbers of conventional
                                armaments until treaty equipment limits were met. After that, continued
                                monitoring would be required to ensure that limitations placed on the
                                various classesof equipment were being honored. According to a DOD



                                Page 10                                 GAO/NSIAIMU%130CFE Treaty Implemenbtion
                                            Appendix I
                                            Issues Related to Reducing Conventional
                                            Forceaand Equipment in Europe




                                            official, more inspectors and greater numbers of sophisticated monitor-
                                            ing equipment might be required. In addition, although the equipment
                                            destruction phase is 3 years for both the INF and CFEtreaties, the CFE
                                            treaty will require a greater degreeof post-destruction monitoring to
                                            ensure that, as newer equipment is added to countries’ inventories, there
                                            are offsetting reductions (through removal or destruction) to stay
                                            within the equipment limits. This monitoring requirement will exist for
                                            as long as the CFEtreaty remains in force.
                                            The annual cost of INF implementation is roughly estimated at about
                                            $160 million, including verification and destruction costs.Although
                                            detailed WEverification estimates have not yet been developed, U.S.
                                            officials stated that the greater scopeand complexity of the CFEtreaty
                                            could result in implementation costs greater than those of INF.Table I.2
                                            summarizes the differences in scopebetween elements of the INF treaty
                                            and CFEproposals.
Table 1.2: Elements of the INF Treaty and
Proposed CFE Treaty                         Category                          INF                                CFE
                                            Treaty type                       Bilateral (United States and       Multilateral (NATO and
                                                                              Soviet Union)                      Warsaw Pact nations)
                                            Destruction items                 846 U.S. missiles to be            NATO equipment to be
                                                                              destroyed                          destroyed-2,224     tanks,
                                                                                                                 1,000 aircraft, 800 armored
                                                                                                                 combat vehicles, 828 artillery
                                                                                                                 piece9
                                            Inspection sites                  133 Soviet sites requiring         Approximately 3,000 declared
                                                                              U.S. inspection                    Warsaw Pact sites requiring
                                                                                                                 NATO inspection
                                            Inspection period                 13 years                           Undetermined
                                            Inspection personnel              200~3oob                           Unknown
                                            Destruction period                3 years                            3 years
                                            Implementation costs              Approximately $150 million         No detailed estimates
                                                                              per year for the United States
                                            Personnel reductions              None required                      US. reduction to 225,000
                                                                                                                 troops in Europe
                                            aAccording to a DOD offual, new data is being developed as treaty negotiations   progress; therefore,
                                            these figures should be consldered preliminary.

                                            bPersonnel assigned to the On-Site inspection Agency only.


                                            According to DOD and State Department officials, the actual costs of CFT
                                            verification will depend on the extent of the verification effort that both
                                            sides believe is necessary.DOD officials stated that the objective of ver-
                                            ification should not be the detection of every piece of equipment that
                                            exceedsCFElimits. DOD and State Department officials noted that


                                            Page 11                                           GAO/?USIAD9@130
                                                                                                            CPJ3Treaty Implementation
                        InueaBehtedtoRedudng~nventionaI
                        Forcea and Equipment in ihrope




                        lOOpercent verification of numerical ceilings would be extremely diffi-
                        cult and unpractical and would result in prohibitive costs.These offi-
                        cials believe that verification should enable NAPIto detect violations
                        that are “militarily significant” and could alter military parity or change
                        warning times. NKIOhas proposed a specified number of ground on-site
                        inspections that, in its opinion, are neededto ensure that militarily sig-
                        nificant violations are detected. This proposal has not yet been accepted.
                        NAKIis currently considering a U.S. proposal to coordinate monitoring
                        efforts among alliance members.State Department officials favor this
                        approach becauseit offers a means of sharing more equitably the costs
                        of inspections and monitoring. In addition, it is hoped that this mecha-
                        nism will provide a larger base from which to draw technical and for-
                        eign language expertise. The alliance, however, has not yet reached a
                        decision on how the monitoring responsibilities or the associatedcosts
                        will be distributed among NKIOmembers.


Equipment Destruction   Although the CFEtreaty will impose total equipment limits for NA’IOand
and Transfer Costs      the Warsaw Pact, each side will individually determine how national
                        allocations of equipment should be made and which alliance members’
                        equipment should be destroyed to meet treaty limitations. DODofficials
                        noted that the intent of the CFEtreaty is to destroy all treaty-limited
                        equipment that exceedsthe limits; that is, withdrawing this equipment
                        east of the Ural Mountains or to the United States is not an option
                        becausesuch action would violate the intent of the treaty. SomeNKIO
                        allies have more modern equipment in their inventories, while others
                        have older, less capable equipment. DODofficials expressedthe hope that
                        members’ older equipment will be destroyed first and their inventories
                        filled with the more modern equipment of other allies. The purpose of
                        redistributing this modem equipment is to achieve a NAI’Oforce struc-
                        ture, postax, that wiIl provide the NATO   alliance with the most modem,
                        capable fighting force within CFElimitations.

                        According to DODofficials, NA’IOintends to incorporate the transfers of
                        treaty-limited equipment into NKI0’sregular force planning process.Dur-
                        ing this process,force goals are established for each country and tai-
                        lored towards the accomplishment of defensemissions. To achieve CFE
                        goals, for example, one country would be required to upgrade its equip-
                        ment, while another country would reduce its total equipment holdings,
                        thus permitting transfers to the country upgrading its inventory.




                        Page 12                             GA0/NsIAD9o-130 CPETreaty Implementation
                     ImleaRelatedtoIkdudng~ventIonal
                     Foxtea and Equipment in Europe




                     US. officials are currently discussingwith the NMOallies how to dis-
                     tribute c~&proposed equipment cuts equitably among the allied coun-
                     tries.3 Decisionswill have to be made on country limits for each class of
                     equipment, the older alliance equipment that should be destroyed, and
                     the newer equipment that should be transferred to other NAXIcountries.
                     Although there are currently no estimates of the equipment transfer
                     costs to the United States, DODand State Department officials have iden-
                     tified several cost-related issuesthat will have to be consideredby the
                     United States and its NA~Dallies to make the processwork. According to
                     a State Department official, the alliance would like to reach agreement
                     on many of these issuesprior to signing the treaty.


Who ShouldBe         NAIOhas not yet dedded which alliance members’ equipment will be
Responsiblefor       destroyed and how the costs for equipment destruction will be distrib-
                     uted among the allies, but U.S. officials note that destruction costs under
Destruction Costs?   CFEcould be high, depending on the destruction methods selected.
                     Destruction costs may be significantly more for the Warsaw Pact than
                     for NAXIbecauseof the much larger numbers of treaty-limited equip
                     ment its memberswill have to destroy. The expenseinvolved will also
                     be affected by the methods chosenfor equipment destruction.

                     After CFEequipment limits have been reached, countries will not be
                     required to destroy the equipment being replaced by more modem
                     equipment. For example, the United States may field new aircraft in
                     Europe-within CF+E   limitations-but it will have the option of bringing
                     the older aircraft back to the United States or moving it to other thea-
                     ters rather than destroying it.
                     Although destruction procedures have yet to be determined, U.S. and
                     NAIDofficials are currently studying how to economically destroy
                     treaty-limited equipment such as tanks and artillery pieces,which are
                     designedto resist destruction. In addition, if NAXIis to destroy older, less
                     capable equipment-most of which is held by aid-recipient countries
                     with limited financial resources-the issue of who will pay for the
                     destruction will have to be addressed.



                     3For example, the initially proposed limits would require that NA’KI reduce by 16 percent the current
                     levels of land-based combat aircrak Tanks would be reduced by approximately 10 percent, and
                     armored combat vehicles by about 6 percent.



                     Page 13                                           ~o/NsuD9M90          CFEiTreaty Implfmemtation
                         Appendix I
                         IasueaRelated to Reducing Conventional
                         Forces and JCquipmentin Europe




DOD and State            Many issuesconcerning the distribution of costs related to CFEhave not
Considerations of cost   been resolved within the alliance. For example, the degreeto which the
                         United States and other countries will receive reimbursement in return
Sharing                  for equipment transferred4 or the form which that reimbursement might
                         take is uncertain.
                         DODofficials said that they hope to transfer equipment to other NATO
                         nations and, even if no cash reimbursement is made, receive somequid
                         pro quo. These officials noted that other types of reimbursement might
                         include, for example, allied agreementto assumea larger share of the
                         NATO  defenseburden, greater host nation support for U.S. forces,
                         earmarking of additional civil assetsfor U.S. wartime use, or reduced
                         U.S. cost shares in joint projects. Such indirect reimbursements or cost
                         avoidance would be obtained, according to DOD,through bilateral agree-
                         ments with individual allies in consideration of “the needsand abilities
                         of the receiving nations.”
                         Even if U.S. officials are permitted to engagein bilateral negotiations to
                         obtain indirect benefits from recipient nations, the types of benefits
                         sought, such as increasedburden sharing, are similar to what the Con-
                         gresshas argued were rightfully other NATUnations’ responsibilities for
                         the common defense.To gain acceptanceof its proposal, the administra-
                         tion will have to persuade the Congressthat it is in the United States’
                         best interest to transfer its more modern equipment to obtain certain
                         benefits that the Congresshas argued were the allies’ responsibility all
                         along.
                         SomeState and DefenseDepartment officials favor the establishment of
                         a NATO common fund, such as the NATO  infrastructure fund, to finance the
                         costs of redistributing modern equipment to NATO  countries and to pay
                         for other cm-related expenses.A common funding approach, in their
                         view, would serve to distribute equipment transfer costs more equitably
                         throughout the alliance. Under this approach, countries with more mod-
                         ern equipment, such as the United States, would be able to receive some
                         direct reimbursement or credit toward their expected contributions to
                         the common fund for the equipment they would transfer.
                         In addition to questions of what will be received for equipment trans-
                         ferred to NATO allies and what form that reimbursement might take,

                         4Transfer costs, as used in this report, refer to the costs of taking ownership of the defense article,
                         that is, the value paid for the equipment. They do not include transportation costs, which are dis-
                         cussed separately.



                          Page 14                                            GAO/NSIADW-130 CFE Treaty Implementation
                            IasueeRelated to Reducing Conventional
                            Forces and J3quipmentin Europe




                            there also remains the question of who will be responsible for associated
                            costs,such as maintenance, spare parts, and training, once the equip-
                            ment is in the recipients’ inventories. Under the bilateral approach,
                            these costs will also be subject to negotiation between the United States
                            and the recipient of the more modern U.S. equipment. Under the infra-
                            structure approach, these related costs would be considered for inclu-
                            sion in the common fund.
                            The common funding approach raises a number of questions that need
                            to be addressed.For example, will additional funds for NATD’S infrastruc-
                            ture fund be required to compensatethose nations transferring their
                            more modern equipment? According to State officials, one possibility is
                            to have the other NAP nations make extra contributions to the infra-
                            structure fund to cover all remaining -related implementation costs,
                            including transfer of equipment, transportation, spare parts, training,
                            equipment destruction, and treaty inspection. Countries’ contributions
                            would be in the sameproportion as their normal infrastructure pay-
                            ments, and the additional contributions would be used to pay for treaty
                            implementation costs.Countries that transfer equipment and spare
                            parts would receive credits equal to the equipment’s value, and those
                            credits would be to be applied against their contribution to the common
                            fund.

                            It may prove difficult to convince many NAP allies to accept a common
                            funding approach becausemost treaty implementation costswould
                            likely be shifted to those countries that are not transferring large
                            amounts of modern-and presumably highly valued-equipment. Coun-
                            tries with the most extensive inventories of modern equipment-
                            France, West Germany, the United Kingdom, and the United States-are
                            also responsible for making the largest infrastructure contributions.
                            Together, these nations account for over 70 percent of the current NATO
                            infrastructure fund. If the equipment they transfer is valued at 70 per-
                            cent of the CFEcommon fund, the remaining NAVI nations will be
                            required to pay for all other CFEimplementation costs (this includes
                            costs related to equipment destruction, equipment transportation, treaty
                            monitoring, and inspection).


Legal Questions Will Have   The United States will have to addresscertain legal issuesrelated to the
to Be Addressed             transfer of equipment to other NATO  allies. As previously discussed,both
                            DOD and State hope to be able to transfer equipment to other NATO allies
                            without necessarily receiving direct compensation.They also hope to be
                            able to transfer equipment that, while required to be destroyed by the


                            Page 16                                  GAO/NSIAD~l9o   CFE Treaty Implementation
                          Appendix I
                          Issuea Related to Reducing Conventional
                          Forces and Equipment in Europe




                          CFEtreaty, is not excessto US. needsworldwide. These objectives will
                          require legislative relief becauseU.S. law only allows transfer of equip-
                          ment that is excessto all DODcomponents,not just excessto Europe.
                          Further, U.S. law currently permits equipment transfers without direct
                          compensation only to NATO countries that are eligible for U.S. security
                          assistance(Greece,Portugal, and Turkey).
                          The current legislation, which authorizes defensearticles to be trans-
                          ferred without direct compensationto Greece,Portugal, and Turkey,
                          requires that no funds available to DOD for the procurement of such
                          defensearticles be expended in connection with the transfer. DOD offi-
                          cials explained that, as a practical matter, this means that receiving
                          nations must pay for equipment transportation costs.Furthermore,
                          since the legislation is limited to defense articles, receiving countries
                          must also pay for the provision of training on their use and the acquisi-
                          tion of spare parts. Thus, it appears that, depending on the terms of the
                          treaty, legislative revisions will be required to permit either the DOD or
                          State proposal to support NATD'S    equipment transfer objectives.


                          Most near-term CFEcost savings will result from troop level reductions;
Potential Cost Savings    limited savings are anticipated from lower equipment levels in the near
From a CFE Treaty         term, although, according to DOD officials, there may be somelonger-
                          term savings associatedwith equipment operations and maintenance.
                          Among the NATO allies, only the United States will achieve significant
                          benefits in the form of defensesavings due to its decision to reduce total
                          U.S. forces. It is expected, however, that other NATO allies will eventually
                          make someunilateral personnel reductions to correspond with equip
                          ment cuts they make to implement WE.Neither the required equipment
                          reductions nor the resulting troop reductions, however, are likely to pro-
                          duce for the other NATO allies savings comparable to those which the
                          United States is expected to experience.


U.S. Troop Reductions     Under the most recent troop reduction proposal agreedto in Ottawa, the
Offer Potential Savings   United States and the Soviet Union would each have to limit their air
                          and ground forces to 196,000 within the Central European zone.”In
                          addition, the United States would be allowed to station 30,000 troops in
                          Europe outside the Central zone.Currently, the United States has about
                          305,000 ground and air forces in Europe. The new proposal would result

                          6For personnel in CFJZ,the Central European zone includes West Germany, Belgium, Luxembourg,
                          Denmark, the Netherlands, East Germany, Czechoslovakia, Poland, and Hungary.



                          Page 16                                        GAO/NSIAD-9M30 CF’ETreaty Implementation
                           IMU- IMated to Eedudng Conventional
                           Forces and Equipment in Jhrope




                           in a reduction of about 80,000 U.S. troops. According to DOD officials,
                           while the CFEtreaty requires removal of these troops from Europe, it
                           does not require that total U.S. forces be reduced by 80,000; that is,
                           these forces could be removed from Europe and placed in the United
                           States or in other theaters where U.S. forces are stationed. These offi-
                           cials pointed out, however, that total U.S. forces will be reduced by the
                           end of fiscal year 1991 by 80,000 personnel or more regardlessof a CF+E
                           treaty. DOD noted that its decision was driven by defensebudget cuts,
                           not cm.
                           DOD  and the State Department could not provide estimates on the poten-
                           tial savings that might be achieved under current WE troop reduction
                           proposals. However, the CongressionalBudget Office estimated that a
                           226,000 troop ceiling-a reduction of 80,000 U.S. personnel stationed in
                           Europe-could result in annual savings of about $6.6 billion in person-
                           nel, operating, and maintenance costs. Thesepotential savings will be at
                           least partially offset by treaty implementation costs.

                           The CongressionalBudget Office assumed that the reductions would
                           take place by removing two heavy Army divisions and two tactical
                           fighter wings. A critical assumption being made, however, is that the
                           80,000 military personnel would be removed from Europe and the U.S.
                           force structure reduced accordingly. As noted above, according to DOD,
                           while a reduction in total U.S. military personnel is likely to take place,
                           it is not required by the treaty.


Limited Savings Expected   NA?Dequipment in Europe would be cut 6 to 16 percent in certain major
From ReducedEquipment      weapons categories.In terms of equipment procurement fund savings,
1 ,..,l”                   the CongressionalBudget Office estimated that CFEcould save the
lATVC13
                           United States, in the long-term, about $2 billion annuaIly. The Office
                           basedits estimate on the elimination of two of the Army’s 28 divisions
                           and two of the Air Force’s 36 wings. The CongressionalBudget Office
                           then reduced the forces’ procurement budgets proportionately (i.e., the
                           Army procurement budget was reduced by 2/28 to correspond to the
                           elimination of 2 of its 28 divisions).
                           According to DOD, personnel reductions in Europe will probably not
                           result in proportionate equipment reductions. DOD officials indicated
                           that someequipment that is made available as a result of personnel cuts
                           may be stored in Europe to meet U.S. reinforcement and resupply
                           requirements. Therefore, procurement funds may not be reduced in
                           direct proportion to personnel cuts.


                           Page 17                               GAO/NSIADBO-130CFE Treaty Implementation
Appendix I
Issues Related to Reducing Conventional
Forces and Equipment in Europe




Other procurement fund savings might have been available to alliance
membersif they had been allowed to use their excessequipment to meet
non-NA’IDrequirements or permitted to sell it to other non-NATO
                                                              allies.
Under the proposed terms of the treaty, however, this option would not
be permitted.




Page 18                                   GAO/NSIAINO-130 CFE Treaty Implementation
Ppe
&&kves, Scope,and Methodology


             Our objectives were to identify (1) areas in which potential costs and
             savings might result from implementing the CFEtreaty between NAIKI and
             the Warsaw Pact and (2) alliancewide issuesrelated to implementation
             of the treaty, such as how costs and savings would be distributed among
             the NA?D allies. We consideredonly those proposals currently being dis-
             cussedin the CFEnegotiations in Vienna. We interviewed officials and
             reviewed records at DOD, the State Department, and the Arms Control
             and Disarmament Agency. We also reviewed reports issued by the Con-
             gressional Budget Office. In addition, we interviewed officials at the U.S.
             Mission and Military Delegation to NATOin Brussels, Belgium; the U.S.
             embassiesin Bonn, West Germany; Paris, Prance; London, England;
             Brussels, Belgium; the U.S. European Command Headquarters in Stutt-
             gart, West Germany; and the U.S. Mission to the European Community
             in Brussels,Belgium. Our review was conducted from October 1989 to
             March 1990 in accordancewith generally acceptedgovernment auditing
             standards. This report is basedon information available as of April
             1990.




             Page 19
Appendix III

Major Contributors to This Report


                                 Louis H. Zanardi, Assistant Director
Nationa1       SecUfitY    and   H. C. Young, Project Adviser
International Affairs            Elena L. Boshier, Evaluator-in-Charge
Division,      W~h~gton,         Beth A. Hoffman, Evaluator
D.C.




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