oversight

NATO Enlargement: Cost Implications for the United States Remain Unclear

Published by the Government Accountability Office on 1997-10-23.

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

                          United States General Accounting Office

GAO                       Testimony
                          Before the Committee on Appropriations, U.S. Senate




For Release on Delivery
Expected at
10:00 a.m., EST,
                          NATO ENLARGEMENT
Thursday,
October 23, 1997

                          Cost Implications for the
                          United States Remain
                          Unclear
                          Statement of Henry L. Hinton, Jr., Assistant Comptroller
                          General, National Security and International Affairs
                          Division




GAO/T-NSIAD-98-50
               Mr. Chairman and Members of the Committee:

               We are pleased to be here today to help the Committee sort through some
               of the issues related to the cost and financial obligations of expanding the
               North Atlantic Treaty Organization (NATO). Our testimony today will
               address three issues: (1) current U.S. costs to support NATO’s common
               budgets and other funding that supports relations with Central and East
               European nations and promotes NATO enlargement; (2) NATO’s defense
               planning process, which will form the basis for more definitive cost
               estimates for an enlarged alliance; and (3) our evaluation of the recent
               Department of Defense (DOD) study of NATO expansion and a comparison
               of DOD’s study with studies of the Congressional Budget Office (CBO) and
               the Rand Corporation.


               The ultimate cost of NATO enlargement will be contingent on several
Summary of     factors that have not yet been determined. Specifically, NATO has yet to
Observations   formally define (1) its strategy for defending the expanded alliance,
               (2) force and facility requirements of the newly invited states, and (3) how
               costs of expanding the alliance will be financed. Also unknown is the
               long-term security threat environment in Europe. NATO’s process for
               determining the cost of enlargement is underway and expected to be
               completed by June 1998.

               In fiscal year 1997, the United States contributed about $470 million
               directly to NATO to support its three commonly funded budgets, the NATO
               Security Investment Program (NSIP), the military budget, and the civil
               budget. This is about 25 percent of the total funding for these budgets. It is
               through proposed increases to these budgets, primarily the NSIP and to a
               lesser extent the civil budget, that most of the direct cost of NATO
               enlargement will be reflected and therefore where the United States is
               likely to incur additional costs.

               Additionally, over $120 million was programmed in fiscal year 1997 for
               Warsaw Initiative activities in the three countries that are candidates for
               NATO membership and other Partnership for Peace (PFP) countries.1 This
               money was provided to help pay for Foreign Military Financing grants and
               loans, exercises, and other PFP-related activities. Funding for these

               1
                In 1994, NATO launched a wide-ranging cooperative effort—known as PFP—with nonmember
               countries to promote democracy, expand cooperation, and strengthen relationships between NATO
               and nonmember countries. Participation of countries in PFP plays a role in NATO’s decisions
               regarding expansion. For further information see NATO Enlargement: U.S. and International Efforts to
               Assist Potential New Member States (GAO/NSIAD-97-164, June 27, 1997).



               Page 1                                                                        GAO/T-NSIAD-98-50
activities will continue, but the allocation between the candidates for NATO
membership and all other PFP participants may change over time. This
funding is strictly bilateral assistance that may assist the candidate
countries and other countries participating in PFP to meet certain NATO
standards, but it is not directly related to NATO decisions concerning
military requirements or enlargement.

NATO defense planners are now developing military requirements through
their defense planning process and are close to completing their analyses.
These requirements will ultimately be translated into costs eligible for
common funding. NATO officials plan to present their cost estimates for
these items for approval at the NATO defense ministerial meeting in early
December 1997. However, it will not be until June 1998 that NATO will
make decisions about whether or how much to increase the common
budgets, which would then be shared among current and new members.
Until this has been done, the implications for the U.S. contributions to
NATO’s common budgets will be unclear.


As you know, DOD, CBO, and Rand developed cost estimates for enlarging
NATO before invitations were extended to Poland, Hungary, and the Czech
Republic and therefore before NATO had assessed its current military needs
or developed military requirements that could be used to make more
accurate cost estimates. Thus, the ranges of these estimates—from
$10 billion to $125 billion—are substantially different, depending on the
assumptions used. In some instances, the cost range estimates overlap;
however, this may be coincidental, since the assumptions and force
postures used to develop the estimates were different. Thus, it is not
surprising that the debate on this issue has been surrounded by some
confusion.

Our analysis of DOD’s cost estimate to enlarge NATO indicates that its key
assumptions were generally reasonable and were largely consistent with
the views of U.S., NATO, and foreign government officials.2 In particular, the
assumption that large-scale conventional security threats will remain low
significantly influenced the estimate. However, DOD’s lack of supporting
cost documentation and its decision to include cost elements that were
not directly related to enlargement call into question its overall estimate.
Because of the uncertainties associated with enlargement and DOD’s
estimating procedures, the actual cost of NATO enlargement could be



2
 See our report NATO Enlargement: Cost Estimates Developed to Date Are Notional
(GAO/NSIAD-97-209, Aug. 18, 1997).



Page 2                                                                     GAO/T-NSIAD-98-50
                        substantially different from DOD’s estimated cost of about $27 billion to
                        $35 billion.

                        Rand and CBO cost estimates are no more reliable than DOD’s, based on our
                        comparison of the three studies. CBO and Rand developed a range of cost
                        estimates for NATO enlargement, including estimates that employ a defense
                        strategy similar to DOD’s. Several factors account for the differences
                        between DOD’s estimate and the CBO and Rand estimates, including those
                        estimates that employed defense strategies similar to DOD’s. For example,
                        CBO assumed a much larger reinforcement force and much more extensive
                        modernization, infrastructure, and training costs than DOD did. Rand
                        assumed a somewhat larger reinforcement force and higher training and
                        air defense modernization costs than DOD did.


                        As it does now, the United States will fund its share of NATO enlargement
U.S. Contributions to   primarily through contributions to the three common budgets. NSIP pays
Common Budgets and      for infrastructure items that are over and above the needs of the member
Other Funding           nations, including communications links to NATO headquarters or
                        reinforcement reception facilities, such as increased apron space at
Sources                 existing airfields. The military budget pays for NATO Airborne Early
                        Warning Force program and military headquarters costs, and the civil
                        budget pays primarily for NATO’s international staff and operation and
                        maintenance costs of its civilian facility in Brussels. For fiscal year 1997,
                        the U.S. contribution for the three common budgets was about
                        $470 million: $172 million for the NSIP, $252 million for NATO’s military
                        budget, and $44.5 million for NATO’s civil budget. Any increases to the U.S.
                        budget accounts would be reflected primarily through increased funding
                        requests for the DOD military construction budget from which the NSIP is
                        funded, the Army operations and maintenance budget from which the
                        military budget is funded (both part of the National Defense 050 budget
                        function), and the State Department’s contributions to international
                        organizations from which the civil budget is funded (part of the
                        International Affairs 150 budget function).

                        While NATO will not have finalized its common infrastructure requirements
                        for new members until December 1997 or decided whether or how much
                        to increase the common budgets until June 1998, DOD and State
                        Department officials told us that the civil and NSIP budgets are likely to
                        increase by only 5 to 10 percent and the military budget will probably not
                        increase at all. This would mean an increase of about $20 million annually
                        for the U.S. contribution to NATO. However, as we indicated, NATO has yet



                        Page 3                                                       GAO/T-NSIAD-98-50
                   to make decisions on these matters. In addition, the United States could
                   choose to help new members in their efforts to meet their NATO
                   membership obligations through continued Foreign Military Financing
                   grants and/or loans, International Military Education and Training grants,
                   and assistance for training activities. The three candidate countries and
                   other PFP countries have been receiving assistance through these accounts
                   since the inception of the PFP program, and this has enabled some of these
                   countries to be more prepared for NATO membership. In fiscal year 1997,
                   over $120 million was programmed for these activities, and about
                   $60 million of this amount went to the three candidates for NATO
                   membership. Any increased funding for such assistance would be funded
                   through the International Affairs and Defense budget functions.


                   It is through NATO’s defense planning process that decisions are made on
NATO’s Defense     how the defense burden will be shared, what military requirements will be
Planning Process   satisfied, and what shortfalls will exist.

                   NATO’s New Strategic Concept, adopted in Rome in 1991, places greater
                   emphasis on crisis management and conflict prevention and outlines the
                   characteristics of the force structure. Key features include (1) smaller,
                   more mobile and flexible forces that can counter multifaceted risks,
                   possibly outside the NATO area; (2) fewer troops stationed away from their
                   home countries; (3) reduced readiness levels for many active units;
                   (4) emphasis on building up forces in a crisis; (5) reduced reliance on
                   nuclear weapons; and (6) immediate and rapid reaction forces, main
                   defense forces (including multinational corps), and augmentation forces.
                   Although NATO has not defined exactly the type and amount of equipment
                   and training needed, it has encouraged nations to invest in transport, air
                   refueling, and reconnaissance aircraft and improved command and control
                   equipment, among other items.

                   NATO’s force-planning and goal-setting process involves two interrelated
                   phases that run concurrently: setting force goals and responding to a
                   defense planning questionnaire. The force goals, which are developed
                   every 2 years, define NATO’s requirements. The major NATO commanders
                   propose force goals for each nation based on command requirements.
                   Each nation typically has over 100 force goals. NATO and national officials
                   frequently consult one another while developing force goals and national
                   defense plans. NATO commanders are unlikely to demand that member
                   nations establish units or acquire equipment they do not have.




                   Page 4                                                      GAO/T-NSIAD-98-50
In its annual response to NATO’s defense planning questionnaire, each
member verifies its commitment for the previous year, defines its
commitment for the next year, and lays out plans for the following 5 years.
Alliance members review each nation’s questionnaire and, in meetings, can
question national plans and urge member nations to alter their plans. After
finishing their reviews, generally in October or November, NATO staff write
a report summarizing each nation’s plans and assessing national
commitments to NATO. Once NATO members approve this report, it becomes
the alliance’s consensus view on each country’s strengths and weaknesses
and plan to support the force structure. It is through this process that NATO
determines what shortfalls exist, for example, in combat support and
combat service support capabilities.

According to U.S. officials, NATO is preparing several reports to be
presented for approval at the defense ministerial meetings in
December 1997. One report will discuss the additional military capability
requirements existing alliance members will face as a result of the
alliance’s enlargement. According to officials at the U.S. mission and
Supreme Headquarters Allied Powers Europe, it is unlikely that any
additional military capability requirements will be placed on NATO
members over and above the force goals they have already agreed to
provide. In other words, if current force goals are attained, NATO will have
sufficient resources to respond to likely contingencies in current and new
member countries. Therefore, it can be concluded that although
enlargement of the alliance is another reason for current allies to attain
their force goals, it will not add any new, unknown costs to existing
members’ force plans.

Other reports resulting from this process will discuss the requirements for
commonly funded items in the new nations and their estimated costs.
These items include infrastructure that will enable the new allies to
receive NATO reinforcements in times of crisis, communication systems
between NATO and their national headquarters, and a tie-in to NATO’s air
defense system. How these projects will be financed by NATO, for example,
whether they will be financed within existing budgets or by increasing the
size of NATO’s common budgets, will not be determined until June 1998.
Therefore, the impact of these costs on the U.S. contributions to NATO’s
common budgets and the U.S. budget will be unknown until next spring.

Another report will present an assessment of the capabilities and shortfalls
in the military forces of Poland, Hungary, and the Czech Republic. NATO
does not and will not estimate the costs of the shortfalls of either the



Page 5                                                      GAO/T-NSIAD-98-50
                          current or the new member states, but once these shortfalls are identified,
                          cost estimates can be made by others. However, even though new
                          members’ capabilities and shortfalls will be identified in December, these
                          countries’ force goals will not be set until the spring. These force goals
                          will, in effect, be a roadmap for the new members on how to address their
                          shortfalls. (See app. I for a timeline illustrating these events.)


                          When the DOD, CBO, and Rand studies were completed, many key cost
Key Assumptions and       determinants had not been established. Consequently, each study made a
Cost Estimates for        series of key assumptions that had important implications for each studies’
NATO Enlargement          results.

Studies                   DOD   made the following key assumptions:

                      •   Specific nations would be invited to join NATO in the first round of
                          enlargement.3
                      •   NATO would continue to rely on its existing post-Cold War strategy to carry
                          out its collective defense obligations (that is, each member state would
                          have a basic self-defense capability and the ability to rapidly receive NATO
                          reinforcements).4
                      •   NATO would not be confronted by a significant conventional military threat
                          for the foreseeable future, and such a threat would take many years to
                          develop.
                      •   NATO would continue to use existing criteria for determining which items
                          would be funded in common and which costs would be allocated among
                          members.5

                          Using these assumptions, DOD estimated the cost of enlarging NATO would
                          range from about $27 billion to $35 billion from 1997 to 2009. The estimate
                          was broken down as follows:




                          3
                           DOD assumed that four countries would be invited to join NATO, but the actual countries that were
                          the basis for the estimate are classified information.
                          4
                           NATO adopted a new post-Cold War strategic concept at its Rome summit meeting in 1991. The
                          concept provides for substantial reductions in the size and readiness of NATO’s forces but increased
                          force mobility, flexibility, and ability to adapt to the changed threat environment.
                          5
                           NATO funds only those facilities or portions of facilities that are over and above the needs of an
                          individual country’s national security requirements. For example, NATO would fund only the portion
                          of infrastructure at an air base that is beyond the host nation’s own needs, such as hangars for
                          reinforcing aircraft, but not hangars for the host country’s aircraft.



                          Page 6                                                                          GAO/T-NSIAD-98-50
                            •   about $8 billion to $10 billion for improvements in current NATO members’
                                regional reinforcement capabilities, such as developing mobile logistics
                                and other combat support capabilities;
                            •   about $10 billion to $13 billion for restructuring and modernizing new
                                members’ militaries (for example, selectively upgrading self-defense
                                capabilities); and
                            •   about $9 billion to $12 billion for costs directly attributable to NATO
                                enlargement (for example, costs of ensuring that current and new
                                members’ forces are interoperable and capable of combined NATO
                                operations and of upgrading or constructing facilities to receive NATO
                                reinforcements).

                                DOD estimated the U.S. share of these costs would range from about
                                $1.5 billion to $2 billion—averaging $150 million to $200 million annually
                                from 2000 to 2009. The estimated U.S. share chiefly consisted of a portion
                                of direct enlargement costs commonly funded through NATO’s Security
                                Investment Program. DOD assumed that the other costs would be borne by
                                the new members and other current member states and concluded that
                                they could afford these costs, although this would be challenging for new
                                members. (See app. II.)


DOD’s Key Assumptions           In our review of DOD’s study of NATO enlargement, we (1) assessed the
Were Reasonable, but Cost       reasonableness of DOD’s key assumptions, (2) attempted to verify pricing
Estimates Are Speculative       information used as the basis for estimating enlargement costs, (3) looked
                                into whether certain cost categories were actually linked to enlargement,
                                and (4) identified factors excluded from the study that could affect
                                enlargement costs.

                                We concluded that DOD’s assumptions were reasonable. The assumption
                                regarding the threat was probably the most significant variable in
                                estimating the cost of enlargement. Based on information available to us,
                                we concluded that it was reasonable to assume the threat would be low
                                and there would be a fairly long warning time if a serious threat
                                developed. This assumption, and the assumption that the post-Cold War
                                strategic concept would be employed, provided the basis for DOD’s
                                judgments concerning required regional reinforcement capabilities, new
                                members’ force modernization, and to a large extent those items
                                categorized as direct enlargement costs.

                                DOD also assumed that during 1997-2009, new members would increase
                                their real defense spending at an average annual rate of 1 to 2 percent.



                                Page 7                                                     GAO/T-NSIAD-98-50
Both private and government analysts project gross domestic product
(GDP) growth rates averaging 4 to 5 percent annually for the Czech
Republic, Hungary, and Poland during 1997-2001. Thus, projected
increases in defense budgets appear affordable. Analysts also point out
that potential new member countries face real fiscal constraints, especially
in the short term. An increase in defense budgets at the expense of
pressing social concerns becomes a matter of setting national priorities,
which are difficult to predict. If these countries’ growth rates do not meet
expectations, their ability to increase real defense spending becomes more
problematic.

DOD further assumed that current NATO members would on average
maintain constant real defense spending levels during 1997-2009.6 Analysts
have expressed somewhat greater concern about this assumption and
generally consider it to be an optimistic, but reasonable projection. Some
analysts indicated that defense spending in some current member states
may decline further over the next several years. Such declines would
partly be due to economic requirements associated with entry into the
European Monetary Union.7

Despite our conclusion that DOD’s underlying assumptions were sound, for
several reasons we concluded that its estimates are quite speculative.
First, DOD’s pricing of many individual cost elements were “best guesses”
and lacked supporting documentation. This was the case for all three
categories of costs: direct enlargement costs, current members’
reinforcement enhancements, and new members’ modernization
requirements. Most of the infrastructure upgrade and refurbishment cost
estimates were based on judgments. For example, DOD’s estimate of
$140 million to $240 million for upgrading a new member’s existing air
base into a NATO collocated operating base was not based on surveys of
actual facilities but on expert judgment. We were told that the actual cost
could easily be double—or half—the estimate.

DOD’s estimated costs for training and modernization were notional, and
actual costs may vary substantially. DOD analysts did not project training

6
 In 1996, defense spending as a percent of GDP was 2 percent for Italy, 1.7 percent for Germany,
2.9 percent for the United Kingdom, and 3 percent for France. If GDP increases in real terms, these
percentages will decline under DOD’s assumption of constant real defense spending.
7
 Under the European Monetary Union, scheduled to go into effect January 1, 1999, the European Union
would have a common central bank and monetary policy and a single currency called the euro.
According to the Maastricht Treaty, the primary goal of the common central bank is price stability. The
treaty requires that the economies of the participating countries converge toward certain performance
goals in terms of inflation, long-term interest rates, exchange rate stability, and budget deficits (no
greater than 3 percent of GDP) and debt (no greater than 60 percent of GDP).



Page 8                                                                          GAO/T-NSIAD-98-50
                             tempos and specific exercise costs. Instead, they extrapolated U.S. and
                             NATO training and exercise costs and evaluated the results from the point
                             of view of affordability. DOD’s estimate for modernization and restructuring
                             of new members’ ground forces was also notional and was based on
                             improving 25 percent of the new members’ forces. However, it did not
                             specify what upgrades would be done and how much they would cost.

                             Second, we could find no linkage between DOD’s estimated cost of
                             $8 billion to $10 billion for remedying current shortfalls in NATO’s
                             reinforcement capabilities and enlargement of the alliance. Neither DOD
                             nor NATO could point to any specific reinforcement shortfalls that would
                             result from enlargement that do not already exist. However, existing
                             shortfalls could impair the implementation of NATO’s new strategic
                             concept. DOD officials told us that while reinforcement needs would not be
                             greater in an enlarged NATO, enlargement makes eliminating the shortfalls
                             essential. This issue is important in the context of burdensharing because
                             DOD’s estimate shows that these costs would be covered by our current
                             NATO allies but not shared by the United States.


                             Finally, NATO has yet to determine what military capabilities,
                             modernization, and restructuring will be sought from new members.
                             Consequently, DOD had little solid basis for its $10 billion to $13 billion
                             estimate for this cost category. Moreover, DOD and new member
                             governments have noted that new members are likely to incur costs to
                             restructure and modernize their forces whether or not they join NATO.
                             Indeed, some countries have indicated that they may need to spend more
                             for these purposes if they do not become NATO members. DOD showed
                             these costs as being covered entirely by the new members.


Potential Additional Costs   NATO  enlargement could entail costs in addition to those included in DOD’s
of Enlargement               estimates, including costs for assistance to enhance the PFP or other
                             bilateral assistance for countries not invited to join NATO in July 1997. In
                             addition, the United States may provide assistance to help new members
                             restructure and modernize their forces. For example, Polish officials said
                             they may need up to $2 billion in credits to buy multipurpose aircraft.
                             While not an added cost of enlargement, such assistance would represent
                             a shift in the cost burden from the new member countries to the countries
                             providing assistance. DOD did not include such costs in its estimate of the
                             U.S. share, though it acknowledged that the cost was possible. Moreover,
                             U.S. and NATO officials have stated that additional countries may be invited
                             to join NATO in the future, most likely in 1999. DOD’s cost estimate did not



                             Page 9                                                      GAO/T-NSIAD-98-50
                          take into account a second or third round of invitations. If additional
                          countries are invited, cost of enlargement would obviously increase.


Comparison of the DOD,    CBO and Rand estimated the cost of incorporating the Czech Republic,
CBO, and Rand Estimates   Hungary, Poland, and Slovakia into NATO. They based their estimates on a
                          range of NATO defense postures, from enhanced self-defense with minimal
                          NATO interoperability to the forward stationing of NATO troops in new
                          member states. However, they also noted that the current lack of a major
                          threat in Europe could allow NATO to spend as little as it chose in enlarging
                          the alliance.

                          Because of the uncertainties of future threats, and the many possible ways
                          to defend an enlarged NATO, CBO examined five illustrative options to
                          provide such a defense. Each option built on the pervious one in scope
                          and cost. CBO estimated that the cost of the five options over the 15-year
                          period would range from $61 billion to $125 billion. Of that total, CBO
                          estimated that the United States might be expected to pay between
                          $5 billion and $19 billion. CBO included in its range of options a $109-billion
                          estimate that was predicated on a resurgent Russian threat, although it
                          was based on a self-defense and reinforcement strategy similar to that
                          used by DOD.8 Of this $109 billion, CBO estimated that the United States
                          would pay $13 billion.

                          Similarly, Rand developed estimates for four options to defend an enlarged
                          NATO that build upon one another, from only self-defense support at a cost
                          of $10 billion to $20 billion to the forward deployment of forces in new
                          member states at a cost of $55 billion to $110 billion. These options
                          include a middle option that would cost about $42 billion that was also
                          based on a self-defense and reinforcement strategy. Rand estimated that
                          the United States would pay $5 billion to $6 billion of this $42 billion in
                          total costs.

                          Several factors account for the differences between DOD’s estimates and
                          the CBO and Rand estimates, even those that employed defense strategies
                          similar to DOD’s. (App. III illustrates the major results and key assumptions
                          of the three estimates.)

                          CBO’scost estimate is significantly higher than DOD’s for the following
                          reasons:

                          8
                           CBO’s lowest estimate is based on a low-threat assessment; the additional costs are predicated on a
                          resurgent Russian threat.



                          Page 10                                                                         GAO/T-NSIAD-98-50
•   DOD  assumed reinforcements of 4 divisions and 6 wings, whereas CBO
    assumed a force of 11-2/3 divisions and 11-1/2 wings and a much larger
    infrastructure for this force in the new member states.
•   CBO’s modernization costs are much higher than DOD’s and include the
    purchase of 350 new aircraft and 1,150 new tanks for the new member
    states. DOD assumed that about 25 percent of the new member states’
    ground forces would be modernized through upgrades and that each
    nation would procure a single squadron of refurbished Western combat
    aircraft.
•   CBO assumed much higher training costs, $23 billion, which include annual,
    large-scale combined exercises. DOD included $2 billion to $4 billion for
    training.
•   CBO included the purchase of Patriot air defense missiles at a cost of
    $8.7 billion, which is considerably higher than DOD’s assumed purchase of
    refurbished I-HAWK type missiles at $1.9 billion to $2.6 billion.
•   CBO’s infrastructure costs were much higher than DOD’s and included new
    construction, such as extending the NATO fuel pipeline, which CBO assumed
    would meet U.S. standards. DOD assumed planned refurbishment of
    existing facilities that would meet minimal wartime standards.

    Rand’s cost estimate is somewhat higher than DOD’s, although both were
    based on similar threat assessments. First, its reinforcement package was
    larger—5 divisions and 10 wings—and therefore infrastructure costs were
    higher. Second, it assumed new members would purchase the more
    expensive Patriot air defense system rather than the refurbished I-HAWKs.
    Finally, it assumed greater training costs than did DOD. The author of the
    Rand study stated that if he had used DOD’s assumptions, the cost range
    would have been almost identical to DOD’s.


    Mr. Chairman, this concludes our prepared remarks. We would be happy
    to answer any questions you or the Committee members may have.




    Page 11                                                   GAO/T-NSIAD-98-50
Appendix I

NATO Enlargement Timeline



Date                    Activity
September 1995          NATO issues study on enlargement.
July 1997               NATO issues invitations to Poland, Hungary, and the Czech Republic to begin
                        accessions talks.
October/November 1997   NATO prepares several reports:
                          • additional military capability requirements for existing alliance members that
                          will result from the alliance’s enlargement;
                          • requirements for commonly funded items in the new member nations, including
                             • infrastructure that will enable the new allies to receive NATO reinforcements in
                             times of crisis,
                             • communication systems between NATO and their national headquarters, and
                             • a tie-in to NATO’s air defense system;
                          • cost estimates for items eligible for common funding presented by NATO officials;
                          and
                          • the capabilities and shortfalls in the military forces of Poland, Hungary, and the
                          Czech Republic.
Early December 1997     NATO defense ministerial meeting to approve the above reports.
Spring 1998             New members’ force goals set.
June 1998               NATO decides whether or how much to increase the common budgets, which would
                        then be shared among current and new members.
April 1999              Target date for new member accession into NATO.




                        Page 12                                                               GAO/T-NSIAD-98-50
Appendix II

Categories and Share of Costs



Table II.1: Estimates From the Executive Branch Report to the Congress, February 1997
Dollars in billions
                                                            New members’        Current allies’
Cost category                                                      share                share        U.S. share         Total
New members’ military restructuring and modernization            $10 to $13                     0            0     $10 to $13
Current members’ reinforcement enhancements                               0             $8 to $10            0        8 to 10
Direct enlargement                                                  3 to 4.5            4.5 to 5.5   $1.5 to $2       9 to 12
Total                                                          $13 to $17.5     $12.5 to $15.5       $1.5 to $2    $27 to $35




                                            Page 13                                                         GAO/T-NSIAD-98-50
Appendix III

Comparison of DOD, CBO, and Rand
Estimates


               Dollars in billions
               Assumption               DOD                     CBO                     Rand
               Total cost               $27-$35 in              $61-$125 in             $10-$110 in
                                        constant 1997           constant 1997           constant 1996
                                        dollars                 dollars ($109 for a     dollars ($42 for a
                                                                defense strategy        defense strategy
                                                                similar to DOD’s)       similar to DOD’s)
               U.S. cost share          $1.5-$2.0               $13.1a                  $5-$6a
               Notional new NATO        A small group           Poland                  Poland
               members                  (details classified)    Hungary                 Hungary
                                                                Czech Republic          Czech Republic
                                                                Slovakia                Slovakia
               Time period              1997-2009               1996-2010               Approximately
                                                                                        1995-2010
               Threat assessment        Low threat              A resurgent Russiaa     Low threata
               Comparable force         4 divisions/6 wings     11.7 divisions/11.5     5 divisions/10 wingsa
               posture options                                  wingsa
               a
               These assumptions correspond to the estimate based on a defense strategy similar to DOD’s.




(711305)       Page 14                                                                   GAO/T-NSIAD-98-50
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