NATO Enlargement:

Cost Implications for the United States Remain Unclear

T-NSIAD-98-50: Published: Oct 23, 1997. Publicly Released: Oct 23, 1997.

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Pursuant to a congressional request, GAO provided information on issues related to the cost and financial obligations of expanding the North Atlantic Treaty Organization (NATO), focusing on: (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) GAO's 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.

GAO noted that: (1) the ultimate cost of NATO enlargement will be contingent on several factors that have not yet been determined; (2) NATO has yet to formally define its future: (a) strategy for defending the expanded alliance; (b) force and facility requirements of the newly invited states; and (c) how costs of expanding the alliance will be financed; (3) also unknown is the long-term security threat environment in Europe; (4) NATO's process for determining the cost of enlargement is under way and expected to be completed by June 1998; (5) 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; (6) this is about 25 percent of the total funding for these budgets; (7) it is through proposed increased 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; (8) 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; (9) this money was provided to help pay for Foreign Military Financing grants and loans, exercises, and other PFP-related activities; (10) funding for these activities will continue, but the allocation between the candidates for NATO membership and all other PFP participants may change over time; (11) 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; (12) GAO's 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., and NATO, and foreign government officials; (13) the assumption that large-scale conventional security threats will remain low significantly influenced the estimate; (14) 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; (15) because of the uncertainties associated with enlargement and DOD's estimating procedures, the actual cost of NATO enlargement could be substantially different from DOD's estimated cost of about $27 billion to $35 billion; and (16) Rand and CBO cost estimates are no more reliable than DOD's.

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