Will Russia’s invasion boost NATO’s budget?
Series Geopolitics & Global Order

Will Russia’s invasion boost NATO’s budget?

18 Mar 2022 - 14:42
Photo: NATO headquarters in Brussels in 2021. © NATO
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What is the purpose and fundamental security task of NATO? The leaders of the Alliance are currently updating its Strategic Concept. Due to be ready by June 2022, it will be the first revision of this key NATO document since 2010. In this Clingendael Spectator series, 11 international experts answer 5 key questions on NATO’s future. Question 2: Will Russia’s invasion of Ukraine encourage NATO members to boost their defence spending to 2% of their GDP? How will enhanced defence capabilities impact the Alliance?

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bannerAt the time of writing, Russian Armed Forces have already started their invasion of Ukraine. Now that this critical threshold is passed, the key question is how many warfighting capable elite units and combat-ready major weaponry (such as fighter aircraft, main battle tanks, and artillery pieces) each NATO nation can actually provide. This is more critical than complex defence economics and endless political discussions.

Another big problem is that various militaries of NATO allies have low combat readiness, and their personnel do not have a strong combat record. I believe NATO’s primary effort should focus on building real militaries that can respond to the real challenges. Considerations of defence economics should remain of secondary importance.

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After Russia’s attack on Ukraine, Chancellor Scholz and the traffic-light coalition (Social Democrats, Free Democrats and Greens) have decided that Germany will step up her defence efforts. A “special fund” of Euro 100 billion should quickly ramp up the underfunded Bundeswehr. The extra money will bring German defence expenditures to 2% of GDP for the coming years, and Chancellor Scholz has promised to hold that level.

To secure a majority, there will also be non-military parts in this “special fund”, and more efficient procurement is needed. This change will be significant and lasting, though. It has support from the Bundestag and the public - two thirds of the German population now backs higher defence spending.

This “new normal” for Germany will be good for NATO: a more reliable German military will focus on defending NATO’s eastern flank. The defence package - and new F-35 fighters to continue nuclear sharing - will ease transatlantic frictions. All of this will make Germany’s diplomatic approach towards Russia more acceptable when needed, which will also improve alliance coherence. 

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The consistent low levels of defence investments over the years by European NATO allies have seriously and negatively impacted the military readiness of the Alliance. The current crisis makes it crystal clear that sustained and serious investments in capabilities, for the purpose of increasing NATO’s defensive abilities and deterrence posture, are more important than ever.

But let us not forget that besides responding to the current crisis, NATO also needs to focus on reimagining and rethinking a comprehensive security approach for the next decades. A myriad of (future) security challenges – conventional and non- conventional, geographical and across domains (from land, sea, air to cyber) – calls for a holistic view of defence spending, which goes beyond the idea of the 2% target.

This will require focusing on Alliance readiness levels, with at the centre the NATO Defence Planning Process, addressing the full spectrum of challenges. NATO’s Article 3 will remain the fundamental principle to make this a reality. 1

bannerThere are obvious shortcomings with the 2% input-model of NATO. But it serves a political purpose of generating pressure for higher spending, both between NATO allies and internally in each country. In addition, the capability targets, NATO’s Readiness Initiative, and the process of filling the NATO Response Force (NRF) are all contributing to improve NATO’s defence output.

However, NATO members continue to struggle to meet agreed readiness targets. Therefore, on top of NATO’s 2% commitment, incentives – and ‘sticks’ – should be considered.

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I do not think the 2% target has been ineffectual. It has given us a baseline to hold countries accountable and assess who is not fairly contributing.

The change to NATO budgeting that I would most like to see is to have common funding for countries that contribute troops to agreed NATO operations, with assessments on the already agreed NATO common funding scale. We should be incentivising participation rather than unfairly burdening our less prosperous allies when they want to contribute to operations.


bannerEurope has to take on more responsibility for its security. This statement has been repeated for years, but the need is getting ever more pressing and is acknowledged on both sides of the Atlantic.

It is also clear that NATO has to move towards a more balanced way of burden sharing. Although Russia has forced the United States to focus on European security at the moment, geopolitical competition between the US and China will require a great deal of US attention in the coming years.

Strengthening European defence capabilities is an absolutely necessary element in Europe’s aspirations to do more for its own security. Therefore the 2% target should be maintained and allies that do not yet meet it have to be constantly reminded about the importance of everyone doing their share. The shock of Russia’s invasion of Ukraine has made reaching the target more realistic than before.

bannerThe 2% pledge made in Wales in 2014 has been helpful in terms of mobilising reluctant NATO allies into investing more in defence. It was accompanied by perhaps a more important pledge to spend at least 20% on major military equipment.

Following 24 February, Germany and some other NATO members announced that they would either match or go beyond the 2% benchmark. These funds must be allocated wisely. Identifying ‘output targets’ linked to the threat environment, the goal of balancing the contributions of the US and the rest of the allies, but also maintaining NATO’s technological advantage, should direct the modernisation efforts over the next decade.

NATO leaders should not replace but rather reconfirm the Wales pledge. Enhancing NATO’s common budgets and programmes (which are mere fractions of national defence spending) to allow efficient functioning of NATO, especially the build-up of infrastructure such as pipelines and storage sites, should be seen as a separate, and much needed effort.

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I have written about this question in my book What’s Wrong with NATO and How to Fix It (2021). NATO should abandon the 2% BNP metric in favour of an ‘Alliance contribution rating’. The latter is, in turn, derived from an analysis by Garrett Martin and Balasz Martonffy.2  In these analyses, the 2% target is retained, but it sits alongside other metrics too often overlooked (for example, the cost of host-nation support for NATO facilities, deployments and exercises).

The NATO Defence Planning Process already sends out sufficient information to inform allies’ decisions on capabilities and deployment – but some statement of overall ambition would be useful (the EU Common Security and Defence Policy used to do this in the 2000s) and given high-level affirmation in the Strategic Concept of 2022. Part three of the 2009 NATO Comprehensive Political Guidance might (in an updated form) serve as a model for the sort of statement required.

The war in Ukraine with the resultant pledges to increase defence spending does not make this suggestion redundant. More allies (including Germany) may now reach the 2% threshold, but that extra money needs to be spent effectively. NATO will need to send the appropriate signals on what this money buys in a looming era of enhanced deterrence and defence on NATO’s eastern flank.

bannerRussia’s war against Ukraine has destroyed whatever was left of Europe’s faltering post-Cold War security order. It is a systemic change of the first order. The deployment of Russian forces in parts of Ukraine and Belarus alters the military balance between Russia and NATO.

Defending the Suwalki gap – wedged in between Belarus and the heavily militarised Russian enclave of Kaliningrad – will become harder for NATO, increasing the risk that the Baltic states will be cut off. In that case, Poland, Slovakia, Hungary and Romania will all be frontier states. These countries only host a few thousand NATO troops, good for deterrence but not so much for defence.

This systemic change is already compelling massive adjustments on the part of NATO. Germany’s plan for full re-armament will spur other countries to follow suit. Greater military spending is just the beginning. The looming new Cold War will likely compel a shift of focus from contributions to operations abroad to development of traditional defence capabilities: tanks, missiles, air defences, artillery, helicopters et cetera.

It would be extremely unwise for NATO countries that are also members of the EU to not make use of the amplifying potential of European integration. Every effort should be made to reduce fragmentation of defence spending amongst EU countries and increase interdependence between European defence companies.

bannerNATO should maintain both input and output measures, even now the war in Ukraine has changed the defence spending game in Europe. The 2% BNP spending target (input) has historically been more effective in driving efforts up than critics allow.

However, critics have a point in saying that the 2% target has become over-politicised (especially during the Trump presidency) and on the output side tends to disconnect from military effectiveness. NATO’s Defence Planning Process is perfectly capable of producing targets for the combined allied level of ambition, which will have to increase in response to Russia’s military aggressiveness.

Now that Europeans seem willing to put their money where their mouth is, one could argue that NATO should shift its focus to organising and rationalising all the new defence investments. NATO should pay attention to this output side, but burden-sharing will continue to involve defence spending, and NATO would do well to maintain input targets to get the full measure of burden-sharing and alliance solidarity.

bannerThe Ukraine war has dramatically changed the debate about defence spending, with European states, most significantly Germany, unprecedently committing to spending more on defence. This confirms that defence spending is correlated with threat perceptions (the ‘Putin factor’) more than with internal peer pressure (the Wales Defence Investment Pledge and the ‘Trump factor’).

Yet this is not the end of the conversation, with at least two issues emerging. First, will European states take this opportunity to develop the defence-industrial dimension of European strategic autonomy, or will they continue to mainly rely on US capacities? Second, and related, will an increase in European defence spending translate into an empowered EU as a defence actor, or will NATO be the main beneficiary of the current revolution?

The last two weeks seem to indicate (or confirm) a division of tasks between the two organisations where NATO is responsible for deterrence and defence while the EU plays an essential yet predominantly political-economic role.