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NATO military expenditure 2017

14 mei 2018

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Last Update July10, 2018

On May 2, 2018 SIPRI published its update of the SIPRI Military Expenditure Database. [1a] Earlier that year on March 15, 2018 NATO issued its Defense Expenditure of NATO Countries (2010-2017) report. [1b] It is time to update our graphs and tables to enhance our understanding of the continued warmongering of our local politicians since the NATO Wales summit declaration in 2014. [2] This updates our previous superseded post, this time in English to facilitate access by our usual visitors abroad on this particular subject.

AS SIPRI indicated the military expenditure in current USD for 2017 was highly impacted by the overall depreciation of the US dollar. As we are mainly concerned with the European military burden we put the emphasis on figures denominated in euros.

“Today, NATO faces the greatest security challenges in a generation—including terrorism, cyber and hybrid threats and a more assertive Russia.” “NATO’s Command Structure is under the authority of the Military Committee.”[11] We will show that in view of the current European military expenditure this committee should be sacked on the spot if they cannot organize a proper defense for the current money made available by the European let alone the US tax payers.

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§1 Introduction

Rather than an unreadable text summary the following table sums up the development of NATO military expenditure 2008-2017 and some friends:

Table 1 Summary military expenditure NATO & some friends

(a) Market exchange rates are more commonly used to compare international defense expenditure, however the outcome in comparing spending between countries over time tends to be volatile. [11] In table 2 we overcome this problem partly by using the same 2017 exchange rate for all years.

(b) From the above it can be concluded that the USD might not be the most appropriate currency to report  European defense expenditure. In table 4 we use the euro for those figures. The same applies for China for the euro. Incidentally, as shown in §1, the euro might be more appropriate to report Russia’s military expenditure.

The definition of military expenditure varies quite considerably between the statistics of the Stockholm International Peace Research Institute (SIPRI) and the International Institute for Strategic Studies (IISS) and of course the NATO. The definition of military expenditure changes over time and differs between countries. [11] The pension cost of retired military personnel f.i., although sometimes included, does not provide much firepower. Paramilitary forces when judged to be trained, equipped and available for military operations are included in military expenditure by SIPRI. This affects amongst other countries with a (semi-)fascist or similar history. The absence of reliable, open available figures allows only an educated guess for some key countries.

Efficiency is also a major factor which is not reflected in the spending. The US army probably is not more efficient then the US car and steel industry. In the good old times the DDR was a showcase for the communist bloc. The Supergau Deutsche Einheit showed us what the actual performance of the DDR was. It is highly unlikely that Russia’s economy has become significant more competitive since. [12] Maybe we should increase Chinese defense expenditure figures with a factor for its productivity. This factor could be provided by Apple, but to do that we need reliable defense figures first.

§2 Russia

Russia’s military expenditure based on the SIPRI data can be graphed as follows [1a;1d]:

Chart 1 Russia’s military expenditure 2008-2017 (SIPRI)

(a) The growth rate is only meaningful if the baseline is indicated. In 2008 Russia’s military expenditure amounted to $ 56,2 bn (real money € 38,4 bn) and in 2017 $ 66,3 bn  (€ 61,1 bn) Exchange rates are by nature arbitrary, particularly for military goods.[3] The relevance of USD figures is consequently at least obscure.

(b) On the right side of the graph the compound annual growth rates are indicated. The inflation adjustment is based on the CPI per OECD-data set. An inflation factor for military goods could and probably would be significantly different. The growth rate, adjusted for inflation, is overall in line with the growth rate in euros. The RUB rates of exchange are based on SIPRI-data set, the USD /Euro rates and vice versa are based on the NATO-data set. [1d]

(c) A significant portion of the Russian defense expenditure should be allocated to contain China, which military expenditure amounts in 2017 to some $150-230 bn. or 2,5-3,4 times Russia. (2008: ≈ 2,3 times). Naturally China’s defense budget increase gives some relieve for the NATO budget.

(d) Alternative data

It is remarkable that I have not been able to trace a NATO estimate of Russia’s military expenditure. One would think that you cannot have a strategy without such data. We therefore have to rely upon SIPRI data like the World Bank [4] or data from the International Institute for Strategic Studies (IISS), both based in Sweden. For the remarkable differences in those figures and the NATO figures see table 3.

“After large real-terms defense-spending cuts of 10% in 2016 and 9% in 2017, Russia is looking to stabilize its total military expenditure at around US$59 bn per annum from 2018 to 2020”, according to an IISS statement.[6]

The European Defence Agency (EDA) is an intergovernmental agency of the Council of the European Union that also provides data. The Defence Data Portal is fine example of the deficiency of that Council and totally out of date. [9]

§3 Overall picture
Table 2 Development military expenditure NATO 2008-2017

(Click on table or CTRL + to enlarge)

(a) This key table compares military expenditure in local currency, USD en current 2017 USD for the years 2008, 2016 and 2017.  The substantial differences between NATO and SIPRI figures show that bureaucrats can fight their own war based on definitions.

(b) As can be seen military expenditure comparisons over the years on the basis of then current USD exchange rates are as useful as an ashtray on a motorbike. For analysis purposes of the European military expenditure we therefore switch to euros in table 3.

(c) The compound growth rate based on local currency expenditure gives a better picture of the actual growth. For hyperinflation countries like Russia the amounts should be adjusted for inflation – see chart 1.

(d) It is the Tragedy of Great Powers that they waste a lot of money on the military. Only a part of the US budget should be rightfully allocated to NATO commitments. Which part is anybody’s guess but a ballpark figure is that the US contributes 22% of NATO bill. [14]  Europe might not be a bunch of “shithole nations” but we come pretty close in Galicula Trump’s view and it is thought that this put some pressure on the European NATO budget. At the other hand the overseas excess cash of tax haven moneys of US multinationals give some reassurance . That the USA, with NRA support, is overdoing it a little bit might be become obvious from the following chart of military expenditure 2017 (SIPRI data):

Chart 2 World military expenditure 2017

The SIPRI database for 2017 adds up to € 1.701 bn and not $ 1.739 bn as mentioned in the SIPRI fact sheet. [1a]

(e) It is remarkable that we as tax payers have to rely upon third parties to get some insight in the military expenditure of our major adversaries. It is further remarkable that some estimates are apparently not worth the paper it’s written on:

Table 3 Military expenditure 2017 SIPRI, IISS and Nato in USD bn

§4 European NATO Countries
Table 4 Military expenditure NATO Europe in € bn

(Click on table or CTRL + to enlarge)

(a) The last column shows the military expenditure at the higher of actual cost or 2% GDP. I do not know what the European politicians at the Wales Summit were smoking when they decided to “commit” to the 2% GDP military expenditure. I see no reason why we would have to spend 5 times the Russian military budget to feel more save.

(b) I am aware that Russia employs significant more military personal but what use is it to have drug addict, alcoholic Oblomovs under arms? (Chechen)

§5 The Netherlands

In the Netherlands it is a show of virtue to comply with international obligations, in part to secure favors and international jobs for our politicians. [7]

If the Wales Summit Declaration [2]  is taken seriously, which is highly unlikely, the Dutch military expenditure will have to increase in the period 2018-2024 by 11,9 % p.a.:

Table 4 NATO commitment The Netherlands € bn

A proper justification for such an increase is until to date lacking. In part it seems to relate to the illegitimate behavior of certain Russian oligarchs in charge in the Kremlin, although they have partly settled in Londongrad enjoying all the facilities of the City.[10]

This lack of strategy is highly consistent with the way the JFS F-35 lightning II melon, was dealt with. The Netherlands committed to buy 85 → 68 → 61 → 37 planes for an amount of € 4,521 mio, without a proper strategy analyses of our long-term military requirements. The number of planes was gradually reduced to 37 and the current budget amounts to some € 5,2 bn. [8] Further it is still uncertain whether all 37 planes can be bought for this buckshee.

Chart 3 Dutch military expenditure 1995-2017 in € mio.

(a) Other expenditure includes, among other, formalization of policies, which must be tactical as a defense strategy is lacking, and legislation on defense matters. It is likely that legal compliance is also included as there were some major incidents. The “other” percentage of total expenditure varies from year to year but a percentage of 19.5% in 2012 is certainly excessive and can only be explained based on the following chart, which unfortunately is in Dutch, and has a certain resemblance with a South American Banana Republic:

Chart 3 Dutch military budget 2018 in € mio

A summary is as follows:

Talbe 5 Dutch military budget 2018 in € mio

(a) With a budget like this, I would keep the whole damn thing secret.

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Sources

[1a] SIPRI, relevant publications:

https://www.sipri.org/media/press-release/2018/global-military-spending-remains-high-17-trillion

https://www.sipri.org/sites/default/files/2018-05/sipri_fs_1805_milex_2017.pdf

https://www.sipri.org/databases/milex

[1b] NATO, “Defence Expenditure of NATO Countries (2010-2017)”

https://www.nato.int/cps/en/natohq/news_152830.htm

The cut-off date for information used in this report was 9 February 2018. Figures for 2017 are estimates.

1c] NATO, “Defence Expenditures of NATO Countries (2008-2015)”

https://www.nato.int/cps/su/natohq/news_127537.htm

[1d] https://data.oecd.org/price/inflation-cpi.htm#indicator-chart

The table below summarizes the rates used:

[2] NATO, “Wales Summit Declaration – Issued by the Heads of State and Government participating in the meeting of the North Atlantic Council in Wales”

https://www.nato.int/cps/ic/natohq/official_texts_112964.htm

[3] https://www.sipri.org/databases/milex/frequently-asked-questions#PPP

Question # 12

[4] The World Bank, “Military expenditure (% of GDP)”

https://data.worldbank.org/indicator/MS.MIL.XPND.GD.ZS

[5] https://www.iiss.org/-/media//documents/publications/the%20military%20balance/mb18/top-15-defence-budgets-2017.jpg?la=en

[6] https://www.iiss.org/-/media//documents/publications/the%20military%20balance/mb18/the-military-balance-2018-further-assessments.pdf?la=en

[7] https://www.state.gov/r/pa/ei/bgn/3204.htm

Even if a war is illegal like in Iraq there is open and secret support. https://www.rijksoverheid.nl/documenten/rapporten/2010/01/12/rapport-commissie-davids

and https://www.vn.nl/de-hoop-scheffer-en-de-old-boys/

[8] https://www.rijksoverheid.nl/documenten/kamerstukken/2017/12/07/beantwoording-kamervragen-over-jsf-toestellen

https://www.rtlnieuws.nl/nederland/jsf-wat-een-enorm-hoofdpijndossier

[9] https://www.eda.europa.eu/info-hub/defence-data-portal

[10] Margaret Hodge, “This is how to curb Putin: stop welcoming Russian kleptocrats.”

https://www.theguardian.com/commentisfree/2018/mar/16/how-to-curb-putin-russian-kleptocrats-salisbury-dirty-money

and

Moscow’s Gold: Russian Corruption in the UK

with a lovely quote:

“there is a view that basically we—the UK—are suckers, and that you can take advantage of all the freedoms and legal protections you have here while stealing at home. So you steal in a place of legal nihilism and you offshore in a place of legal solidity”

https://publications.parliament.uk/pa/cm201719/cmselect/cmfaff/932/93202.htm

[11] Ministry of Defense, “Finance and Economics Annual Bulletin International Defence 2017”

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/662991/Finance-economics_annual_statistical_bulletin_international_defence_2017-_November_Revision.pdf

[12] Susanne Oxenstierna, “Russia’s defense spending and the economic decline”,  Journal of Eurasian studies, November 3, 2015.

https://www.sciencedirect.com/science/article/pii/S1879366515000287

and

https://www.clingendael.org/sites/default/files/pdfs/20111129_clingendaelpaper_mdehaas.pdf

Quote page 34

[13] https://www.nato.int/nato_static_fl2014/assets/pdf/pdf_2018_02/1802-Factsheet-NATO-Command-Structure_en.pdf

[14] NRC, Ko Colijn, “Hier had je ‘no’ moeten zeggen, Rutte”

https://www.nrc.nl/nieuws/2018/07/10/hier-had-je-no-moeten-zeggen-rutte-a1609447

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