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). However, as we indicated, NATO has yet 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. NATO’s Defense Planning Process

It is through NATO’s defense planning process that decisions are made on how the defense burden will be shared, what military requirements will be satisfied, and what shortfalls will exist. Using these assumptions, DOD estimated the cost of enlarging NATO would range from about $27 billion to $35 billion from 1997 to 2009. DOD’s Key Assumptions Were Reasonable, but Cost Estimates Are Speculative

In our review of DOD’s study of NATO enlargement, we (1) assessed the reasonableness of DOD’s key assumptions, (2) attempted to verify pricing 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. Most of the infrastructure upgrade and refurbishment cost estimates were based on judgments. DOD’s estimated costs for training and modernization were notional, and actual costs may vary substantially. Potential Additional Costs of Enlargement

NATO enlargement could entail costs in addition to those included in DOD’s estimates, including costs for assistance to enhance the PFP or other bilateral assistance for countries not invited to join NATO in July 1997. Comparison of the DOD, CBO, and Rand Estimates

CBO and Rand estimated the cost of incorporating the Czech Republic, Hungary, Poland, and Slovakia into NATO. 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. Of that total, CBO estimated that the United States might be expected to pay between $5 billion and $19 billion. 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.
Why GAO Did This Study

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.

What GAO Found

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.