BASIC NOTES

July 1997

Network on European and Transatlantic Security

Military Buildup in Central and Eastern Europe: NATO Membership for Sale

By Kirsten Ruecker

Executive Summary
In preparation for NATO expansion, central and eastern European countries such as Poland, Hungary, the Czech Republic, Romania and Slovenia are purchasing offensive military hardware such as F-16 and F-18 fighter aircraft and attack helicopters in order to improve their prospects for membership.

NATO expansion has turned central and eastern Europe (CEE) into a lucrative arms market worth at least US$35 billion.¹ While the limited financial resources of these countries may prevent them from buying weapons "off the shelf," it has not deterred suppliers. Instead, with the assistance of western governments, arms suppliers have creatively devised a number of alternative financial arrangements. Military aid programs, offset agreements, coproduction, and "no-cost" leases may lessen the burden on CEE countries, however, it also appears western governments and taxpayers may foot part of the bill.

• Despite statements by NATO officials that a military buildup will not secure membership, central and eastern European elites are being pressured into buying these weapons and weapons systems in order to improve their chances for membership.
  
  
• By prioritizing the military component of aid to the region, western governments are facilitating the transfers of heavy weaponry. This includes the recent shifting of US funding from economic and political development to military aid programs.
  
  
• No external military threat to central and eastern European security exists.
  
  
• The selective arming of countries with advanced offensive weaponry is destabilizing to the region and counterproductive to NATO's security objectives.

Recommendations

• Establish a moratorium on the transfer of advanced offensive weapons to CEE countries and undertake a regional impact study for all transfers of offensive weaponry to CEE. The US Congress has reportedly put the transfer of attack helicopters to Slovenia on hold citing the need to explore the impact this selective transfer will have on the region.²
  
  
• Reinstate US economic assistance programs to CEE. These programs were initiated with the objective of rebuilding their economies and polities, not for the purchase of advanced aircraft and attack helicopters.
  
  
• Develop a policy on transferring the appropriate command, control, communications and intelligence equipment sufficient to enable CEE countries to effectively participate in peacekeeping and peace-support operations.

CEE Pressured to Buy Advanced Weaponry
The pressure to buy advanced weaponry is reflected in policy decisions that contradict budgetary constraints in CEE countries. For example, in April 1997, the Hungarian air force announced that it was retiring from active service its fleet of MiG-23MF, MiG-21MF fighters and Sukhoi Su-22M-3 attack and trainer aircraft. This was justified as a "cost-cutting measure." Hungarian Defence Minister Gyoergy Keleti stated that these aircraft were too expensive to maintain in the absence of an immediate threat to Hungary. Ironically, the Hungarian air force is now considering purchasing new fighters, with the Saab JAS 39 Gripen, McDonnell Douglas F/A-18 and Lockheed Martin F-16 emerging as contenders for the contract.³

In some instances, the pressure has been even more explicit. In April 1997, the Polish Defense Ministry announced it would "issue invitations to tender" for 250 new multi-role fighters in October or November, with selection due in May or June 1998.⁴ Soon after, Poland announced its intention to delay plans to purchase new fighter aircraft for the next five years.⁵ The next day, in response to western pressure, the Polish government reversed its decision.⁶

Recent and Future Tenders⁷

Financing the Transfers
To finance the extensive transfers, the West has developed a variety of schemes, including selling off second-hand weapons, offering "no-cost leases" and negotiating offset agreements.

Through offset agreements, suppliers compensate recipient countries for weapons purchases by "offsetting" the costs through investing in the country or buying other products. These deals are perceived by CEE countries as a means to stimulate foreign investment and trade. Therefore, deals in this market are increasingly being negotiated on these terms. Hungary, for example, in its negotiations for a fighter jet contract with Lockheed Martin and McDonnell Douglas has signed offset framework agreements.⁸ In its April 1997 announcement of its intention to purchase 250 fighters, the Polish Defense Ministry stipulated that the agreement should provide for a maximum number of offsets.⁹ While offsets appear to reduce the financial burden on the purchasers by stimulating investment, the burden is instead shifted to supplier nations.¹⁰

Military Aid to CEE
Providing military aid to CEE has become a top priority for the United States. In December 1996, Poland, Hungary and the Czech Republic were added to the Pentagon's Defense Export Loan Guarantee (DELG) program.¹¹ DELG is a self-financing program which permits the Pentagon to guarantee up to $15 billion in private sector loans to underwrite the sale or lease of US weapons or services. Although this program entails no direct expense to the American taxpayer, in the case of default or non-payment American taxpayers will be liable for the repayment of both the principal and interest.¹²

The focus on military financing has translated into reduced funds available for economic packages to CEE. In 1996, the United States withdrew $7.8 million from two economic assistance programs and shifted them to defense programs for a total of US$15.6 million.¹³

Conclusion
It is often argued that even in the absence of NATO expansion, these countries would westernize their militaries. This argument is misdirected and misinformed. In the absence of direct military threats to these countries' security, the questions that western governments should be asking are: What is the purpose of these transfers? Are these transfers destabilizing?

Instead, the West is using weapons transfers as a foreign policy tool for a region that has in recent history been tension-ridden. One question remains elusive in the entire debate about NATO expansion. Given the absence of a direct military threat, the marketing objectives of suppliers to ensure "product loyalty" and the legitimacy that NATO expansion confers on the transfers of advanced offensive weaponry: whose interests are being secured?

ENDNOTES

1. "Biggest Arms Fair in Europe Opens in Czech Republic," reprinted at http://www.centraleurope.com/ceo/news/10.html, May 07 1997. For a good discussion of the relationship between NATO expansion program and the military buildup in central and eastern Europe, see "Arming NATO's Partners," BASIC Paper No. 6, December 1994 and "Arming Central and Eastern Europe," BASIC Paper No. 12, 27 September 1995.
2. There are conflicting reports on the status of this transfer. "Critics Rap Possible Chopper Sale to Slovenia," Defense News, 2-8 June 1997, it was reported that the House International Relations Committee has put a hold on any such sale. However, an aide to the Committee told BASIC that no such hold had occurred.
3. "Hungarian economising compels air force cuts," Jane's Defence Weekly, 16 April 1997.
4. "Central Europeans To Call For New Fighter Bids By End-1997," reprinted at http://defence-data.com/page528.htm, May 13, 1997.
5. "Poles put off buying new fighters," Financial Times, 18 April 1997.
6. "Poland confirms fighter plans," Financial Times, 19 April 1997.
7. For full documentation, please see BASIC Paper No. 22.
8. "Contenders vie for Hungary fighter deal," Financial Times, 26 May 1997.
9. "Central Europeans to Call For New Fighter Bids By End-1997," reprinted at http://defence-data.com/page528.htm, May 13, 1997.
10. For a good discussion of the effects of offset agreements on the American economy, see William D. Hartung, Conflicting Values, Diminishing Returns: The Hidden Costs of the Arms Trade, Arms Transfer Control Project, World Policy Institute at the New School for Social Research, February 1994.
11. "State Grants Loan Nod to C. Europe Nations," Defense News, 2-8 December 1996.
12. For a good discussion of the variety of US military financing programs and recent figures, see Federation of American Scientists, Arms Sales Monitor, No. 34, 30 April 1997.
13. See "1997 US Military Assistance to Central Europe," reprinted at http://www.cdi.org/issues/Europe/$ceeaid.htm.

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