NATO's Senior Defense Economist Adrian Kendry has responded to ten questions
from atlantic-community.org members about the interaction of economic and
security challenges. In the first part, Mr. Kendry explained potential threats
to the stability of the Alliance, terrorist recruitment and defense spending
levels: NATO's
Senior Defense Economist on Security Despite Austerity - Part 1
Following are his responses to six more questions. You can also watch Adrian
Kendry's exclusive
video statement, which launched this Q&A.
Hristijan Ivanovski, Research Associate, Centre for Defense and
Security Studies, University of Manitoba, Canada: Which current or
planned NATO capability projects are most affected by the continuing drop in
national defense budgets? Is there any indication of pursuing new common
capabilities (other than the existing AWACS or AGS) despite the financial
crisis?
Adrian Kendry: At the Lisbon
Summit in 2010, NATO Allies endorsed decisions to rectify the Alliance's
most critical deficiencies in defence capabilities, including the availability
of heavy-lift helicopters, enhanced medical and logistical support, countering
improvised explosive devices and improved air and sea-lift capabilities. In
addition, the Lisbon Summit stressed the importance of providing the
capabilities that will protect NATO member states from various emerging security
challenges and enable an appropriate response. These include ballistic missiles,
cyber attacks and the need for a sustainable capability in joint intelligence,
surveillance and reconnaissance. As the question implies, progress in the
development of these capabilities has often been slower than intended as NATO
member states wrestle with the acute defence budgetary challenges arising from
the financial and economic crisis. However, there are some highly important
multinational and complementary initiatives in developing a Strategic Airlift
Interim Solution (chartering Antonov An-124-100 transport aircraft) prior to the
operational service of the Airbus A400M transport aircraft, together with the
Strategic Airlift Capability that has been secured with ten Allies and two
partner nations buying three C-17 Globemaster III transport aircraft. This
acquisition provides a heavy airlift capability that has supported enormously
diverse missions such as assistance to Poland following the air disaster in
Russia; African peacekeeping; humanitarian relief in Pakistan and Haiti; and the
ISAF operation in Afghanistan. Undoubtedly, the financial crisis continues to
pose considerable problems for Allies and Partners in the development of
capabilities; but in the financially frugal conditions, nations are committed to
doing the best they can.
Alyson JK Bailes, Visiting Professor, University of Iceland, Reykjavik
- Former Director of the Stockholm International Peace Research Institute -
United Kingdom: One of the best ways to get more bangs for
fewer bucks is for nations to specialize further in their defense roles on a
basis of comparative advantage. I have described this and the obstacles in an article
for atlantic-community.org. What is NATO doing to overcome these problems
and encourage member states to specialize more?
Adrian Kendry: The economic and fiscal crisis on both sides of the
Atlantic makes it imperative that NATO's historic mandate to promote
multinational defence cooperation and capabilities must be renewed as
imaginatively and energetically as possible. As Ambassador Bailes correctly
notes, NATO is seeking to renew the spirit and purpose of its multinational
defence cooperative initiatives by encouraging Allies to engage in "Smart
Defence" projects and the "Connected Forces Initiative". "Smart Defence"
embraces the call for nations to deepen and widen multinational defence
cooperation (described by the European Union as "pooling and sharing"
arrangements) by specialising and prioritising in order to get the greatest
"bangs for bucks". The economics of austerity dictates that new and dynamic
cooperative arrangements in the research, concept development, production and
acquisition of defence capabilities (for example, in the field of ballistic
missile defence) must satisfy the scrutiny of Finance Ministries and others that
such cooperation will create genuine synergies and the potential for significant
economies of scale. Together with the related "Connected Forces Initiative",
directed at promoting greater interoperability through education and training
among the NATO armed forces, these innovations have the capacity to transform
the mentality and practices of Allied nations in their pursuit of greater
efficiencies and better management of increasingly scarce defence resources.
However, Allies must not neglect other important steps to be taken in enhancing
defence reform and greater cooperation. Inefficiency through unintended or
intended misuse or corruption of budgets also constitutes a serious obstacle to
the greater transparency and accountability of defence spending. The NATO
Building Integrity Initiative is a complementary programme to the other efforts
outlined to extract the best quality, and not just quantity, of
defence output as NATO prepares to meet further challenges at the end of its
present mission in Afghanistan in 2014.
Rhys A. Merrett, PhD Candidate at the Australian National University,
Canberra - Australia: Negotiations over a proposed merger between two
of Europe's largest defense contracting firms -- British Aerospace Engineering
(BAE Systems) and European Aeronautic Defense and Space Company (EADS) -- were
recently abandoned. The proposed merger would have created Europe's single
largest defense contracting firm. To what extent does effective defense
integration amongst NATO's European member states (i.e. smart defense) rely upon
the initiatives of non-Government owned corporations and private industry, such
as the proposed BAE-EADS merger?
Adrian Kendry: Almost twenty years ago, the United States experienced
a profound metamorphosis in its defense industrial base (the so-called
"Secretary of Defense William Perry Last Supper") directed at reducing the
number of prime contractors during a period of shrinking demand while preserving
the industrial and technological capabilities within the defense industrial
base. In Europe in late 2012, BAE Systems plc represents the sole European prime
and system contractor in the military aerospace and defense sectors, competing
(and collaborating) with the United States' largest aerospace and defense
corporations (Lockheed Martin; Boeing; Raytheon; General Dynamics; Northrop
Grumman; United Technologies; L-3). The proposed BAE merger with EADS would have
strengthened the European capability in the military and commercial aerospace
sector and created a "super-prime" whose assets and market shares would have
rivalled Boeing and Lockheed Martin.
Of itself, such a merger would not address the substantial over-capacity and
inefficiency that has long resided throughout the European defense and aerospace
industrial base. "Smart Defence" proposals are designed to strengthen Allied
(and potentially partner) cooperation in a range of logistics, situational
awareness and other support projects. The question posed addresses more
fundamental defence integration in Europe with industrial and technological
collaboration among primes and sub-contractors that would strengthen the
multinational cooperation (taking the Eurofighter Typhoon four-nation consortium
as a reference point) that already exists. Reshaping the European defence
industrial and technological base requires both reform initiatives from the
demand side (nations must agree on common requirements for proposed equipment
platforms) and the supply side (the measures to consolidate and improve the
industrial and technological base). Such measures must take note of the many
tiers of sub-contractors across Europe; and the degree of cooperation and
collaboration that takes place between suppliers not only on both sides of the
Atlantic but also with firms with growing aerospace and defence capabilities in
the Asia-Pacific, Middle East and South America regions
Alex Battaglia, US citizen living in Berlin, Germany: How do
NATO countries counteract illicit or illegal/terrorist activities through
non-transparent private sector banking or internet money transfer? For example:
the proverbial use of Swiss Bank Accounts or the newer more easily attained
internet money transfers (Paypal, webmoney, etc.) to fund some nefarious
activities. And furthermore, how could NATO countries go about this without
stepping on individual privacy rights or established "internet
freedoms"?
Adrian Kendry: NATO itself is not a law enforcement agency and the
measures to counteract illicit terrorist activities through non-transparent
banking or money transfer are under the responsibility of Justice, Law
Enforcement and Treasury ministries and agencies. The question underlines the
reports that the volume of illegal financial flows in a number of countries is
estimated to be several times larger than their annual government budgets. This
huge imbalance between funds available to criminal networks and those at the
disposal of the state reinforces a culture of corruption and economic
distortion. The adaptive and evolutionary nature of such illegal funding flows
through the exploitation of other vulnerabilities (notably remittances from
radicalised Diasporas, informal money transfers corrupting the vitally important
hawala system of trust in trade and the network of hawaladalars, informal money operators, who facilitate trade in the absence of more
formal banking and financial arrangements. As Mr. Battaglia correctly notes,
modern internet payment methods provide encouragement to those that wish to
pervert the proliferation of financial methods and activities in pursuit of
criminal and terrorist objectives. NATO countries rely on the broad framework
and conduct of financial regulation and the dedicated agencies directed to
combating and countering serious fraud, organised crime and terrorist financing.
The global financial and economic crisis poses a serious challenge to such
scrutiny since the focus of intervention has been so strongly on stabilising the
international financial system. Furthermore, balancing cyber freedom, security
and regulation without eroding individual civil liberties will require
increasingly close cooperation and exchange of information across national
borders (as, for example, embodied in the United Nations Counter-Terrorism
Committee, the inter-governmental Financial Action Task Force or the informal
Egmont Group of financial intelligence units) to address this growing
threat.
Oleg A. Khlopov, Associate Professor at the Department of World
Politics and international Relations, Russian State University for the
Humanities, Moscow - Russia: In case of new growing demand for energy
and other strategic resources what could NATO do to avoid new kinds of possible
resource wars and conflicts?
Adrian Kendry: NATO member states comprise energy consumers, producers
and transit countries. The dialogue among Allies with Partner countries that
also represent energy consumers, producers and transit countries, is of vital
importance in a world where, as noted by the International Energy Agency (IEA)
in its 2012 World Energy Outlook report, the global energy landscape is changing
with potentially great implications for energy markets, trade and dependency.
According to the IEA, global energy demand is projected to grow more than 33%
until 2035 with consumption in China, India and the Middle East responsible for
3/5 of this increase. In these circumstances, and given the growing implications
of energy demand for water and food consumption, Mr. Khlopov is correct in
identifying the potential for energy and related economic and social instability
provoking conflicts. NATO provides an important forum for Allies and Partners
who wish to discuss and consult on energy security and energy infrastructure
security concerns. NATO is not an energy security organisation but NATO
possesses a unique capability to engage with its Allies and Partners and offers
a confidence-enhancing framework in which to prevent strategic resource
competition either spilling over into conflict or being disrupted by acts of
piracy or terrorism.
Costinel Anuta, graduate in Advanced Security Studies at the George C.
Marshall Center for Security Studies - Romania: In the last few
years, energy security has been labeled as the main challenge for NATO stemming
from the economic sphere. How did the financial crisis shape NATO's concerns
within the economic field and what other economic domains are to be tackled by
the Allies in the near future? Moreover, what would be the impact of the
financial crisis on the global competition for energy resources and in
particular on NATO's energy security, taking into account that the deployment of
the Allied military units is largely dependent on fossil fuels?
Adrian Kendry: The 2010 NATO Strategic
Concept outlined the challenge posed by the question in a clear and
forthright manner. In Paragraph 13, it is recognised that:
All countries are increasingly reliant on the vital communication, transport and transit routes on which international trade, energy security and prosperity depend. They require greater international efforts to ensure their resilience against attack or disruption. Some NATO countries will become more dependent on foreign energy suppliers and in some cases, on foreign energy supply and distribution networks for their energy needs. As a larger share of world consumption is transported across the globe, energy supplies are increasingly exposed to disruption.
The financial crisis has exacerbated the energy and climate challenges confronting the world by reducing the availability of funding for investment in more sustainable energy development that would enhance energy efficiency and reduce energy intensity in consumption. New technologies are creating new and potentially substantial energy resources (for example, natural gas and liquefied natural gas) but the challenge for the member states of NATO and other countries is to secure the investment into greater energy efficiency that will assist in the vital task of promoting greater diversity in the global mix and distribution of energy sources and the combating of global warming (with its potentially devastating effects on human, environmental, economic and national security). Concerning the more energy efficient deployment of Allied military units, NATO has increasingly recognised the need for its own energy costs and environmental impact to be properly understood and evaluated in the planning and decision-making processes.
The editorial team would like to thank all participants in this Q&A and especially Mr. Kendry for taking the time to answer them in such detail.
- 9
December 20, 2012
Lawrence Efana
On the report of "questions and answers", the editorial team has done a fine work and NATO's Senior Defence Economist also has indeed provided cogent answers to be expected for the selected questions. It has been swift and smooth to read and enjoy. Allow me briefly and integratively join you making it swift to target selected highlights. Doing so does not need to mean raising supplementary questions. Both parts are well connected. There is interesting thread running through the answers for the first four set of questions more directly relevant for the theme "Security Despite Austerity". For that, the question "...When can we say that a critical point has been reached in an economic crisis for it to be considered a security threat?.... Unfortunately, only Spain was perhaps a representative? focus here. However, directly and indirectly the answer is just what would be expected: explained by (i) NATO's collective defense rationality; (ii) its crisis-management mechanisms, and (iii) continuous improved approaches to the culture of cooperation and partnership .... (all in the interest of both international organizations and security). In economic terms and its bearing on security, the debt crisis, partly underlying US fiscal cliff policy-endeavours and the European debt and Euro-zone currency crisis are of immediate NATO hence transatlantic interest. Between both, issolationism would not pay, not unfortunately at the EU level either. Security thus, as it has been coined out implies relatively well disciplined adherence to positive economic measures and will to grow.
The Defence Economist is articulate concerning the link between security and the economy, hence the texture of conequence, to the point of clarity worth recalling:
"The fiscal policies that have been, and are being, implemented to bring under control the large budget deficits and increasing national debts in the .......are very controversial. Even though the stance of monetary policy is very permissive, with low interest rates and central bank interventions (to ease by injecting liquidity) into the economy, fiscal austerity inevitably adds to the slow and in some cases declining economic output in NATO European states, with persistent and high unemployment - among young people and wage freezes or reductions, creating considerable economic and social misery". This is the challenge!
There are various ways to interpret and apply these, but the consequences are clear: it rocks the boat of security and incites terrorism - works of criminals intensify in proportion to how worse things get? The question is how suitable or unsuitable it is to call for Defense Budget Cuts or Control----what we have seen across NATO member states and affiliates. The fear about its consequence in ideological and rightwing inductrination circles itself is a threat to be kept in mind. That defence spendings under these conditions compete with the development of other sectors is nothing to hide but speak out for, so that policy makers and people know. The case of tax hikes for the wealthiest hangs here too with all its controversies!
Summing up all, how these in turn play out on the 2nd part of the questions and answers become the problem of how the first range of questions is comprehended. NATO has embarked on reforms and for that capabilities, technical requirements of various kinds, and logistical supports are all seen interwoven into the concept "Smart Defence, connected force initiatiaves, and cooperation. These are no less bolstered by effective investment and research and development approaches. They make-up the arms of the business dimension with business ethics: competition and democratic economic policy approach and management. In it the front-line countries tow the less developed, plan missile systems, pooling resources and sharing. All these require funds and in my mind leave us on this theme to lift out two competing alternative theses: can NATO work with separate goals and achieve simmultaneously the mutual benefits wanted, or will it have to work with separate approaches for the mutual benefits. Economic structures decide this and with austerity still in stronghold economic arguments above tend to impose rationality of balance and caution with promises of growth thin as they are and environmental challenges many as they are. How can peace management not be the only way out? whatever that means for the theme?