Senior Researcher at the Dnipropetrovsk Branch of the National Institute of Strategic Studies

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The famous formula of NATO's First Secretary-General Lord Ismay concerning the goals of this Alliance in Europe "keep the Americans in, the Russians out and the Germans down" in the first half of 2002 completely disappeared from political analysis. Instead, there is another expression which belongs to Douglas Faith, the Deputy of the US Defense Secretary: keep the myth alive! Such change in emphases and sentiments in the Western nations took place on the eve of the decision of the Council of the National Security and Defense of Ukraine as to the strategic course towards NATO membership. The low-key reaction of the European countries, indifference of Russia, as well as political tensions around Ukraine's participation in the Prague Summit, compel to think over the issue: does NATO membership remain politically important for our country and is such a membership politically and economically feasible?

NATO Strategic Prospects

Strengthening of euro as compared to US dollar, which can be seen in Ukraine in recent time, fosters the point of you that NATO is losing its relevance so far as the Alliance's primary economic function is military guaranteeing of US dollar. According to this view euro has its own military guarantor, namely, European Rapid Reaction Corps (ERRC) created by the EU. Yet, one may prov that even if NATO and ERRC have such economic functions, the only real military guarantor of euro is the North Atlantic Treaty Organization.

It is clear that without common European defense budget, the establishment of any "European defense community" that would be independent from NATO is impossible. Until it happens (and it will not happen for a long time) the Alliance's military monopoly in Europe will remain steadfast. Agreements on military cooperation between NATO and EU reached in the end of 2002 suggest that the two organizations are ready for interlocking, but not interblocking in their actions. EU clearly has no intentions to take on most demanding NATO functions.

The main threat to NATO cohesion lies in growing gap in combat capabilities between the USA and the majority of European countries. The prospects of overcoming this disproportion are poor. Only the additional increase in the USA defense budget in 2003 exceeds

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the general defense expenditures of any other member state of NATO. A situation is possible when for mere technical reasons the United States will not be able to participate in joint NATO operations.

This explains why the USA's attitude to joint combat operations within the framework of the Alliance in the fall 2001 was cardinally different from that early in 1999. The United States turned down the proposal of the NATO Secretary-General Lord Robertson to involve Alliance's structures for operation in Afghanistan. As a result the application of Article 5 of the Washington Treaty, which happened for the first time in history, did not have the military embodiment for the reason of the negative attitude of the suffered side (though the positive political effect and auxiliary military measures were taken).

During the campaign in Afghanistan the USA manifested stunning for many Europeans reluctance to operate through NATO in order to satisfy its own security interests. But the position of the Europeans themselves as to NATO was inconsistent. During the 90s they resisted to the US attempts "to revive" NATO by means of new missions and acquiring a greater independence from the UN Security Council in decision-making as regards the use of force. At the beginning of the new decade the USA refusal of these attempts started to concern the Europeans.

The next change happened in the end of 2002 when the USA asked for NATO support for possible military action against Iraq. As during the Kosovo crisis the Alliance got divided on the issue of war. Once again Americans proved to be more proactive and Europeans more reluctant as to the Alliance functions. Yet, however loud the transatlantic argument is, the recent history suggests that the problem is rather tactical than strategic.

Early in 2002 at the annual conference of the USA mission to NATO the senator Richard Lugar outlined the three basic viewpoints on the Alliance's future, which prevail among the representatives of the American defense and security population. The first of them consists in the fact that after the accession of all Eastern European countries NATO should proceed to the integration into the western security system of Russia and Ukraine, to this end using the mechanisms like Russia-NATO Council. By this scenario the North Atlantic Treaty Organization should become mainly political one having some military instruments for maintenance of peace in Europe.

According to the second viewpoint NATO should remain within traditional framework. It may admit several new members but it should not go too far in relations with Russia and in the fight against terrorism. The future operations may be collective ones but should be organized on the principle of the "coalitions willing". In this case the USA should be concentrated on conduction of military operations and the Europeans, mainly, on peacekeeping operations in Europe and around it.

The third viewpoint consists in the fact that NATO is a natural defense instrument of the transatlantic community, including the struggle against new threats such as terrorism, proliferation and use of the weapons of mass destruction. The Alliance should be adopted to the new conditions, but not by means of "the division of labor" between the United States and Europe. The way in which the United States operates in Afghanistan may be ineffective in other cases and therefore cannot be regarded as a model for the future operations. On the other hand, the shortcomings of the air operation against Yugoslavia are not a weighty argument to reduce NATO functions to exclusively political ones. Taking into consideration the global nature of new threats, the division between the missions in and out of the area should disappear.

The conservative variant of the NATO development is unlikely since it inevitably leads not only to political, but also to military degradation. The residual functions in the form of countering highly unlikable large-scale attack

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against Europe will not be able to provide for the required level of the Alliance support by the member states. Under such circumstances the NATO will soon cease to be even a toolbox for organizing "coalitions of willing". On the other hand, the variant of NATO transformation into mainly political organization may be easily realized.

Hence, the third variant, according to which NATO should become the primary western security organization, is the most perspective, but also the most difficult for realization in view of the scope of the required reforms. The Prague Summit demonstrated NATO's readiness to go along the road of the acquisition of a new global role.

Enlargement of NATO Economy

The Treaty on Conventional Forces in Europe may be regarded as one of the main "marketing" documents that may be used in research of the economy of NATO enlargement. The quotas established by this document and by the relevant protocols to it are, in essence, a maximal assessment of the market capacity of the separate countries for the main categories of military products.

If we accept the said approach and use the average prices for the typical models of western arms, the volume of new markets for the western arms for the second "wave" of NATO enlargement may be estimated at the level $58 bn, of which Romania's share is $27 bn, Bulgaria's - $23 bn, Slovak Republic's - $8 bn. Slovenia, Estonia, Latvia and Lithuania would not essentially change this assessment.

These figures do not have any direct economic meaning and do not mean possible profits of the concrete arms producers. Strictly speaking, they constitute an upper assessment of arms markets to which western producers will have a preferential access as compared with the Russian ones. The importance of the given assessments consists in a possibility to compare them with the analogous calculations for the previous and hypothetical future "waves" of enlargement. For the first "wave" we have $63 bn. The difference with the second "wave" is less than 10% (owing to Romania and Bulgaria). It is interesting that for Ukraine such an assessment equals $75 bn, i. e. Ukraine itself may be a "wave".

The real volumes of the additional funds on Eastern European armaments market may be assessed on the basis of projected changes in the defense spending of potential new members and on the basis of comparison with the experience of Poland, Czech Republic and Hungary.

The Membership Action Plan provides for achievement of certain levels and structure of the defense spending. At present, the following three main categories of the assessments in this sphere may be regarded as generally recognized. The first is a share of the defense spending in the gross domestic product (GDP) of the certain state. It is considered that is should amount not less than 2%. Second is the defense spending per capita. The given indicator is auxiliary to the previous one. It makes possible to establish the minimal level of the defense spending for the countries with weaker economies. Under this criterion, the average level for developed members of NATO reaches about $400, lower limit - approximately $70.

In contrast to the previous two, the third criterion reflects not the total expenditures but the level of technical equipment of the armed forces. It is calculated as defense spending per servicemen. For leading western countries it exceeds $100000, while the low level is about $15000.

Among the Prague newcomers only the Slovak Republic meets two criteria at once, namely, it spends for the defense the required share of GDP and these expenditures correspond to the size of population. Other countries do not meet one or both of these conditions. If calculate the additional annual defense spending required for the achievement of the above-mentioned levels, we have a figure about $1.6 bn, including for Romania

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- $1.0 bn, for Bulgaria - $0.3 bn, for Slovenia and Latvia - $0.1 bn, for Lithuania - $0.07 bn, for Estonia - $0.03 bn. In case of steady increase in spending during typical for NATO 10 years of full integration (in the given case from 2004 to 2014) we shall get average annual increase of $0.8 bn and the total amount of $8 bn. Evidently, the most part of this sum will be spent for technical re-equipment.

The comparison with the experience of the three members of the first "wave" gives the analogous assessment. According to the plans of technical re-equipment of Poland, Czech Republic and Hungary approved by the Alliance, they will spend for armaments and military equipment about $0.7 bn annually.

It should be noted that the additional armaments expenditures required for NATO membership represent the commercial interest not only for the western produces. For Europe in general and for Eastern Europe in particular, recognized is the practice of so-called offset measures. Military suppliers, which secure foreign defensive orders, as a rule, should invest into economy of customer countries. Thus, Poland's legislation envisages that every order to the foreign defense producer to the tune of $5m should be accompanied by return investments equivalent to the volume of the order, half of which should go directly into the Polish defense sector. The legislation of the Czech Republic requires for offset measures at the level of 150% of the contract sum. The similar norms are in effect in other European countries.

Thus, the emergence of the western producers on the armaments markets of the NATO newcomers of the second "wave" will be accompanied by total investments in the economies of these countries on the level of their additional spending on armaments, which may be approximately $0.8bn annually.

Assistance to the candidates and new members on the part of the Western countries is another important economic aspect of NATO enlargement. In the mid-90s the US Congress Budget Office and RAND made the assessments of the cost of the integration into the Alliance of the Visegrad group. According to these assessments NATO members would have to spend tens of billions of the US dollars. Later on the assessments were reduced to officially declared $1.5 bn during ten years. The second "wave" is planned to be a zero-sum enlargement. The new members, in NATO opinion, should themselves pay for their membership. Meanwhile, it does not mean that economic assistance to the candidates and new members is not provided at all.

The Western countries continue to invest into security of Eastern Europe. One of the forms of ally's assistance is the transfer or sales of armaments and military equipment at the symbolical prices. For example, after Poland obtained from the US one combat control ship and four helicopters SH-2G, from Germany - 128 tanks Leopard-2A4 and 23 fighters MiG-29, from Norway - two submarines (two more will be transferred before 2004). Though all this military equipment was in use for a long time, its total cost at the average prices on the armaments markets amounts to over $1.0 bn. The similar assistance is provided to the Czech Republic and Hungary.

Apart from direct military assistance, NATO and the EU continue to finance a lot of different programs aimed to contribute to security of the Central and Eastern European, as well as former soviet countries. During 1990-1999 the members of NATO and EU directed to Central and Eastern Europe approximately $71 bn, including the European members of the Alliance - about $47 bn. For the same period, former soviet countries obtained western assistance of $35 bn, including from the European countries - $20 bn. From 1993 to 1999 more than $11bn were spent for the development programs on the Balkans, almost all of them by Europeans.

It is important that the EU, in contrast to NATO, is financing its own enlargement. For instance, during 2000-2006 it is planned to spend about $60 bn for the measures in

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connection with admission of new members. To a great extent, it explains the possibility of the zero cost of the second "wave" of NATO enlargement. Some programs of NATO, first of all as regards the development of infrastructure and transport networks, were simply transferred to EU financing. In some simplified form the situation may be characterized as a partial financing of NATO enlargement by the European Union.

The NATO membership requires readiness to bear certain organizational expenditures. It includes maintenance of the staff about 200 persons in the integrated structures, payment to NATO budgets and participation in joint military operations. These amounts are small as compared with, for example, the expenditures for technical re-equipment of the armed forces, but it is effective money that should be allocated from the state budget. In 2000 Poland paid to NATO joint budgets $24.2 m, the Czech Republic - $8.8 m, Hungary - $6.4 m. The above-mentioned countries annually spend for participation in joint operations, respectively, about $5.0, 1.0 and 0.2 m.

The expenditures for the host nations support is an important part of the functioning of the integrated military mechanisms of NATO. This is also one of the major factors that influence on formation of the US policy towards NATO. If the defense industry of the United States is interested in the defense orders of potential members then the Defense Department in their support of possible US military presence, i. e. availability of military infrastructure.

Hungary's contribution in frames of host nation support is assessed at $5.7m per year. Currently, there are no calculations for Poland and the Czech Republic. The point is that the certain forms of support, such as granting the flight rights, not always may be assessed financially. In any case the host nation support is one of the principal factors that influence the US policy formation with respect to NATO enlargement.

The above analysis is based on the assumption that this process will not have significant negative consequences for security in Europe. In other words, economic efficiency of NATO enlargement is directly related to the development of cooperative relations with Russia.

New European Entente

There is an old definition of the new form of relations between NATO and Russia. This is not the union, not an "almost membership" and not an associate membership. It is the entente, which means "an agreement". The absence of a common defense differs it from a military alliances such as NATO, an orientation toward external common threats differs it from systems of collective security, such as OSCE.

In its essence the entente is situational, it is limited either in time (because of political conjuncture) or in the list of conditions of its own involvement.

The fact that the NATO-Russia Council should not be regarded as the establishment of the military alliance or the step in this direction is clear from Russia's official statement on the absence of the plans of unification of military doctrines. This structure does not have in its foundation the obligations of such level as the Washington Treaty, which lies in the basis of NATO, or the Treaty on Conventional Forces in Europe, which is one of the pillars of the OSCE.

The establishment of the Russia-NATO Council testifies to a substantial progress on the part of Russia. It agreed to reach a consensus basing on the common interests. Thus, Russia gained access to one of the main technologies of decision-making by the Western countries, namely, consensus-building technology. But it did not get access to another even more important technology that provides for obligatory reaching a consensus. Russia may block but not to guarantee the adoption of a certain common decision by Russia-NATO Council.

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Hence, the main know-how of the western political system remains prohibited to Russia, namely, a technology with which the western countries always reach a consensus on the main issues. The Washington Treaty is one of the guarantees that NATO North Atlantic Council will remove contradictions for the sake of the common decisions. With regard to Russia-NATO Council there are no such guarantees. The entente is the entente, it is not the military alliance.

Possibly, such an extent of Russia's involvement in the Western system at present is not only maximally possible, but also maximally desirable. The promotion of internal economic development is an officially declared priority of Russia's foreign policy. For the sake of it Russia is ready to make any concessions in military-political sphere, including as regards NATO enlargement.

Russia is rapidly training in strategic planning. If not in 10 then in 20 years the world will change considerably. Geopolitical situation, energy flows and means of warfare will be other. Russia has sufficient intellectual resources to glance in the future and to comprehend advantageous position if such exists. But to achieving it peace and concentration are required. The entente with the West is an ideal instrument to this and: neither unnecessary confrontation, nor unnecessary obligations.

Russia tries not to counter, but complicate NATO enlargement. For this purposes the soviet-style demarches are not necessary. Such issues as the Baltic countries' accession to the treaty on Conventional Forces in Europe and the Black Sea Fleet deployment require much effort. If Russia manages to place further NATO enlargement in dependence of their solution, it may be sufficient to achieve of Russia's strategic objectives.

Russia's polite reaction to Ukraine's statement on intentions as regards NATO membership may be explained namely by this reason. It cannot be ruled out, that between NATO and Russia there is an understanding as to impossibility of Ukraine's accession to NATO while the Black Sea Fleet deployment issue is still there.

Thus, the new European entente does not remove obstacles for Ukraine's membership in NATO. It rather replaces ones by others. Nobody objects to such a membership any more, but only till the terms remain unattainable. To make them attainable is the matter of Ukraine itself.

Fulfillment by Ukraine of the prerequisites of NATO membership

The issue of Ukraine's membership in NATO is being gradually transformed from a foreign policy problem into internal political one. It is impossible to join the Alliance without profound internal transformations not only of political, but also economic nature. There appeared in Ukraine those political forces that have seen new possibilities in these transformations, and those ones that have felt a threat. It is not an ideological confrontation of the rights and the lefts now, but rather a collision of business interests.

In contrast to the countries of the first and second "waves" of enlargement Ukraine have not passed through events that are considered in the West as a decisive and irreversible refusal of the past. That is a "velvet" revolution with ritual political sacrifice - lustrations. Biographical facts that in Eastern Europe require confessions are often advertising as merits in Ukraine.

And even if the question is not of the measures of that kind, in its relations with the West Ukraine should provide for a considerably higher level of openness.

An important factor regarding fulfillment by aspirants of general political and economic requirements consists in the fact that NATO, so to say, involves the outer auditors for assessing the progress in this sphere. These are the EU and the Freedom House. The EU should qualify the candidate as a democratic country with market economy. The assessment

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is made by fact, i. e. without fixation in the past and personalities, but only the EU candidate may obtain it. Ukraine is not such a country.

As the previous experience testifies, an invitation to NATO should follow obtaining by a candidate country of a rating 2,2,F on behalf of the Freedom House, which means generally free country with almost full political and civil rights. At present, Ukraine has 4,4,PF, which means tangibly limited political and civic rights and only partially free country. The assessment got worse during 2002. To tell the truth, Turkey and Russia have still worse level, Turkey is already NATO member and Russia is not going to join the Alliance. Fortunately, drastic increase in Freedom House assessments by two marks during a year is not uncommon. So, while meeting other requirements of the membership, the Freedom House rating will hardly be an unsolvable problem.

It should be noted that having declared the intention to join NATO Ukraine lost the possibility to appeal to Russian models of social transformations. Russia has no intention to join the Alliance. Its relations with NATO do not require internal changes and cannot be an example for countries that are striving for membership. By very statement on integration into NATO Ukraine undertook certain additional obligations, at least as regards the change of orientations. There is no "Russian road" to NATO, but there are "Polish", "Czech" and "Hungarian" roads.

Providing for the civil control over the armed forces belongs to political and economic requirements. In the opinion of western experts NATO will not demand from new members the obligatory achievement of the Western European standards in this sphere. As the experience of the first "wave" of enlargement testifies, fulfillment of general norms is sufficient. That is, there are problems for Ukraine in this sphere but they may be solved.

The second group of requirements is related to military capabilities of Ukraine. It should not only provide for its own defense, but also to make the contribution to NATO collective forces. The Alliance estimates more and more highly mobile autonomous forces and high-precision weapons. Ukraine may concentrate its efforts on the development of airmobile units or, for instance, to train marine task forces. The concrete variant will depend on the resources and own priorities.

The host nation support on behalf of Ukraine is an area of cooperation with NATO that is highly valuable not only militarily, but also politically. Forgotten to some extent references to strategically important location of Ukraine may be confirmed exactly in this sphere. Ukraine's military infrastructure has a great importance in providing for NATO force projection in the depths of Eurasia.

The third group of requirements consists in allocation by Ukraine of the sufficient resources for defense purposes. This question is rather knotty. There are two generally known "political" figures, namely, 2 per cent of GDP, which is NATO's requirement, and 3% of GDP, which is the requirement of Ukraine's legislation. The different institutions and different experts differently assess whether Ukraine achieves the above-mentioned levels. For example, for the year 2000 the assessments varying from 1.4% (CIA Factbook) to 3.6% (data base of military spending of the Stockholm International Peace research Institute - SIPRI). While appeals are often heard in Ukraine to increase the defense spending to NATO level, nobody refutes the assessments that this level has been achieved long ago.

The problem is complicated by methodological differences. Dollar assessments made on the basis of the market exchange rates do not reflect the real defense capabilities of Ukraine as compared with other countries. The assessments based on the purchasing power parity change the percentage ratios since the purchasing power parity may be different for GDP in general and for defense sector of goods and services in particular. In addition, such assessments give an enormous figure of

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annual defense spending for Ukraine - above $5bn that does not mean the real funds in convertible currency.

NATO definition of defense spending, which is also used by the SIPRI, substantially differs from dominating in Ukraine. Such spending includes expenditures not only on the Ministry of Defense (except for expenditures on disarmament) but also on other militarized formations intended for defense (except for civil defense). In case of Ukraine these are Internal Troops of the Ministry of the Interior, Border Troops and some units of Security Service of Ukraine, which, pursuant to the Law of Ukraine "On defense of Ukraine", should perform functions of territorial defense.

The defense spending also includes military pensions, defense-oriented outer space activities and scientific and applied programs. The expenditures for keeping internal order are excluded from calculations. Summing these articles in the State budget of Ukraine for 2002 gives a figure about UAH 6.4 bn. Assessment of Ukraine's GDP in 2002 amounts to about UAH 236 bn. Thus, a share of military spending is 2.7%. It is more than NATO requires and almost so many as it is established by Ukraine's legislation.

However, on the whole optimistic assessment does not correspond to exclusively pessimistic assessment of the defense spending structure: 36% are pensions; 27% - allowances; 5% - public utilities; 4% - scientific research work: 2% - purchase of armaments; 1% - capital expenditures. The rest, mainly, is related to logistics. So, the defense spending requires rather radical restructuring than general growth.

The conversion of defense spending into US dollars at the market exchange rate makes it possible to evaluate the chances of Ukraine as the candidate for NATO members basing on resource requirements. Just now by the main indices of the defense spending (total defense spending - $1.2bn, a share in GDP - 2.7%, expenditures per capita - $24 and expenditures per one serviceman - $3076) Ukraine surpasses Romania. Let us assume that Ukraine's GDP in future will be increasing by 5% annually (in permanent prices of 2002), and the defense spending will be remained at the level of 3% of GDP, in that case, on planned reduction of Armed Forces, Internal Troops and invariable strength of Border Troops in the near years Ukraine will compete with Bulgaria. Lower NATO (Poland-Turkey) level of expenditures per capita - $70 will be achieved before 2020, expenditures per one serviceman - $15,000 up to 2028.

Corrected scenario which would envisage the achievement by Ukraine of the lower level of the main parameters of defense spending up to 2020 differs from the previous one only by deeper cuts - to the level of 210,000 servicemen totally for the Armed Forces, Internal troops and Border troops (instead of 308,000 in the previous scenario).

It means that Ukraine's invitation to NATO, if proceed exclusively from the requirements of resources, is possible in 2010, and the accession - in 2012. Such an assessment is based on the typical period of the full integration into the Alliance of new members that makes up approximately 10 years.

The given assessments based on the calculations in national currency and their USD equivalent at the market rate of exchange reflect NATO practice to prioritize more open economies for which the market exchange rate of national currencies does not principally differ from the parity purchasing power rate.

As opposed to NATO, the US Defense Department prefers using the purchasing power parity for comparisons of military spending of foreign countries. This reflects its primary interest in real combat capabilities of potential allies and enemies.

This aspect may be of great importance for Ukraine since it creates the possibility for "military barter". The above possibilities of Ukraine for host nation support should be evaluated at the internal Ukrainian prices for goods and services in defense sphere. On this market a hryvnia at parity purchasing power

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may be weightier than a dollarUnder such conditions granting services to the Pentagon that would be evaluated on the domestic market by the amount of, say, UAH 100 million per year, may be evaluated by the USA as $100 million per year. It would make it possible to take the seventh place by this parameter for Ukraine among the US allies. That is, the question of host nation support is of great political weight. The complex of issues of information security generally belongs to the final, not initial, conditions of entering NATO. The common information protection envisages exchange of cryptographic and communication technologies sensitive to national security. By the previous experience of NATO enlargement, such exchanges and procedural agreements take place at the last stage of the accession procedure. Till then the interaction in this sphere is based on agreements of general nature.

The last complex of issues is related to the adjustment of legislation. Up to now, there were no insurmountable obstacles in Ukraine for adoption of laws, which are regulating relations with NATO. There are no grounds to expect for emergence of such kind problems in the future.

Conclusions

Chances of Ukraine of the Alliance membership may be generalized as follows. Politico-economical sphere is the most problematic for Ukraine. The situation may be improved by involvement of the EU in regular "audit" of Ukraine as a pretender to membership in the Western institutions. Such an involvement of the EU is a difficult for implementation though very effective measure.

The situation in the field of defense capabilities is favorable for Ukraine, and potentially even advantageous one, first of all owing to airmobile forces, AN-70 program and military infrastructure, which may be used in frames of host nation support.

Resources' allocation by Ukraine for the defense may be positively estimated in an aggregate sum. But the structure of the defense expenditures is incompatible with possible membership in NATO. Not so much the increase in spending is required as their restructuring and downsizing of troops.

The issues of information security and harmonization of legislation may be evaluated as neutral ones, i. e. as such that do not create the principal obstacles while not giving tangible advantages.

Parliamentary hearings devoted to interrelations of Ukraine and NATO in October 2002 became a sign that Ukraine's approaching the Alliance ceased to depend exclusively on the volatile efforts of separate politicians and state institutions.

Documents on future NATO-Ukraine relations adopted during the Prague Summit proclaim commitment of Ukraine to make necessary reforms to meet the requirements of NATO membership. The above analysis confirms that this goal is desirable and achievable. Ukraine's invitation to NATO in 2010 or even earlier is the reality under condition of the effective use of existing possibilities.

Translated by Anatoliy Murashko

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