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REPORTS - Press Release For Immediate Release: April 21, 1999

The Costs of NATO Expansion Revisited: 
From the Costs of Modernization to the Costs of War 

by William D. Hartung 

Executive Summary
Major Findings
I. Introduction: From the Costs of Expansion to the Costs of War
II. If I Had a Hammer: The Opportunity Costs of NATO Enlargement 
III. Meanwhile, Back at the Arms Bazaar

Major Findings:
Finding 1: Last year's debate on NATO expansion failed to foresee the alliance's largest new cost, the operation in Kosovo. Estimates by government analysts and independent think tanks put the cost of the operation thus far at over $600 million, but as the Clinton Administration's recent $6 billion emergency supplemental budget request for Kosovo suggests, that is only the down payment on what could become a very expensive proposition. Projections by the Congressional Budget Office suggest that if a ground war were to be launched in Kosovo involving 50,000 U.S. military personnel, the annualized cost would exceed $19 billion. This is in line with a rough estimate by Michael O'Hanlon of the Brookings Institution that a ground war in Kosovo could cost $10 to $30 billion. 

Finding 2: In its enthusiasm for expanding NATO's membership and core missions, the Clinton Administration has neglected other, more broadly-based institutions like the United Nations and the 55-member Organization for Security and Cooperation in Europe (OSCE). As a first step towards building a more robust capability for international peacekeeping, the U.S. should pay its back dues to the United Nations, which could be covered for less than the cost of one of the $2 billion B-2 bombers that have been put on display over Kosovo. Strengthening the conflict prevention capabilities of the OSCE would likewise take a small fraction of the funds currently devoted to the war in Kosovo: the organization's entire $112 million annual budget is the equivalent of the cost of a few days of bombing raids on Belgrade. And the $2 million yearly tab for the OSCE's conflict prevention unit equals the cost of just two Tomahawk cruise missiles. 

Finding 3: Despite the leisurely pace at which new NATO member states are upgrading their arsenals, U.S. arms makers are still aggressively marketing their wares to the governments of new and prospective members of the alliance. Poland has recently put out the word that it is interested in buying 60 new attack helicopters, a deal that could ultimately be worth over $1 billion. And Boeing has offered the Warsaw government a wide-ranging arms package that includes Hellfire missiles, upgrades of its Soviet-era helicopters, a piece of the action on the company's new L-159 combat aircraft (produced with its Czech partner, Aero Vochody), and a dozen or more surplus F-18 aircraft. A number of U.S. arms makers are putting up $250,000 each to serve on the host committee for this week's NATO 50th anniversary activities, and these companies will also be out in force for a 50th anniversary of NATO air show that will be held in Prague next month. U.S. companies like Boeing, Lockheed Martin, and United Technologies are putting energy into East and Central Europe in the hopes of getting the inside track on fighter purchases by Poland, Hungary and the Czech Republic which will occur in five to ten years time ? a package deal to sell even a few dozen fighters to the three new member states could be worth more than $3 billion. 

Finding 4: The U.S. government has stockpiled over $1.5 billion in grants and subsidized loans that U.S. firms can use to finance arms sales to new and prospective NATO member states. The biggest commitment is the Central European Defense Loan fund (CEDL), which was given over $800 million in lending authority under the Pentagon's Foreign Military Financing (FMF) loan program before Congress terminated new FMF lending authority late last year. 

Recommendation 1: To head off the possibility of costly and ill-considered future commitments like the current air war in Kosovo, NATO's new strategic concept should abandon any suggestion that the alliance operate outside of the European theater, and make an explicit commitment to seeking the approval of the UN Security Council for any operation other than the direct defense of the territory of a member state. 

Recommendation 2: The Congress should cut subsidies for arms exports to new and prospective NATO member states, and the Pentagon should terminate the Defense Export Loan Guarantee (DELG) program. Unless and until states in the region develop credible plans to invest their own funds in defense modernization, it makes no sense for the U.S. government to be stockpiling subsidies for that purpose. 

Recommendation 3: The U.S. government should invest time and resources in development of conflict prevention and peacekeeping capabilities in more broadly-based organizations like the United Nations and the Organization for Security and Cooperation in Europe. Critically needed funds could be provided to these organizations for a fraction of the cost of the current war in Kosovo. 

I. Introduction: From the Costs of Expansion to the Costs of War
Prior to last spring's Senate vote to admit Poland, Hungary, and the Czech Republic into the NATO alliance, there was a lively debate about the cost of this major new commitment. Governmental cost estimates for enlarging the alliance ranged from the Pentagon's official estimate of $1.5 to $2 billion over ten years for "direct enlargement" to the Congressional Budget Office's (CBO) estimate of as much as $125 billion over thirteen years. 

Non-governmental think tanks made their own cost assessments. Ivan Eland of the Cato Institute put the total tab at about $70 billion, with the U.S. share at $7 billion. And the World Policy Institute projected a worst case, highest cost scenario for NATO growth based on the alliance's "open door" policy: if NATO went on to add as many as a dozen new members rather than just the three nations added in the first round of enlargement, the top end CBO estimate of $125 billion for three to four members could quadruple to as much as $500 billion over a thirteen year period, of which the U.S. share could reach one-third to one-half. 

The differing estimates on NATO expansion were based on different definitions of what the cost components of enlargement were, and different assessments of the strategic and political factors influencing total costs. For example, the Pentagon's estimate explicitly excludes the costs of modernizing the armed forces of the three new member states, despite the fact that the World Policy Institute has identified over $1.5 billion in grants, subsidized loans, and weapons giveaways which the U.S. government had already committed in order to help countries prepare for NATO membership. The dueling estimates also differed on major issues such as how much it would cost to bring the military infrastructure of new member states up to NATO standards; the costs of modernizing the weapons inventories of new members states; and the extent to which NATO members in Western Europe would need to improve their transport and mobility assets in order to have a credible capability to reinforce the new members in a military crisis. None of last year's estimates of the costs of enlarging NATO addressed the costs of short-term military operations that might be undertaken by an enlarged NATO, which ? given the current air war in Kosovo ? may turn out to be the largest category of cost for the alliance for the foreseeable future. 

The cost issue was one of the few issues to generate significant political opposition to NATO expansion in the run-up to the spring 1998 ratification vote in the Senate. But interestingly enough, the wide differences in the estimated costs of NATO enlargement had only a modest effect on public opinion. Whether the costs to U.S. taxpayers were going to be a few hundred million dollars or several hundred billion dollars, the basic public attitude was the same: a majority of Americans did not believe that U.S. taxpayers should pick up the tab for helping new NATO members modernize their armed forces. For example, in an April 1998 poll commissioned by Business Leaders for Sensible Priorities and conducted by the Princeton, New Jersey-based firm Opinion Research Corporation International, 56% of those polled came out against NATO expansion once they learned that "estimates of the cost of the first phase of this expansion to U.S. taxpayers range from $400 million to $19 billion." That same month, the Survey Center at the University of New Hampshire found that 79% of New Hampshire residents were opposed to NATO expansion once they were told that "estimates of the costs of NATO expansion to U.S. taxpayers range from $400 million to $250 billion." 

During the Senate debate on NATO expansion last spring, the cost issue was raised most forcefully by Sen. Tom Harkin (D-IA), who put forward an amendment to cap the costs of U.S. government subsidies for NATO expansion. Although Harkin's amendment was defeated by 74 to 26, it helped give a higher profile to the cost question, which may have contributed to the relative success of Sen. John Warner's amendment calling for a three-year moratorium on additional rounds of NATO enlargement beyond the invitations of Poland, Hungary and the Czech Republic to join the alliance. Warner's amendment garnered 41 votes, which was substantially more than the 34 votes (one-third plus one) that would be needed to block a second round of NATO expansion. Concerns about costs, alliance cohesion, and the effects of further expansion on U.S.-Russian relations have all come together to convince the Clinton Administration to take a go slow approach to new rounds of NATO enlargement. Prior plans to announce a new round of candidates at this month's 50th Anniversary of NATO commemoration in Washington have long since been put on the shelf, with the most likely timing for another round of expansion (if there is one) now being pushed off to at least 2001? safely past the year 2000 presidential elections. 

For the foreseeable future, the most important factor determining public attitudes towards the U.S. commitment to NATO in general and NATO enlargement in particular will be the outcome of the current operation in Kosovo. Has NATO been a positive factor in efforts to stop ethnic cleansing in Kosovo and rein in the activities of Slobodan Milosevic? Or has the Clinton Administration's stubborn reliance on using NATO to the exclusion of other, more broadly-based mechanisms ? such as the United Nations and the Organization for Security and Cooperation in Europe? done more harm than good? The public assessment of these questions will have much to say about whether there will be enthusiasm for additional rounds of NATO expansion in the wake of the Kosovo crisis, or whether there will instead be a contentious debate about the costs and purposes of the NATO alliance and the future U.S. role in it. 

II. If I Had a Hammer: The Opportunity Costs of NATO Enlargement
When the costs of NATO expansion were being debated last year, officials within the Clinton Administration and in pro-enlargement think tanks routinely made the point that expanding NATO would reduce the costs of defending Europe, not increase them. The logic behind these assertions was fairly straightforward. Advocates of enlargement maintained that the new member states feel more secure once they joined NATO, and would therefore not have to spend as much on their military forces as they would if they had to "go it alone" in a "tough neighborhood." Supporters of expansion further suggested that countries seeking NATO membership would be on their best behavior, and that as a result they would improve their records on democracy and human rights and resolve any outstanding ethnic or border disputes they might have with their neighbors. 

Critics of expansion raised several points in opposition to this rosy view of the impact of a bigger NATO on security and military spending in East and Central Europe. Citing NATO member Turkey's 15 year campaign of bombing and burning villages in its war against Kurdish autonomy in the southeastern portion of the country, some suggested that NATO membership might be viewed as a blank check to engage in internal ethnic conflicts and carry out human rights abuses with relative impunity. Other analysts suggested that to the extent that expansion created a new dividing line in Europe, new NATO members might at some future date drag the alliance into outstanding ethnic and border disputes that they had with neighboring, non-NATO members. 

As was the case in the assessment of NATO costs, analysis of the impacts of NATO enlargement on the security situation in East and Central Europe has also been overshadowed by the war in Kosovo. The relevant question now with respect to NATO in general and NATO expansion in particular is whether the intense focus on "updating" NATO and making it relevant to the new security problems facing Europe and the world has led to the neglect of other security instruments such as the United Nations and the Organization for Security and Cooperation in Europe. 

A number of advocates of NATO expansion have suggested that the alliance's choice in the post-Cold War period is to "expand or die." And others have asserted that although NATO was originally designed to confront a rival military alliance, the now defunct Warsaw Pact, that given its superior resources and clear command structure it is the most useful tool available to deal with problems like ethnic conflict in the Balkans. But after witnessing a month of NATO bombing raids in Kosovo, Serbia, and Montenegro, it seems that the current NATO effort serves as living proof of an old proverb: if all you have in your tool box are hammers, all your problems start to look like nails. 

Judging from the performance to date, the most charitable assessment that can be made of NATO's disastrously counterproductive decision to launch an air war in an attempt to stop ethnic cleansing on the ground in Kosovo is that in the face of counter-evidence from their own diplomats and intelligence sources, the leaders of the alliance somehow managed to convince themselves of their own rhetoric? that Slobodan Milosevic would back down after a short period of air strikes and accept NATO's terms for the future of Kosovo. Several sources within the U.S. government have even suggested that the timing of the bombing raids was influenced by the date of the 50th Anniversary of NATO celebrations in Washington, on the theory that it would be too embarrassing to let Milosevic thumb his nose at NATO at what was supposed to be the moment of its greatest triumph. Add to this the repeated assertions by analysts in government and the media that NATO's "credibility" is at stake in Kosovo, and one has to wonder whether in choosing NATO as the main vehicle for resolving the crisis there, the Clinton Administration has simply chosen the wrong tool for the job. 

The first question that must be asked about the NATO air war is why the United States and its NATO allies never sought the authorization of the United Nations Security Council for what is after all an intervention in an internal dispute that was occurring within the borders of the former Yugoslavia. Under traditional interpretations of international law, a UN mandate is required for military operations for purposes other than self-defense. And even if one tries to carve out a "humanitarian exception" to justify the NATO intervention ? on the grounds that the Milosevic regime is engaged in ethnic cleansing bordering on genocidal conduct ? one has to question why this humanitarian argument was not at least discussed within the UN before NATO launched its air attacks. On a more practical level, doing an end run around the Security Council for a major operation like Kosovo risks not only alienating major players like Russia whose assistance may ultimately be needed to resolve the crisis, but it can also promote hastily-crafted, ill-conceived tactics that lack the kind of international legitimacy and steadiness of purpose that a major undertaking of this kind demands. 

When a policy like the current U.S./NATO air war in Kosovo fails so utterly to have the desired effect, it's always easier to look back at what could have been done differently than it is to look forward to what needs to be done next. Even so, it's hard not to ask whether the U.S. government's emerging emphasis on the role of the "new NATO" in dealing with a wide range of new security challenges -- from ethnic conflict in the Balkans to international terrorism to the spread of weapons of mass destruction in the Middle East ? has blinded U.S. officials to the value of other institutions and other approaches to peacekeeping and conflict prevention. 

Prior to the bombing campaign, the OSCE had roughly 1,500 human rights monitors in Kosovo attempting both to document and hopefully to prevent the outbreak of ethnic cleansing in the province. Given its modest $112 million annual budget ? the equivalent in cost of a few days worth of bombing raids on Belgrade ? the organization had to pass the hat to raise funds for the mission, which relied in some instances on untrained volunteers whose qualifications involved little more than a proficiency in English. And the OSCE's conflict prevention unit receives only $2 million per year, or the cost of two of the hundreds of Tomahawk cruise missiles that have been fired by NATO forces in the current conflict in Kosovo. As Daniel Plesch and Julianne Smith of the British American Security Information Council have suggested, a better-funded OSCE could develop specially-trained "Civilian Intervention Units" that could be put on the ground in areas at risk of ethnic conflict before the killing starts. 

Similarly, if the United States were to pay its outstanding dues to the United Nations ? which it could do for less than the cost of just one of the $2 billion B-2 bombers that have been put on display over Kosovo? it would be better positioned to press for a more coordinated approach to UN peacekeeping, with better-funded, better-trained units and clearer lines of authority between the UN and regional bodies like the OSCE or the Organization of African Unity which could be delegated the lead role in peacekeeping missions in their areas. 

Whether these preventive mechanisms could have averted the current crisis in Kosovo is impossible to say with any certainty. However, it is interesting to note that last summer, the Clinton Administration ignored a proposal from its own representative to NATO, Alexander Vershbow, which would have entailed the development of a joint U.S.-Russian plan to impose a political settlement in Kosovo that the two nations would have jointly presented to the United Nations Security Council. Vershbow's proposal would have involved 30,000 to 60,000 troops to enforce it. In the midst of White House concerns about the terrorist attacks on U.S. embassies in Africa and the political risks of a proposal that might involve sending significant numbers of U.S. troops overseas in advance of the November 1998 mid-term elections, the Vershbow proposal was allowed to languish. By the time the Clinton Administration re-focused its policy apparatus on Kosovo in late 1998 and early 1999, the emphasis had shifted almost exclusively towards using the threat of NATO air strikes as leverage to get the Milosevic regime to agree to the terms of the Rambouillet peace agreement. Now, a month after the bombing campaign first began, there are discussions of finally doing what should have been done in the first place ? involving Russia and the United Nations in hammering out and policing a peace agreement for Kosovo. 

If we are indeed going to have a "new NATO," the lesson of Kosovo may be that this new NATO should use force only to assist a member state in defending itself against aggression or with a clear mandate from the United Nations Security Council. And the United States and its NATO allies should invest in other institutions, like the OSCE and the UN, that ? because of their broader membership base -- are better positioned to engage in conflict prevention, peacekeeping, and peace negotiations. In addition to the human costs associated with the failure of NATO policy to stop ethnic cleansing in Kosovo, it's also worth looking at the economic costs of failing to head off this war. 

Costs of the War in Kosovo
- According to the Center on Strategic and Budgetary Assessments, the U.S./NATO air war in Kosovo cost $600 million over the first three weeks, and continuing at current levels will cost $20 to $65 million per day. The biggest costs to date have been the hundreds of cruise missiles launched against targets in the former Yugoslavia, which run at roughly $1 million per copy for the Raytheon sea-launched Tomahawk version; and the fuel and operations costs for all the expensive fighters and bombers that have been brought into play, including the B-2 "Stealth" bomber, which costs $300,000 to fly back and forth from the U.S. to Kosovo. 

- The Congressional Budget Office has projected that the war in Kosov will cost at least $3 billion through next March, and "$4 billion if peacekeeping efforts continue through end of fiscal year 2000." But CBO Director Dan Crippen also notes that sending in ground troops "would increase the mission's price tag by $300 million per month for each increment of 27,000 troops deployed and by more than $1 billion a month to sustain the air campaign." That would mean that if the war goes on for another year and involves on the order of 50,000 U.S. personnel, the costs could reach more than $19 billion. This is consistent with a rough estimate by Brookings Institution analyst Michael O'Hanlon, who has suggested that a ground war in Kosovo could cost $10 to $30 billion. 

- Meanwhile, the Clinton Administration is seeking a $6 billion supplemental appropriation to pay the costs of projected military and humanitarian efforts in Kosovo, while some Congressional Republicans have seized upon the supplemental to suggest add-ons to the Pentagon budget in the range of $12 to $16 billion.

Ultimately, the costs of NATO proper and NATO expansion in particular will be closely linked to the "lessons" drawn from the Kosovo conflict. If the main policy lesson learned is that the U.S./NATO coalition needs to spend more to be able to project force into the middle of internal conflicts in Europe and beyond, the costs of an expanded NATO could run into the hundreds of billions of dollars in the next decade and one-half. If, on the contrary, the Kosovo operation prompts a re-evaluation of NATO's emerging strategic concept that involves trimming back NATO commitments to only those operations that either involve defense of a member state from outside aggression or a so-called "humanitarian" intervention that is approved by the UN Security Council and conducted in cooperation with broad-based regional organizations like theOSCE, then the lessons of Kosovo could lead to reduced military expenditures on the part of the United States and its NATO allies in the decades to come. In short, will NATO pursue a preventive strategy in cooperation with other institutions and regional powers, or will it continue the reactive, "go it alone" approach that has led to the current fiasco in Kosovo? 

III. Meanwhile, Back at the Arms Bazaar
When NATO expansion first became a major topic of discussion in 1996 and 1997, U.S. arms makers expressed high hopes regarding their prospects for making major sales to prospective NATO members. Joel Johnson, Vice President International of the Aerospace Industries Association, spoke enthusiastically of an $8 to $10 billion market for U.S. combat aircraft in the region, while the Rand Corporation suggested an arms procurement market in East and Central Europe of up to $35 billion over a decade or more. The Polish government had spoken of the possibility of purchasing as many as 200 Western fighter aircraft, a huge deal by any standard; and both Hungary and the Czech Republic engaged in major discussions with Lockheed Martin, Boeing, and the British Aerospace/ Gripen marketing partnership about purchasing dozens of new combat planes. 

Once the U.S. Senate ratified the entry of Poland, Hungary, and the Czech Republic into NATO, their big plans about purchases of Western arms were almost immediately pushed back into the indefinite future. Instead of buying scores of new planes, Poland is now considering leasing a dozen or so surplus F-16 or F-18 combat aircraft from the Pentagon. Similarly, Hungary and the Czech Republic have put their prospective fighter purchases on the back burner for the foreseeable future. All three new member states have made only modest increases in their defense budgets, well below the target rates that they had informally agreed to in accession talks with NATO representatives prior to being brought into the alliance. Small amounts of Pentagon-backed loans have been used to finance sales of Lockheed Martin F-117 radars and related communications gear to the new members states. Poland has recently announced a possible tender for 60 new attack helicopters, along the lines of the Bell/Textron Super Cobra or the Boeing Apache, but the government has yet to solicit actual bids. 

At the moment, the biggest flow of funds in the East and Central European arms market is from U.S. contractors to their potential partners in the region. Boeing has purchased a 35% share of the Czech aircraft manufacturer Aero Vochody, and is partnering with that firm to produce L-159 multi-role aircraft for the Czech armed forces. Textron has bought 70% of Romanian helicopter maker IAR Brasov, in hopes of carrying through an on-again, off-again deal to sell Romania Cobra helicopters and production technology in a package that could be worth $1.6 billion. And if Poland agrees to buy its F-16 aircraft, Lockheed Martin has agreed to build it in conjunction with Polish airframe manufacturer PZL Mielec, at production facilities in or near Warsaw. A recent Polish government plan to privatize large parts of the Polish defense industry is the latest bid to attract capital from Western arms makers who are seeking a foothold in the East and Central European market. 

If anything, the slow pace of the East and Central European arms market has only acted to increase the pace of marketing efforts on the part of U.S. firms. When Polish Defense Minister Janusz Onyskiewicz visited Washington in late January, his schedule included meetings with major defense contractors United Technologies, Boeing, and Lockheed Martin, plus the U.S. Committee on NATO, whose president, Bruce Jackson, is a vice president at Lockheed Martin and a major player in the pro-NATO expansion lobby in the United States. Boeing took advantage of the meeting to offer Poland a wide-ranging arms package, including Hellfire missiles (with production technology), upgrades on the electronics of Poland's Soviet-style helicopters, and a piece of the action on the L-159 combat aircraft that Boeing is building with its Czech partner Aero Vochody. This impressive package was put forward for the sole purpose of convincing Poland to lease surplus F-18s (built by Boeing's McDonnell Douglas division) rather than Lockheed Martin F-16s. While the lease arrangement itself is worth next to nothing to U.S. companies, whichever company's aircraft is leased will have the inside track on an eventual sale of new combat aircraft to Poland, since Polish forces will get used to using that aircraft, and will have to work with that firm on training and maintenance. U.S. companies are also hoping to convince Hungary and the Czech Republic to lease U.S. combat aircraft as a prelude to purchasing U.S. fighters five or ten years down the road. 

Meanwhile, U.S. defense contractors Boeing, Raytheon, United Technologies, and TRW have all agreed to put up $250,000 in cash or in-kind contributions to serve as part of the Host Committee for the NATO 50th Anniversary celebrations in Washington. Lockheed Martin's Bruce Jackson has also been a major player in organizing events surrounding the 50th anniversary, and Sally Painter, a former Commerce Department official who works with Jackson at the U.S. Committee on NATO (formerly the U.S. Committee to Expand NATO), is the staff director for the NATO Host Committee effort. Investing in the NATO Host Committee gives U.S. arms companies access to the top officials of the 43 nations that are attending the NATO anniversary, and the chance to put in a good word or two about their company's weapons systems with the people who will be making the purchasing decisions. Contacts made at the NATO 50th anniversary events in Washington can be followed up at a special 50th anniversary of NATO air show that will be held in Prague in May of 1999, where U.S. companies will be out in force trying to demonstrate the virtues of their weapons systems over those of their competitors. 

As we observe the aggressive marketing campaigns of U.S. arms makers towards East and Central Europe, one obvious question arises: if the region's arms market is moving at such a leisurely pace, why are U.S. companies still in there pitching so hard for sales? Part of the answer has to do with the nature of the post-Cold War arms market. As the Pentagon makes the transition from one generation of weaponry (like the F-16 fighter) to the next (like the F-22 fighter and the Joint Strike Fighter), companies like Boeing and Lockheed Martin are looking to foreign sales to keep key production lines up and running and boost company profits. By some estimates, foreign arms sales can be twice as profitable as comparable sales to the Pentagon. The revenue stream from major deals like the $9 billion sale of 150 F-16s to Taiwan in 1992 can keep bolster the profits of a company like Lockheed Martin for years; on the flip side, delays in big deals like Lockheed's $5 billion prospective sale of F-16s to the United Arab Emirates can knock down earnings and stock prices. So, even if Poland, Hungary, and the Czech Republic take five or ten years to buy a few dozen new combat aircraft each, that could translate into $3 billion or more in new sales for a firm like Lockheed Martin or Boeing. 

If and when these countries decide to make major weapons purchases, they will seek U.S. government financing. Over the past four years, the U.S. government has committed itself to more than $1.5 billion in grants, subsidized loans, and weapons giveaways to prospective NATO members, including over $150 million in outright grants and over $800 million in subsidized loans under the Central European Defense Loan program (CEDL). Because of the spotty track record of U.S. government-sponsored arms sales loans ? which have resulted in over $9 billion in loans being written off for political or economic reasons in this decade alone ? Congress moved last year to shut down the loan portion of the Pentagon's Foreign Military Financing (FMF) program, which served as the basis of the Central European Defense Loan fund. Similarly, Pentagon procurement chief Jacques Gansler tried late last year to shut down his agency's Defense Export Loan Guarantee (DELG) program, which had been looked to as a possible source of cash flow to support NATO expansion, because the program was running at a loss and had posted only one major loan guarantee, in support of a sale of pilotless drones to Romania. 

But arms industry executives serving on the Pentagon's Defense Policy Advisory Committee on Trade have since convinced Secretary of Defense William Cohen to give the DELG program a reprieve. Given the limited interest on the part of East and Central European buyers and the shaky credit history of U.S. government-backed arms sales loans, the most prudent course would be to shut down the DELG program and eliminate the $800 million in lending authority that has built up in the Central European Defense Loan program over the past four years. If and when the nations of the region seek a major purchase of U.S. combat equipment, financing can be arranged at that time. Stockpiling subsidies in the absence of a market is fiscally irresponsible and strategically unwise, as it may foster unnecessary arms proliferation. The U.S. government should not be in the business of making it easy for foreign clients to buy advanced U.S. combat aircraft, particularly if those clients are unwilling to put any of their own funds at risk. 

This source note provides data on the major sources relied upon for this issue brief. Additional questions on specific facts can be directed to the author. On the projected costs of NATO expansion, see William D. Hartung, Welfare for Weapons Dealers 1998: The Hidden Costs of NATO Expansion, available on the web at (click on "Arms Control" in Projects Listing); Congressional Budget Office, Costs of Expanding the NATO Alliance (Washington, DC: CBO, March 1996); and Ivan Eland, The High Cost of NATO Expansion: Clearing the Administration's Smokescreen (Washington, DC: Cato Institute, October 29, 1997). On the costs of the war in Kosovo, see Steven Kosiak, "Costs of Allied Air Campaign: Day 22," Washington, DC, Center for Strategic and Budgetary Assessments, April 15, 1999 (see also regular updates at On alternative approaches to the Kosovo conflict in general and European security issues in general, see Daniel Plesch and Robert Bullock, "NATO's SWAT Team," Global Beat Syndicate, April 7, 1999 ( and the wealth of analysis and commentary provided on the web page of the British American Security Information Council, at On the role of U.S. arms companies in lobbying for arms sales in East and Central Europe, see Hartung, Welfare for Weapons Dealers 1998, op. cit.; and Sam Loewenberg, "Stocking Up for the Next War," Legal Times, April 5, 1999.