Order Code RL30150
CRS Report for Congress
Received through the CRS Web
NATO Common Funds Burdensharing:
Background and Current Issues
Updated January 20, 2006
Carl W. Ek
Specialist in International Relations
Foreign Affairs and National Defense
Congressional Research Service ˜ The Library of Congress

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NATO Common Funds Burdensharing:
Background and Current Issues
Summary
Member states of the North Atlantic Treaty Organization (NATO) contribute to
the activities of the alliance in several ways, the chief of which is through the
deployment of their own armed forces, funded by their national budgets. Certain
commonly conducted activities, however, are paid for out of three NATO-run
budgets. These three accounts — the civil budget, the military budget, and the
security investment program — are funded by individual contributions from the
member states. The countries’ percentage shares of the common funds are
negotiated among the members, and are based upon per capita GDP and several other
factors. The aggregate U.S. share, which has fallen over the past three decades, stood
at 27.4% in 2003. Ten central and eastern European nations were admitted into the
alliance in 1999 and 2004, and several other countries would also like to join. As
NATO expands, it has incurred certain additional costs to accommodate the new
members. These costs are being shared by all, including the new countries. This
report will be updated as events warrant.

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Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
NATO Civil Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
NATO Military Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
NATO Security Investment Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Common Funds Burdensharing Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
List of Tables
Table 1. NATO Common Funds Cost Shares, 2003 . . . . . . . . . . . . . . . . . . . . . . . 8

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NATO Common Funds Burdensharing:
Background and Current Issues
Introduction
Members of the North Atlantic Treaty Organization (NATO) contribute to the
alliance in various ways. The most significant means by far is through funding, in
their national defense budgets, the deployment of their respective armed forces in
support of NATO missions. In recent years, as the alliance has undertaken
enlargement, current member countries have been providing bilateral assistance to
prospective future members. Defense analysts point out that the NATO allies also
contribute to mutual security in many other ways.1
Several NATO activities, however, are coordinated and conducted by the
alliance’s headquarters in Brussels. These operations are directly funded by three
common accounts: the NATO Military Budget, the NATO Civil Budget, and the
NATO Security Investment Program (NSIP). The funds are maintained by direct
contributions from NATO’s member states. Individual shares of the civil and
military budgets have not been fundamentally changed in decades. The NSIP shares
have been negotiated every few years among the allies based upon gross domestic
product (GDP), per capita GDP, and several other factors.
Twice a year, ministers of NATO member countries provide guidance on
general use of NATO resources. But the actual management of the accounts is
conducted by separate committees. As their names imply, the three funds are
responsible for separate but often complementary activities.
NATO Civil Budget
The NATO civil budget supports the alliance’s Brussels headquarters and its
international civilian staff, which “is responsible for developing and implementing
1 Funding levels for deployment are difficult to assess and compare, as they can be
calculated in different ways. See CRS Report 95-726, Defense Budget: Alternative
Measures of Costs of Military Commitments Abroad, by Stephen Daggett and Kathleen H.
Hicks, June 16, 1995. The Pentagon has emphasized that allies make contributions to
mutual security in a number of ways. See U.S. Department of Defense, Report on Allied
Contributions to the Common Defense. A Report to the United States Congress by the
Secretary of Defense. July 2003. Washington, D.C. The Defense Department published
a “Statistical Compendium” of allied contributions in 2004.

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NATO’s overall political and security policies.”2 NATO’s international staff is
headed by the Secretary General’s office, and consists of civilian employees of
member countries, often provided to NATO on 3-4 year details. Among other
activities, this staff supports the work of the North Atlantic Council (the governing
body of the alliance) and its more than two-dozen committees.
The civil budget covers standard administrative tasks, such as personnel, travel,
communications, utilities, supplies and furniture, and security. In addition, this
budget is used for several program activities, including public information, civil
emergency planning, and the work of the science committee.
The civil budget also has funded the non-military aspects of structures related
to enlargement, including the Partnership for Peace (PfP) program and the Euro-
Atlantic Partnership Council (EAPC).3 The civilian side of these bodies sponsors
activities intended to strengthen European security through creating stronger political
and economic systems in former-communist countries. In addition, the civil budget
funds activities related to the Mediterranean Dialogue, the NATO-Russia Founding
Act, the NATO-Ukraine Charter, as well as relations with the European Union.
NATO’s civil budget is financed by all member states, usually through their
ministries of foreign affairs. The U.S. contribution is provided through the State
Department’s budget (Contributions to International Organizations). The 2004 U.S.
assessment was 21.8%, and the total cost requirement was $44.9 million.4
NATO Military Budget
NATO’s military budget is, in most years, the largest of the three accounts.
More than 60% of this fund is used to pay for operational costs of the international
military staff, its headquarters in Mons, Belgium and subordinate commands in
different NATO geographical areas. This budget also covers the cost of
administering the alliance’s military-related activities and organizations, including
Airborne Early Warning and Control System (AWACS) fleet operations, which
accounts for a significant portion of the U.S. share; the NATO pipeline (referred to
as the Central European Operating Agency); and the Maintenance and Supply
Agency.
2 U.S. Department of State. Congressional Presentation Document. Fiscal Year 2000.
(Contributions to International Organizations). Washington, D.C. p. CIO-47.
3 Created at the initiative of the United States in January 1994, PfP is intended to promote
and develop concrete aspects of security cooperation in Europe, as well as to help interested
countries prepare for NATO membership. In 1991, the North Atlantic Cooperation Council
was established to permit political consultation on security matters between NATO and
former Warsaw Pact countries; it was changed and renamed — the EAPC — in May 1997.
4 U.S. Department of State. Congressional Budget Justification. Fiscal Year 2006.
(Contributions to International Organizations). Washington, D.C. p. 775.

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The level of the military budget is reviewed and approved annually by the North
Atlantic Council’s Defense Planning Committee. Individual member state
contributions to the budget are based on a cost-sharing formula. Expenses for the
various activities funded by the Military Budget may be split among 25 or 26
members, because France does not participate in all military activities. The U.S.
contribution to NATO’s military budget is provided through the Department of the
Army’s Operations and Maintenance account (Support for Other Nations). The U.S.
share in 2004 ranged from 22.5% (with all 26 members participating) to 26.7% (with
25); U.S. contributions to the AWACS program ranged from 31.3% to 40.1%.
According to the Pentagon, the U.S. contribution to the NATO military budget in
FY2004 was $ 272.2 million.
NATO Security Investment Program
Formerly known as the NATO Infrastructure Fund, this program in the past was
responsible chiefly for funding military installations and construction projects. In
May 1993, the functions of the program were changed significantly to reflect the
alliance’s new security policy. Known since December 1994 as the NATO Security
Investment Program (NSIP), the fund’s activities have been steered away from a
static defense posture, appropriate during the Cold War, toward crisis control, anti-
terrorism and other tasks, which require more rapid force mobility and flexibility.
Accordingly, the NSIP budget now involves the collective financing of a wide
variety of NATO support functions, including, for example: command, control,
communications hardware and software; logistics activities; training installations;
transportation; and storage facilities for equipment, fuel, and munitions.
Because NSIP projects may be located in any of the member countries, this
program has tended to be somewhat more politically sensitive than the other two.
Infrastructure and other NSIP projects are decided upon through a priority planning
process. Specific projects are generally awarded on the basis of competitive bidding,
and, once completed, undergo NATO-controlled inspection and auditing.
According to the U.S. Department of Defense (DOD), the focus on new NATO
missions and the resultant redirection of NSIP activities have been relatively
advantageous for the United States. Among other benefits, a change made in May
1993 to the “program’s funding criteria for facilities construction and restoration all
but eliminates NATO facility funding for the European allies but continues full
support for U.S. requirements at European bases.”5 NSIP also helps fund U.S.
storage facilities in Europe, as well as reinforcement capabilities assigned to NATO.
DOD has noted that the United States has benefitted from NATO infrastructure
support for several military operations, including the 1986 air strike on Libya, Desert
5 U.S. Congress. House of Representatives. Appropriations Subcommittee on Military
Quality of Life and Veterans Affairs and Related Agencies. Military Construction Program.
FY2006 Budget. NATO Security Investment Program. Justification Data Submitted to
Congress. Washington, D.C. February, 2005. Part 4. p. 628.

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Storm, Provide Comfort, Deny Flight, peacekeeping activities in the Balkans, as well
as military operations in Afghanistan and training in Iraq.
In the 1990s, NSIP funding shortfalls were an issue. According to DOD,
Congress had “substantially reduced the Department’s budget request ... [and] a large
number of U.S.-unique projects could not be considered for NATO funding.”
Pentagon officials state that in the post-9/11 defense budget environment, this has
ceased to be a problem.
DOD has complained, however, about a prohibition — in place since 2000 —
on spending NSIP funds on NATO Partnership for Peace projects in countries that
formerly belonged to the Soviet Union. The ban, DOD argues, “continues to have
considerable negative political consequences” for U.S. regional objectives.6
Like the NATO military budget, funding of NSIP projects is divided among 25
or 26 member states, depending upon French participation. In 2004, the U.S. share
fluctuated between 21.7-24.7%, due to changes in member participation. The United
States provides funds to NSIP through the military construction appropriations. The
funding level for 2004 was $169.3 million. Although the U.S. percentage share has
remained fairly constant over the past decade, absolute funding levels declined in the
wake of the collapse of the Warsaw Pact.7
Common Funds Burdensharing Issues
The majority of NATO-related expenses incurred by member states arises from
the deployment of their own armed forces. For this reason, the burdensharing debate
in the United States has tended to focus not so much on NATO’s common funds, but
rather on the extent to which established allies have been restructuring their forces
and acquiring new military capabilities that enable them to respond to both NATO’s
traditional Article V, as well as its new, non-Article V missions, and on the ability
and willingness of the newer members to modernize their militaries, make them
interoperable with alliance standards, and develop niche capabilities.8
As noted above, the three NATO common accounts are funded by contributions
from the member states. How are national shares determined? The NATO Handbook
notes that
[b]y convention, the agreed cost-sharing formulae which determine each
member country’s contributions are deemed to represent each country’s “ability
6 Ibid.
7 See, for example, United States General Accounting Office. NATO Infrastructure
Program: As Threat Declines, NATO Reduces Expenditures. GAO/NSIAD-92-174.
Washington, D.C. May 1, 1992.
8 See, for example, CRS Report RS21659, NATO’s Prague Capabilities Commitments, by
Carl Ek; and CRS Report RS21864, The NATO Summit at Istanbul, by Paul E. Gallis.

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to pay”. However the basis for the formulae applied is as much political as it
is economic.9
In May 1998, the U.S. Government Accountability Office (GAO), responding
to a congressional request, issued a report on the history and apportionment of NATO
common funds shares.10 According to GAO, NATO cost shares have not been
reviewed regularly, but have been changed in response to requests from individual
member states, or to major events, such as changes in membership. Like all NATO
decisions, burdensharing arrangements are based upon members’ consensus.
NATO has revised relative member contributions based on “event-driven”
changes. The GAO cited the following: (1) the 1966 French withdrawal from the
military command, described below; (2) the admission of Spain in 1982 and the more
recent enlargements in 1999 and 2004, for which shares were renegotiated among all
members; and (3) Canada’s 1994 unilateral 50% reduction of its NSIP contribution,
for which several European member countries agreed to defray the cost among
themselves.
In addition to changes caused by specific events, the alliance has periodically
subjected shares to comprehensive reviews. In the early years of NATO, the alliance
agreed to split up members’ shares by grouping countries according to their economic
strength, and then assigned members within the different groups identical shares,
referencing those countries’ contributions to the United Nations. In 1952, the three
largest member states (the United States, the United Kingdom [U.K.], and France)
each paid 22.5% of the budget, while the other countries were assessed according to
their ability to pay (i.e., their relative GDP). In 1955, NATO determined that each
country’s future contribution would be based on its average past expenditures for the
civil and military budgets, and also agreed not to continue to review cost shares
annually. Since then, relative shares of the civil account have remained unchanged.11
The military account was revisited in 1965, when the U. K. requested a review
of that budget to take into account changed relative economic conditions among
member states. The following year, France withdrew from the NATO military
structure, and reduced its contributions (since made on a unilateral, ad hoc basis);
this change was accommodated by prorating shares among the other members. The
net effect of both the British-requested review and the partial French pullout was a
small redistribution of shares of the military budget.
Shares of the NSIP account have been examined somewhat more frequently.
The changes have been made through negotiations, but the complete rationales
behind the share revisions have not been made public. According to GAO, the
9 North Atlantic Treaty Organization. NATO Office of Information and Press. NATO
Handbook. Brussels, Belgium. 2001. p. 204.
10 U.S. General Accounting Office. NATO: History of Common Budget Cost Shares.
GAO/NSIAD-98-172. May, 1998.
11 When Spain joined in 1982, its share was negotiated, and the other members’ shares were
prorated accordingly. Shares were similarly reapportioned after the 1999 and 2004
enlargements.

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alliance has sought to achieve an equitable distribution of NSIP cost shares by
considering several factors: (1) members’ capacity to pay; (2) benefits of use of NSIP
projects that accrue to individual members; (3) economic benefits of construction of
NSIP projects in member countries; (4) non-infrastructural security contributions
made by individual countries; and (5) “various political and economic factors.”12 In
addition, the alliance reportedly takes into account the scope and sophistication of
member nations’ defense industries. These criteria are not, of course, fully
quantifiable; NATO has sought to develop such hard-and-fast, objective guidelines,
but has been unable to achieve consensus. Therefore, GAO concluded, “the setting
of cost shares is essentially accomplished through negotiations.” NSIP cost shares
were last reviewed and revised in 1990. However, in early 2004 the alliance’s
European members agreed to standardize the percentages that each participating
nation contributes to the military budget and NSIP.
When burdensharing contributions are negotiated, the alliance reportedly has
taken into consideration the United States’ worldwide security responsibilities. For
example, the 2003 U.S. contribution to the NSIP budget was 23.8% — not too far
above Germany’s 19.8%. But that same year, U.S. GDP was $10.3 trillion, while the
combined GDP of the other 18 NATO allies was $8.9 trillion. If NATO common
funds assessments were based solely on GDP, the U.S. share that year would have
been 53.6% and Germany’s would have been 9.8%.13
Nonetheless, the total size and individual shares of the common funds have been
the subject of discussion in recent years. Prior to the 1999 enlargement, analysts
estimated the cost of adding new members at between $10 billion and $125 billion,
depending upon different threat scenarios and accounting techniques. Some
Members of Congress expressed concern over these cost projections and were also
worried that the United States might be left to shoulder a large share of the
expenditures; they questioned whether existing burdensharing arrangements should
continue and suggested that the European allies should be encouraged to assume a
larger financial share for the security of the continent. However, a NATO study
estimated that enlargement would require only $1.5 billion in common funds
expenditures over 10 years, and DOD concurred. It was further forecast that the 2004
round of enlargement would cost a similar amount, “with greater benefits” to U.S.
security. In addition, the addition of ten new contributors to the NATO common
funds actually reduced the percentage shares of the established members — including
the United States.14
12 Although the GAO report does not describe these factors, a 1990 Cato Institute report
identifies several likely variables, including “numbers of active-duty, reinforcement, and
reserve military personnel and amounts and types of equipment and weapons systems each
member-state contributes, [and] ... such less quantifiable factors as the member-state’s
geographic proximity to the likely points of engagement... .” See NATO in the 1990s:
Burden Shedding Replaces Burden Sharing. By Rosemary Fiscarelli. Foreign Policy
Briefing. CATO Institute. June 26, 1990. p. 2.
13 Data are from the website of the Organization for Economic Cooperation and
Development (OECD).
14 CRS Report 97-668, NATO Expansion: Cost Issues, by Carl Ek, February 26, 1998. U.S.
(continued...)

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Finally, policy analysts long have argued that alliances save money. The NATO
Handbook, for example, noted that “to arrive at a meaningful conclusion” on the cost
of belonging to the alliance, “each member country would have to factor into the
calculation the costs which it would have incurred, over time, in making provision
for its national security independently or through alternative forms of international
cooperation.”15
14 (...continued)
Department of Defense, Report to the Congress on the Military Requirements and Costs of
NATO Enlargement. Washington, D.C. Feb. 1998. U.S. Congressional Budget Office.
NATO Burdensharing After Enlargement. Washington, D.C. August 2001. U.S.
Department of State. Bureau of European and Eurasian Affairs. Fact Sheet: The
Enlargement of NATO. Washington, D.C. January 31, 2003.
15 p. 202.

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Table 1. NATO Common Budgets Contributions and Cost
Shares, 2004
Total
Total Cost Shares
Member State
Contributions
(%)
(US$)
Belgium
76.2
3.5
Bulgaria
12.0
0.5
Canada
114.6
5.1
Czech Republic
16.4
0.7
Denmark
52.0
2.3
Estonia
1.3
0.1
France
122.7
5.5
Germany
464.0
20.8
Greece
15.0
0.7
Hungary
11.8
0.5
Iceland
0.5
0.1
Italy
163.4
7.3
Latvia
1.7
0.1
Lithuania
3.6
0.1
Luxembourg
1.9
0.1
Netherlands
83.5
3.7
Norway
41.6
1.9
Poland
45.2
2.0
Portugal
12.1
0.5
Romania
13.3
0.6
Slovakia
5.4
0.2
Slovenia
28.4
1.3
Spain
50.8
2.3
Turkey
31.7
1.4
United Kingdom
255.1
11.4
United States
607.3
27.2
Source: U.S. Department of Defense.

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