NATO’s New Defence Spending Pledge Is a Distraction
...from what really matters: capability development. Minna Ålander argues in the Europe Dispatch that the new NATO defence spending pledge is unhelpful.
Hello Everyone,
I am old enough to remember the good old times when we were focused on the news that really matter after NATO summits, instead of defence spending pledges based on an arbitrary number an erratic US President devises. Supporting Ukraine and who is doing what used to be such a topic. Or that the new NATO Forward Land Force contingent in Finland will become operational this year (I wrote about the setup last week on Northern Flank Notes). Instead, we are now distracted with all kinds of dumb statements. I nevertheless try to keep track of the good news, and there have been some recently – even on Ukraine, although they are now overshadowed by the news that the US is pausing aid again, including air defence missiles despite the increased Russian attacks lately. NATO summits, on the other hand, should perhaps best be adjourned for a few years.
Best,
Minna

NATO’s New Defence Spending Pledge Is a Distraction
The discussion during and after last week’s NATO summit in The Hague focused on the new five percent defence spending pledge (3.5 percent direct defence spending and 1.5 percent on infrastructure by 2035) by the Europeans largely overshadowed any other news from the summit. It exemplifies how the focus on defence spending as percentage of GDP distracts from what is actually important: capability development and readiness enhancement. While the five percent pledge seems to have given Trump enough of a win for now, so that this year’s summit didn’t end up the alliance’s last one, it risks creating completely wrong incentive structures (namely to spend a lot of money instead of producing and procuring efficiently). Max Bergmann wrote an excellent critique of the pledge that I really recommend to read. It is probably for the best that most European NATO members are not in any serious hurry to reach the spending goal.
Luckily, procedures exist that can help avoid a worst-case scenario in which all European countries rush to spend on the same equipment and compete with each other on the market. NATO defines capability targets for its members that ideally should be met, but does not really have much of an enforcement mechanism. The likelihood that NATO nations take their allocated targets seriously is higher now, though, thanks to the sense of urgency that the combined force of Ukraine’s tight situation and Trump’s presidency have created in Europe. And the new defence spending pledge incentivizes, well, defence spending. However, the uncertainty about US commitment is likely to complicate the NATO Defence Planning Process (NDPP).
If Europe is to succeed in spending the money smartly, it needs to do so in a more coordinated fashion – and buy European. Both have usually been difficult undertakings due to the inefficiencies in the European defence industrial base. Even more important than the NATO defence pledge, therefore, are the EU’s efforts to streamline European defence industrial production and procurement. After two test runs, the ASAP (Act in Support of Ammunition Production) and EDIRPA (European Defence Industry Reinforcement through common Procurement Act), the EU is now working on a new regulation, the EDIP (European Defence Industry Programme), that combines the lessons learned from the two acts. The sums allocated to ASAP (€500 million) and EDIRPA (€310 million) have been criticized for being irrelevantly small, but the amount of money was not the main objective of the two acts. They were test mechanisms to see how the EU can best help bring demand and supply together, and they worked. EDIP is set to kick off with €1.5 billion, but as a standing mechanism more money can be allocated to it in the EU’s next Multiannual Financial Framework from 2027 onwards.
In addition, EU Military Staff has compiled national and international capability objectives for the member states (which, however, the latter are likely to ignore even harder than NATO’s). While the EU can only incentivize joint production and procurement, not enforce it, the member states have agreed on seven overall key priority areas for capability development:
Air and missile defence
Artillery systems
Ammunition and missiles
Drones and anti-drones systems
Military mobility
AI, quantum, cyber and electronic warfare
Strategic enablers and critical infrastructure protection including strategic airlift, air-to-air refuelling, maritime domain awareness, and protection of space assets.
The NATO summit declaration was with only five points much shorter than usual – not unexpectedly – and only referred to Ukraine in the context that “Allies reaffirm their enduring sovereign commitments to provide support to Ukraine” (emphasis added by me). It can be taken as some kind of a silver lining that at least military support for Ukraine counts towards the five percent pledge, as the communique notes that Allies “will include direct contributions towards Ukraine’s defence and its defence industry when calculating Allies’ defence spending”. That creates a positive incentive to keep up support for Ukraine to meet the target - but only for those to whom the pledge applies, excluding the US.
The EU, on the other hand, has began treating Ukraine like a member state in all but name. Cooperation with and ramping up the Ukrainian defence industry features prominenlty in the EDIP and Ukraine is to have full access to the programme. Since April, Europeans are chairing the international Ukraine Defence Contact Group (aka Ramstein format), in which the US has scaled down its role. The group has been a positive example of a European takeover of leading roles in the now nine capability coalitions.
Space is another area to watch: Sweden recently signed a letter of intent on cooperation with Ukraine on space capabilities, such as satellite communications. Germany is already significantly supporting Ukraine in the same area, as I have mentioned previously. The need for greater autonomy in space is one of the most urgent capability building areas for Europe, reflected in the new EU Space Act (which the European Commission promoted on Bluesky with the picture below). On the member state level, the Finnish Ministry of Defence has signed a letter of intent with the Finnish satellite company Iceye to procure SAR satellites – a first step towards developing an independent Finnish satellite capability, which signals that even the smaller European states are investing in space capabilities. These moves on the European and national level are indicative of the rapidly eroding trust in future availability of US-provided strategic enablers.
Minna, great summary! Much of the details I did not know and this is helpful to understand, and heartening to read in many respects. However, the percentage spending I would view as something to mollify the orange infant in diapers and acts as a pacifier while Europe builds its own capabilities and leaves the US behind quietly. You are right to worry about wasted spending and duplication, but the moment is too serious to engage in such folly.
In the end, NATO as we have known it is dead. It will move forward as a European plus Canadian endeavor and hopefully over time under a completely different infrastructure from NATO.
Despite the US easing export controls on electronic design automation (EDA) and ethane, China continues to restrict their exports of rare earths and rare earth magnets.
https://swarajyamag.com/news-brief/chinese-freeze-on-rare-earth-magnet-talks-pushes-indian-automakers-towards-costlier-alternatives-report
This is a bottleneck worth watching. As you know, no rare earths, no missile defenses.