Ambassador Lute on a Panel “The Cost of European Security” at the Carnegie Endowment for International Peace

Ms. Dempsey: Good evening everybody. Thank you very very much for your patience. It’s a great honor to be here. My name is Judy Dempsey. I don’t live in Brussels. Non-resident doesn’t mean that I don’t have a roof. I live in Berlin, but I’ve come over for this event and especially for my friend and boss Jan Techau; and my friend and colleague, Ambassador Douglas Lute, American Ambassador to NATO; and Malcolm Chalmers, who’s always incredibly helpful and critical and open-minded when I ask him any questions related to security and defense issues.

So it’s a very easy format. …Ambassador Lute, I’m very tempted to ask you if there really is a security vacuum in Europe, which is really what Jan’s argument is. How do you see this, just not the two percent issue, but this whole back and forth between Europe and the United States?

Ambassador Lute: The report is labeled the politics of two percent. The politics really for NATO culminated at the Wales Summit, which was almost precisely a year ago, so let me just unpack a little bit of the context of the decision taken by the 28 leaders and heads of state, to include President Obama on our part.

Why did they sign up for this pledge? What was it about Wales? Was it just persuasive diplomacy on behalf of the U.S. Mission to NATO? No. Some of my staff I think think that, but that’s not actually the case.

There were a series of factors that came together, that intersected at Wales, and I’ll tick them off for you here, that I think changed the conversation on two percent and really reflect back on Jan’s point about this being a political tool or a political factor.

First of all, at Wales the conversation was very much, and somewhat unexpectedly, somewhat surprisingly, very much shifted to what the leaders began to call the arc of instability. What they’re referring to, of course, is Putin in the east with Ukraine, and to the southeast ISIL. Just 30 days or so before the Wales Summit, ISIL seized the second largest city in Iraq, Mosul. And of course, all of this was taking place on the Syrian and Iraqi border with Turkey, a NATO ally, a 1500 kilometer border. So that was happening at Wales.

Then to the south across the Med, you saw what I consider a failed state in Libya and the beginning of a migrant flow out of Libya, using Libya as sort of the end of the funnel. But migrants were really coming from the Sahel, the Middle East, and even South Asia.

So all this came together and was on the leaders’ plate when they met in Wales.

If that weren’t enough, they were reminded that NATO had unfinished business. We’re still in Afghanistan, we’re still in Kosovo. Leaders were reminded that we had responsibilities and relationships with 40-some partners around the world that range from Morocco to Japan, and many nations in between. They were reminded that NATO had committed to new capabilities that were about to come on-line, and they were going to be expensive. Capabilities like the Alliance Ground Surveillance System, essentially the first high altitude, long endurance drone that NATO will own and operate in the coming years. And also the NATO ballistic missile defense system, which is also expensive. So new capabilities.

So when you add this up — arc of instability, unfinished business, partners, new capabilities — it became pretty clear that this wasn’t going to be cheap.

Meanwhile, the same 28 leaders had a financial portfolio that they brought with them to Wales. So it wasn’t just a security situation. They, of course, are the keepers of the checkbooks, ultimately, for their governments. And by 2014, all 28 allies were beginning to move out of the trough of the 2008 recession.

Now the recovery from 2008 is still to this day uneven, but this year for, I think, the first year since the recession, all 28 allies are showing some growth. Some of the growth is below one percent, some of it’s right on the margin, but for the first time, there’s pretty even evidence that we’ve turned the tide. Again, it’s very uneven. We can get into the specifics there. But the economic situation seemed to be turning.

Then finally, there was recognition of this persistent imbalance that Jan’s report refers to. And this, of course, is the comparison between two roughly equal GDPs. The GDP of the United States and the summed GDP of the other 27, which are roughly equal. And yet defense spending against these two roughly equal denominators has the United States spending 70 percent of the total and the others spending only 30 percent. So there was this sort of gap between commitment to the alliance, which is equally shared, and obligations and resources committed by way of funding, which from the United States perspective is out of balance. It’s a 70/30 out of balance.

So what did the leaders actually do? So they signed up, here’s what they signed up for. There were no proxies. They were all there. The lights were on. It was read very clearly and they signed up for the following: That all 28 agreed that they would reverse the decline in national defense budgets and move towards two percent of GDP for defense spending in the course of a decade. Nobody thought this was going to happen overnight, right?

And they further said that inside that two percent defense spending figure, they would commit 20 percent towards capital investment. So equipment investment. Not manpower, not operations and maintenance, but towards new equipment. So two percent and 20 percent. That’s essentially the pledge.

Now there are some common misperceptions about the pledge. In fact the report highlights, and Jan’s comments actually highlight, some of these misperceptions. First of all, that NATO is fixated, artificially, unrealistically on a too narrow bumper sticker number. Two percent. What is two percent? Jan said it’s neither realistic nor in some ways useful. And that actually a more sophisticated metric would be to focus on outputs. So not inputs, outputs. Not on quantities of inputs but on quality of outputs. And if NATO were a sophisticated organization, it would in fact do that. Well I’m here to report tonight that in fact we do.

So you can’t fit all of this on a bumper sticker, which maybe today reads two percent. But the reality is that NATO every year across all 28 allies assesses these two input measures, so two percent and 20 percent, alongside nine output measures. These are all qualitative measures of output. They involve air, land and sea forces and they involve the ability of that ally to deploy those forces and the ability of that ally to sustain those forces. So we do a very deliberate measurement every year of outputs.

Some say the two input measures are unrealistic or they’re missing the story. There are 11 metrics, not two. And nine of the 11 are focused on outputs.

Now these remain difficult because of the political narrative. The output measures remain classified, and you can imagine why. They’re not perfect. These metrics are not green across the board with all 28 allies meeting all nine output measures. And it’s not smart for a military alliance to demonstrate publicly and to have this conversation publicly about shortfalls in capabilities and so forth. But I will give you some insight to the classified reports.

First of all, no single ally among the 28 meets all nine output measures. So the United States of America is not green across the board on output measures. We all have work to do.

Very significantly, we’ve done some research, and it turns out there’s a correlated effect, empirically, between input measures and output measures. So what might seem sort of intuitive, that you’ve got to pay more to get more, actually proves out empirically. So it takes inputs to get outputs. For those who would say it’s unrealistic, it’s wrong, it’s sophomoric, actually there’s a correlated effect between inputs and outputs. Then finally, the pledge itself refers in passing to the output measures and the leaders committed to those as well.

There’s also some fine print or some overlooked portions of the pledge, elements of the pledge that I want to highlight to you.

First of all, it allows that the 28 economies are not going to grow uniformly. So the pledge actually includes the words “as economies grow, you move towards two percent.”

The second is, this is going to be a long term effort. The pledge is explicit: “in the course of a decade.” So here we are, one year after Wales, I’m going to give you the data here in a second, and it’s not uniformly positive. But again, this is a long term effort. You don’t turn around public spending on the order of magnitude that we’re talking about here in order to close the 70/30 gap in one or two budget cycles. It takes a prolonged effort, over a decade.

The other thing that’s somewhat overlooked is that this is the first time in NATO’s history that the two percent pledge, which has been around for a while — I mean this wasn’t invented at Wales, but it’s the first time in NATO history that it was taken by leaders.

When we went back and looked at this as we were working on the pledge in the run-up to Wales, we actually said, where did this come from? Who has made this pledge before? Is this really a meaningful thing to take to President Obama? Or is this just rhetoric?

It turns out, the record is that only Defense Ministers in the past had ever committed to two percent. Well, imagine how easy that was politically, right? You’ve got 28 Defense Ministers. They’re all agreeing that their budgets should be increased. It’s not that ambitious actually. They, of course, then went back to 28 capitals and they were undoubtedly met at the airport by the 28 Finance Ministers and subsequently, by the 28 leaders of government and heads of state. So I don’t think it was very ambitious of NATO over the years to get Defense Ministers to agree that their own budget should increase. Wales was different in that regard. This was leaders. This is leaders who have the whole fiscal portfolio of their governments at hand.

The last thing I’d like to just update you on is where are we now? We’re one year into a ten year process. Well, maybe we should do this every year for ten years, this session, so that we can update one another, right? But here’s where we are.

First of all, we’re starting from a low base line. I don’t refute Jan’s report. Today five allies make the two percent cut; seven make the 20 percent capital investment. So it’s five and seven today out of 28, which is not very encouraging.

However, in the course of the last year since the Wales pledge, here’s the data. Twenty-one of the 28 have halted or reversed the decline in defense spending towards the two percent goal. So 21 have halted or reversed the decline, which is all that’s required year by year. We won’t be able to judge the full impact of the pledge until year ten, at the end of the decade.

Beyond those 21, 24 have halted or reversed the decline in the 20 percent factor, the capital investment factor.

So look, largely we agree with the Carnegie report. We got it right. Two percent is largely a political tool. It highlights very importantly, though, the political obligations of burden sharing and collective defense. That’s not an obligation that’s 70 percent the Americans’ obligation. That’s an obligation that’s shared across all 28 allies.

It is useful on both sides of the Atlantic. In his outline of the political utility, I largely agree with that. It’s helpful for me to go back to Washington and have two percent in the pledge written out. I show it to every congressional delegation that comes through Washington. That’s good for me. That’s good news.

Finally, I think it’s useful for Europeans, and this goes to the question of the security vacuum. To assess whether they have sufficiently invested in their own collective defense. Let me just take you one short excursion to the Washington Treaty.

Article 3 in the Washington Treaty, not Article 5. Article 3 in the Washington Treaty obliges every member nation to take sufficient steps domestically, internally, individually, towards self-defense, and it obligates in Article 5 that an attack on one is an attack on all.

The Washington Treaty, though, is founded first on national obligations. Article 3 precedes Article 5 in the layout of the Treaty. So all 28 of us have national responsibilities, and I think given what’s going on around Europe today, given the disparity, 70/30, that it’s time and I think this is what the pledge does for European leaders. It’s time for European leaders to look at the ledger sheet and determine whether or not they are sufficiently committed to their own defense.

Ms. Dempsey: I just want to bring up this, I mean having read Jan’s report, I don’t think he was saying that America is going to pull away the security guarantee. My interpretation, that Europe itself was creating a security vacuum for their own security. I don’t think the U.S. would dare give up the security guarantee.

Ambassador Lute: Let me clarify this. This is not altruism. This is just national interests. We have made this commitment since 1949 yes, in the interest of Europe and a peaceful, stable Europe. But that is fundamentally an American interest. So the reason we should remain confident that there’s not going to be an ultimate vacuum is that it’s in America’s interest that they’re not be so.

Ms. Dempsey: But the trend going through the three arguments, although you may see it a little bit differently, Ambassador, the trend still is the fact that the Europeans, as Europeans, do not still have a common threat perception. Which actually affects how they see the budgets, affects how they work for themselves, let alone how they deal with the United States. I think this is a hugely debilitating aspect.

Jan touched on, I think we still are in the comfort zone. And what would push Europeans out of this comfort zone is if we should have been out of it a long time ago, ever since Georgia, in some ways, Russia’s invasion of Georgia. I don’t know what would push Europe to actually understand why they have to really boost the defense much more collectively together. This is what bothers me about this trend in Jan’s paper.

Jan, do you want to pick up on any of the comments?

Mr. Techau: I will say one or two things very briefly.

First of all, what Malcolm just said in the very end is I think very important and it relativates the entire party here tonight a little bit. The real threat of course to European security comes from within Europe. That has always been the case. That’s very clear. And this is why the political fallout from many of the internal crises is so worrisome.

We are a foreign policy think tank so we don’t primarily focus on the internal kind of integration issues that Europe has, but it’s deeply worrying because of course it has a direct impact on the ability of the Europeans to act as a foreign policy entity, both individually as nations and also, of course together, as Europeans both inside NATO and the EU.

There are a couple of things that I could comment on that were said. It is true, it was said that the spending patterns are roughly the same today as they were in the 1950s. Basically that seems to indicate that we’re in pretty good shape. That might be true in terms of the relative spending, when you compare them with each other. But it’s all at a considerably lower level than it was. Of course we don’t have the model threat of the Soviet Union any longer and that is a huge factor in all of this and that dictates threat perceptions, but my feeling is that we’re moving into territory that’s a lot more dangerous and with that comfort zone in place, you know, the fact that we’re all spending at the relatively same patterns doesn’t comfort me a great deal, I have to say.

Ambassador Lute: If I may, this is what was different at Wales. It was the combination of Crimea, Donbas, Mosul and migrants that maybe forced the leaders out of their comfort zone. That dynamic was different.

Ms. Dempsey: But you see, Ambassador, if you go on this argument you have to factor in Malcolm’s point, the [inaudible] security, yes, it’s outside, but it’s coming from within which complicates the issue, which the Americans must be very worried about.

Ambassador Lute: Fair enough, but that’s not fundamentally —

Ms. Dempsey: I know.

Ambassador Lute: That’s not a NATO issue from the inside as much as it is sort of an EU political national issue.

Ms. Dempsey: I think it is a NATO issue.

Ambassador Lute: If you’re taking this argument as far as questioning democratic principles and so forth, yes. That’s all part of the underpinning of the alliance. But I don’t know that we’re going that far, right? Was that your point?

Mr. Chalmers: It doesn’t affect NATO as an institution unless countries have a coup or —

Ambassador Lute: Nobody’s ever left NATO, so we don’t have to —

Mr. Techau: We have been very accommodating to non-liberal governments inside NATO during the Cold War. It was, it would probably be less so today, but under the threat of the Cold War it was perfectly fine to accommodate non-democratic governments inside NATO and we’ll probably be able to do the same thing again if we have to.

Mr. Chalmers: I wasn’t really addressing it as a NATO point, more as a national security or a collective security point. And I think for my country, for example, the security implications of the United Kingdom breaking up, as could have happened last year, or the UK voting to leave the European Union. You know, on one level what’s the implication for defense? But there will be implications for defense if either of those things happen. We can think of examples of that sort in most countries I think.

Ms. Dempsey: I think I shall open this up. I think the idea is to take three or four questions at a time. First of all identify yourselves. Secondly, one question per person, and please keep them very focused.

Audience: Thank you, I’ve been told sitting here that it was the seat of the one who has to ask the first question, so I just tried to fulfill my commitment. [Laughter].

My name is Frederick Murrow. I’m a former civil servant of the French Senate and I’m now a lawyer at the Bar of Paris and the Bar of Brussels.

It happens that I’ve worked for one of my clients this year on the Pesco. Pesco is a permanent structure corporation. And it took me a long time and I found out that it’s very similar, to the two percent metrics, the two percent politics in these periods. What we are talking about is to increase the percentage of spending of the people.

I will not question the realistic goal of the two percent quantity, although I want to raise the fact that it will take $87 billion for all the countries to meet [inaudible]. $26 billion for Germany; $16 billion for Italy.

But my question is about shouldn’t we alongside this quantitative goal focus more on quality of goals, not in terms of outputs which are classified, but I mean in capability of acting together. What is the point of spending more if we are launching now, right now, six different programs of frigates in the European countries? What is the point of saying that the UK is the first country in Europe spending if UK does not want to act and to go to Syria?

So instead of focusing on the muscles which are important, yes, money does matter. Shouldn’t we focus more on our political capability? Sorry to be long.

Ms. Dempsey: That was very focused.

Audience: Great discussion. I think it’s very stimulating that we managed to talk about a figure, a budget figure, and have some real political strategic points.

Sorry, [Fabris Potay] from NATO.

I just wanted to make two very quick comments and one question. Very quick comment. I totally agree with Ambassador Lute. I think there is no dilemma between input and output because I think the real equation is you’ve got to get both right. Because we know some countries are good on input but are not really there on output and vice versa. So I think it’s a non-debate.

I like very much Malcolm’s point but I slightly disagree that somehow the geometry of European military powers have not really changed. Yes, you still have the top two, France and the UK there. But I think for two reasons it’s changing. One is worrying, and one is a new trend.

The worrying is you see what we can call the middle class — So Italy, Spain, Netherlands are really, if you look at the 10-20 year trend they’re really what we say in French. That means they’re really falling below the line of being both good on output and good on input. This is a problem when you are an alliance of 28 allies because you don’t only need leaders. You also need other countries to make a real collective effort possible. So I think here there’s an issue that goes beyond the usual European leaders that is about how do we make sure that we’ve got the whole of a European effort.

The trend on the changing European geometry and military power, Malcolm, you only looked at Europe and military power through the prism of expeditionary operations. But what we know since last year is there is a new front line open which is what we call the Eastern Front and which is very much about collective defense. And when it comes to collective defense you do have new powers that matter very much. One is Germany. Politically, but also militarily. One that is growing is also Poland. So I think the geometry here is kind of expanding in a way. Typically you are right, that it was more expeditionary and crisis management. So I think we need to look at it as something more mobile and changing.

My question. I was also in the back stage of preparing the transatlantic declaration where we put the two percent and it was a very interesting development. The one thing where we were always stuck, but for obvious reason, is how do we enforce these magical numbers. This is an alliance of sovereign nations with sovereign budgets and with difficult finance ministers, and we don’t have, per se, enforcement mechanisms, as now I think the EU has developed some kind of enforcement mechanisms on European countries’ budgets.

So the question to Ambassador Lute and maybe the two other speakers, is where could we go in terms, in the next years in terms of exerting slightly more pressure than diplomatic pressure. It can be naming and shaming, but how far can we go? I think we are doing better inside the privacy of the rooms in showing the numbers and who is doing well and who is doing less well. But should we go further? Should we have some more regular reporting? And should we have more public reporting? Because if not, the risk is that, I get the point that communicating too openly about our strengths and vulnerabilities is a problem, but not communicating about them I think leads to speculation. Thank you.

Ms. Dempsey: That’s a very good point.

As you know, NATO, we’ve always had discussions about NATO’s communication skills.

Audience: Brook Singer, Defense. Straight to the question.

Wales, the Wales two percent pledge was binding on politically elected, temporarily politically elected governments and not their standing bureaucracies, so what is NATO going to do to organize, to keep up that pledge? Are you going to organize a pledge every two or three years and have new leaders sign onto that? And given that the allies are going to stretch out the achievement of that two percent as far as they can, we can safely assume it will be ten years. What implications does that have for the RAP and the timing and the achievement of the RAP?

Ms. Dempsey: That was very sly how you snuck in your second question. I have to keep my ears open.

Audience: Julian Barnes, Wall Street Journal.

On the issue of sovereignty versus pooled resources, is there a way to tweak how the VJTF, the spearhead force is put together, fielded, utilized to force more of a pooled resource issue there? Is there the beginning of a solution in that?

Ms. Dempsey: Great questions. I think we should start from the last one, the pooling, the pooled resources.

Ambassador Lute: First of all, there are some modest success stories in terms of pooling. Admittedly I say modest, but we are pooling for the Alliance Ground Surveillance, this UAV that involves 15 nations. We own and operate our own pooled AWACS fleet. So in the air, surveillance of the air. There are some modest efforts with regard to pooling airlift. But fundamentally, the pooling, the logic of the efficiency of pooling, bumps up against sovereignty and defense industry issues, so we’ve never gotten to the point where we’ve taken this hard decision to sacrifice some sovereignty for military efficiency.

As regards, this then intersects the question of could we use the VJTF perhaps as a vehicle to push more of this? I don’t think so, and the reason for that is the VJTF, the spearhead force, is organized around what we call framework nations, so lead nations on a three-year rotational basis. So fundamentally we’re relying on national forces to man and equip the VJTF and not pooled forces. So it would be quite difficult I think to find common capabilities that you could use non-stop across the VJTF spectrum. We had to do it at Wales and we’re now executing. So we didn’t have time to sort of craft a pooling solution. We had to go with what was on the shelf and what was on the shelf were national forces.

Ms. Dempsey: It’s touching on Mr. Murrow’s question also, about the capabilities working together as well. And it’s been such a mantra of NATO for such a long time.

Ambassador Lute: Of course we call this interoperability. Right? At least the operational integration of forces is interoperability. But I took your question to do more with industry and procurement and so forth.

Audience: [Inaudible].

Ambassador Lute: But policies towards acquisition or policies towards operational policymaking.

Audience: Operational.

Ambassador Lute: We’re quite integrated. That’s what I do something like 12 hours a day. From the outset the members have committed to an integrated military command structure, so this is Phil Breedlove just down the road in Mons and so forth. But also a standing political structure, which is the North Atlantic Council. I could get, I hope I don’t, but I could get a call before the end of this session, the Council is convening to take up a political issue. All of us live here in Brussels. If we’re away we’re required to have a deputy. We’re on recall. So it’s quite integrated. I mean integrated to the extent that I spend more time with these folks than I do my family.

Mr. Techau: In a way there are two levels — interoperability and integration. Integration is the more far-reaching kind of thing which is what I think you’re alluding to and [inaudible] is an instrument in the EU to foster that integration. That’s not going to come any time soon. There are some rumors that the Germans all of a sudden want to make this part of the British negotiation. I’m not sure that’s actually going to fly. That’s for afterwards when we have alcohol.

Two things that [Fabris] said. First of all, the dilemma on input and output, and I agree with what Ambassador Lute said, that of course there is a correlation between spending and outcomes. That’s quite clear. That’s almost like a commonplace. If you don’t spend anything there’s also no outcome. But it’s interesting how greatly that varies inside NATO. I mean you have countries that have a relatively healthy ratio and then you have countries that have a totally unhealthy ratio. Our host country, Belgium, is one of those that has an unbelievably unhealthy ratio where the level of spending that goes into non-outputs is just not sustainable at all, but they have sustained it for a long long time. They’re not going to change it any time soon.

So yes, there is this correlation. Does that buy us a lot more? No. It means that two percent is not meaningless but it also means that two percent is certainly not enough in terms of the argument that you want to make.

Secondly, on how to enforce two percent. That’s a tricky question. In the end, you of course can’t enforce because it’s a non-binding commitment. That means that you can only do soft stuff to enforce it. But perhaps you can, and that’s a communications issue more than anything else. Use parts of these nine criteria to the extent that you can use it. Most of it is classified but you can perhaps find some poetry that uses it without breaching the confidentiality.

Shameless naming and shaming. That’s a problem for NATO itself, obviously because the member states run NATO and they don’t want to be named and shamed by you guys, but there are ways to play it perhaps. I think naming and shaming is probably the best thing to do.

Ambassador Lute: Just at the Defense Minister’s meeting, just last June, for the first time, you probably helped behind the scenes on this, right? We actually displayed, so 28 Defense Ministers, the Secretary General, the session is live, and we passed out a chart that had across the top 11 measures, and across the flank, 28 countries. It was red and green. It was quite stark. Getting NATO to be only that transparent was a multi-month effort, just to produce the chart and get it in front —

Audience: And I think we removed one of the two colors.

Ambassador Lute: So we’re in the early days of internal accountability and transparency. But also, under-appreciated in the pledge, the leaders agreed to check this and show and tell at every future summit.

Ms. Dempsey: But that’s all internal. It’s taken us 60 years to reach this. A year ago we were sitting here discussing why NATO matters, and we were struggling to reach out to the public. We’re getting into the whole problem of this two percent — You barely name and shame among yourselves. What about reaching out to the public to say this is what’s the issue of NATO. This is about the security of the transatlantic alliance. This is about protecting our security. The public knows nothing about it.

Mr. Techau: On Fabris, and the Wall Street Journals in the room, documents can be leaked. I’m just saying that. [Laughter].

Ambassador Lute: That would never happen in our government. [Laughter].

Mr. Chalmers: Let me just come back on some points.

In the UK debate, the two percent mattered. It did give those arguing for an increment to the defense budget some extra power to their [output]. But I think the reason it mattered in the UK is because we were so close to the two percent, so it was a realistic thing to do in terms of our national budget. I think the further countries are below it, the more important it is to have other indicators which they can realistically, in terms of their own domestic politics, without increasing the budget by 40 percent or something, and that’s where some of these confidential indicators come in.

But it’s also other things in terms of contributing to various missions and so on. And there are some countries which are at 1.3, 1.4 percent who are punching above their weight in Iraq and did so in relation to Libya and others who did not. So those are important indicators. We shouldn’t only be focusing on spending.

Some of the questions about pooling, and I think sometimes those questions are more relevant for those countries which don’t have any possibility of having an independent capability without pooling. So it tends to be the smaller you are the more important that is.

But one of the reasons why the UK, and I think France, maybe Germany, spend a bit more on defense is because political leaders know that they have an instrument which they can use, and they don’t have to go to NATO to do it, they don’t have to get 20 other countries to agree to it. It’s something they can actually use independently. I realize that’s difficult, but we do it in the lines of independent democratic countries with separate defense budgets, accountable to our national taxpayers. Therefore, you have to get a big benefit from pooling and sharing.

On procurement, I think the UK experience historically of collective procurement projects, collaborative procurement projects in Europe is pretty mixed in terms of cost savings. Because of all the different military requirements and all the different defense industrial interests come in and actually it would be cheaper and produce better weapon systems if you bought something off the shelf or perhaps something much more straightforward, and that’s why we’ve ended up going for F-35 rather than another European combat aircraft, the next aircraft generation. [Fabris’] points are really excellent in terms of the geometry and how you think about them.

I think one of the questions I have is that in this period when the main focus has been expeditionary warfare after the end of the Cold War, I would say that the German position in that pecking order has fallen, and maybe also some of the other European countries you were talking about. Because Russia and collective defense has become less important. Now it’s become more important. It’s not the only game in town but it’s become more important. It will be very interesting to see whether the role of Germany and maybe the Netherlands, maybe some others, moves up that pecking order a bit more compared with what it has been for the last 20 years.

And my impression, but others probably know more. My impression is that defense is being taken more seriously in Germany than it has been for some time, precisely because deterrence of Russia is something which the Germans feel more comfortable with than they did with involvement in traditional British areas like Iraq and Afghanistan which, after all, were part of our imperial sphere of influence in the past. Maybe not. Maybe that won’t be the change.  But of course one of the results of this all coming down is that the countries near the bottom of that lead table, even if their relativities haven’t changed so much in aggregate terms, do end up in more and more areas being unable to generate a credible national capability. And of course because they’re national forces, they’re very reluctant to specialize, because specialization is always something you want other people to do but it’s very difficult for any of us to reduce the spectrum of our capabilities because it means relying more on others who may not be there in a day.

Ambassador Lute: One thing that underpins both the report but also the conversation this evening is this question of shared threat perception. Just a data point: if you look at the defense spending decisions since, over the last year, the closer you live to Russia, the more clear-cut you have in most cases legislated your path to two percent. So for the Eastern Flank allies it’s more than a Wales pledge among leaders who can arguably change office and so forth. For them, if you take the Balts, for example, they’re on a legislative path to get to two percent. Poland’s already there. Estonia’s already there. Romania is making big strides. So it’s interesting. Geography here still counts, right? And they have a shared threat perception and one that is quite up close and personal because it wasn’t that long ago that they lived this threat.

Ms. Dempsey: Absolutely. Whereas Britain would see more ISIS as a threat in a very different way, and the French would have their own —

Ambassador Lute: Migration, ISIS —

Mr. Chalmers: — more money for defense in the UK. Cameron made a speech saying what he really wanted more capability for was drones, ISR and counter-terrorism.

Ms. Dempsey: We have room for a very short round of questions, and I hope we can deal with them very quickly.

Audience: David Fukey. I’m with the European Institute for Asian Studies at the moment, so I might have some views on the rebalancing to Asia. But more relevant, I covered NATO as a journalist since the ‘60s when I kept hearing pledge year after year, about flexible response that we never met. We never adopted the capabilities.

I’m wondering now whether again, there’s a need for a flexible response and a look at priorities. Asymmetric or hybrid warfare was mentioned. I wonder whether that requires the same kind of big ticket capabilities that we have had in the past such as BMD, ballistic missile defense, which if I remember correctly was targeted against Iran. Iranian capability. Is that still a factor?

Ms. Dempsey: That’s very important. Thank you.

Audience: Just on two percent — [Savraj Walski] former [inaudible] of Poland, former Chairman of Foreign Affairs Committee in NATO [inaudible], author of the defense policy position paper of the [inaudible] in parliament.

Congratulations on focusing on two percent. That’s to Mr. Techau. Endless discussion we can have on security. But there is very [inaudible], and I have to say that I distributed your paper at the Bureau meeting of our fraction on defense position paper. With some hesitation. I didn’t like the parts of your paper where you put into doubt the sense of using it. As a politician I’ll tell you yes, it’s a great sense; second, as a politician I’ll tell you don’t trust politicians, rather trust systemic solutions.

We as Europe, we are free-riding on the U.S., and the U.S. and southern Europe, you are free-riding on Central Eastern Europe in terms of expenditure. It’s contrary to the solidarity principle. I have a question to a German whether the new explosion of solidarity in Germany will lead us somewhere closer to that.

My question is as follows. Whether neutralizing defense expenditure on the excessive deficit procedures of the European Union, not only EMU but on the [inaudible] of the EU. In a sense as it was done with the Juncker Investment Plan, which means there are counted into deficit but not punished by the Commission. A proposal which I have put into the paper and which I have lost the vote by 16-11, which is not that bad. My question is, whether this systemic solution when there’s some hope of more common perception of threats coming would not be a solution which would not necessitate to have every three years new generation of leaders to meet, but to create a systemic solution that every expenditure after two percent commitment would be excluded from punishment by the rules of the union, fiscal rules. Then we would have probably the input as it should be and good input guarantees good output. Thank you.

Ms. Dempsey: It sounds like breaking the stability pact, being sanctioned or fined. Who would like to pick up this point?

Ambassador Lute: I don’t have one on the EU internal dynamics but I do want to come back on missile defense.

You’re right, the ballistic missile defense that’s in operation today and maturing over the next couple of years, NATO-owned and operated, is focused on Iran. It’s important to remember that the deal which has been signed dealt with the nuclear warheads atop ballistic missiles, but only those warheads. So not conventional warheads, not chemical warheads, and not the missiles themselves.

So while arguably if implemented according to the standards the nuclear threat will be reduced, the purpose of the agreement itself, it doesn’t reduce the threat of Iranian missiles. So NATO is proceeding on program with its BMD.

Ms. Dempsey: Thank you for that clarification.

Mr. Chalmers: You’re absolutely right to focus on response to asymmetric threats because I think that’s very important in the Middle East but it’s also I think important in relation to Russia, and missile defense I think is part of that where we’re facing greater missile threats including in the Middle East and elsewhere, so that’s something that’s important.

I think also important is investment in intelligence and surveillance, really critically important in terms of what we’re doing in different parts of the world. And actually some independent national capability in that regard is important for some European countries also, in order to have political influence.

Special Forces, really important, play a really important role. And also I think development of cyber capabilities including defensive cyber capability is really important in terms of some of the forms of threats we’re facing going forward. Of course we have to have deterrence of a force on force scenario with Russia, but precisely because NATO has very considerable conventional capabilities. Russia is more likely to do things which try and get under the threshold where we’re likely to get involved in largescale conventional warfare. Deterrence is most effective if you can match an opponent at each level and therefore escalation is credible.

Ambassador Lute: But these asymmetric tools below conventional are the most difficult because they’re designed to be ambiguous, sometimes non-attributable. And they’re designed also to play against the boundaries of where military force and police forces and border guards and so forth, where all those boundaries lay inside our governments. So this is a real challenge for NATO because we have part of that responsibility, but part of that responsibility falls on the nation itself, the first line of defense. And a big part of the responsibility falls on the EU as well. So you have a triangle between national, NATO and EU responsibilities and we’re only just defining how that should work. It’s a big challenge.

Ms. Dempsey: It’s really important.

Mr. Techau: I think it’s absolutely right what Mr. [Fukey] said that pledges historically don’t make much of a difference and therefore, I tried to be very cautious with the two percent overall. It makes a lot of sense when it comes in combination with a real threat perception. We have that partially in NATO, which is why it partially works, but we don’t have it across NATO, which is why it doesn’t work across the board in NATO. In a simplified way I think that’s the truth of the matter and we can have 100 more pledges, and if there’s not a real credible threat then that’s not going to lead us very far.

On Germany. Malcolm earlier said it’s interesting how another territorial defense Article 5 stuff is kind of en vogue again. The Germans all of a sudden are more there. And I think that’s absolutely crucial to understand if you want to understand German defense policies and its position in NATO. The Germans find expeditionary warfare very, very unpalatable, for a number of reasons. They always teeth-grindingly do it, but they don’t really want to do it and it’s always a hard sell domestically.

That’s not the case when it comes to Article 5, and you could see this after Ukraine when the Germans were actually surprisingly forthcoming in the reassurance immediately after it turned hot. A lot of people in this town were very surprised about the Germans actually coming forward relatively solidly and quickly and meaningfully also. Not only framework nation, but also in terms of meaningful contributions.

So I think in that sense with this new outburst of solidarity in Germany, will that lead us anywhere on Article 5?   many years, which has made me a lot of friends in Berlin. But I think on that Article 5 commitment Germany is rock solid. I wouldn’t doubt that for one second. Whether it’s always capable to deliver what is desirable is another question. But in terms of its determination to live up to its Article 5 commitment, I think nobody should really doubt the steadfastness of Germany and that’s pretty much a political consensus in Germany, apart from some loonies on the fringes.

But on expeditionary warfare, that remains the big story to be seen. That for me is the litmus test as to whether Germany can become more than just a player in a very confined, integrated European context, or whether Germany can also step up to become a guarantor of a more kind of global stability framework that essentially is what’s at stake and whether Germans feel very difficult, and for me that remains the big question in Germany. But in terms of will Germany defend Poland if that needs to — Absolutely, it will.

Ms. Dempsey: Jan, thank you.

We’re going to wrap up the session. Before we do, I just want to say a big thanks to Jan for the paper and a big thanks to Ambassador Lute for coming here and giving a very special view and reassuring us. It’s very important.

Ambassador Lute: I hope you got that, but I’m not sure how you did. [Laughter].

Ms. Dempsey: It’s very complicated, this security vacuum at the moment, the whole idea of it.

And Malcolm, thank you for going through the whole mechanics of Britain.

Thank you very, very much for coming and we invite you to the hamburgers and wine and hot dogs. [Laughter].

Thank you very much.