By Anna M. Dowd and Stephen J. Flanagan
“We must be prepared to pay the price for peace, or assuredly we shall pay the price of war.” – President Truman, 1948
Echoing President Truman’s historic sentiment, current NATO leadership emphasizes a critical reality: preventing war demands investment. The ongoing conflict in Ukraine starkly illustrates this point. The immense human suffering and the staggering economic burden – Ukraine dedicating nearly a quarter of its GDP to defense, a stark contrast to European NATO allies’ spending – underscore the undeniable link between security and cost. This analysis, drawing on insights akin to a RAND ‘euro’ perspective, delves into the escalating costs of Euro-Atlantic security and the imperative for a strategic realignment in burden-sharing.
Failure by European nations to increase investment in deterring potential aggressors like Russia and China will inevitably lead to exponentially higher costs and risks for the entire alliance. Imagine a scenario where Russia achieves its objectives in Ukraine, solidifying its sphere of influence and deepening alliances with China and other adversarial actors. This outcome would foster persistent instability across the Euro-Atlantic region, imposing massive financial and strategic burdens on the United States and its European partners. The implications are severe: Russia potentially encircling NATO’s eastern flank while aligning with powers actively seeking to disrupt global order. This looming threat necessitates immediate and substantial reinforcement of defense capabilities and a fundamental reassessment of how the burden of maintaining security is shared within the alliance. Alarmingly, many European nations, with notable exceptions, appear to underestimate the profound and far-reaching costs associated with such a deteriorating security landscape.
The Rising Premium on Transatlantic Security in a Contested World
The increasingly global nature of geopolitical competition dramatically elevates the cost of Euro-Atlantic security across military, economic, and societal dimensions. A thorough understanding and quantification of these escalating costs are crucial. Furthermore, establishing a framework for equitable burden-sharing among allies is essential to guide necessary investments. These investments span military capabilities, critical infrastructure, societal resilience, and the very foundations of the alliance itself.
Russia’s aggressive expansionism, its calculated weaponization of energy resources as a political tool, and its sophisticated employment of gray zone tactics present substantial challenges to U.S. and broader Western interests that extend well beyond the European theater. These actions not only destabilize regional balances but also introduce significant strain into the global security architecture. Concurrently, China’s increasingly assertive posture in the Indo-Pacific region, coupled with its coercive economic measures targeting European nations, necessitates proactive strategies to mitigate dangerous dependencies on Chinese technology and essential raw materials. The deepening alignment between Russia, China, North Korea, and Iran, forming what some analysts term an “Axis of Upheaval,” represents a generational challenge. This evolving axis demands a robust, coordinated, and long-term response to effectively mitigate its potentially destabilizing global impacts.
Alt text: Stephen Flanagan, RAND analyst, expert on Euro-Atlantic security and defense strategy, contributing author on the rising costs of maintaining peace in Europe.
These converging global trends have placed an unprecedented premium on allied security, a level of urgency unseen since the height of the Cold War. The costs associated with effectively addressing these multifaceted challenges are not solely financial. They encompass significant political and strategic dimensions, demanding comprehensive assessments and proactive preparations to ensure long-term security and to prevent cascading instability across other vital regions worldwide.
Should Ukraine be absorbed into Russia’s sphere of influence, the ramifications for European stability would be profound and destabilizing. Such a shift would fundamentally alter the regional balance of power, significantly escalating tensions across the entire continent. A Russian success in Ukraine might embolden further aggressive actions, as Russia seeks to expand its influence over neighboring states, thereby destabilizing the broader global geopolitical order. Moreover, a strengthened “Axis of Upheaval,” emboldened by Russian gains, could have far-reaching consequences, potentially extending instability into the Middle East and the strategically critical Indo-Pacific region.
Historical analysis, while limited in scope, consistently demonstrates that collective security arrangements with allies and partners are the most efficient and cost-effective means of guaranteeing stability. A Congressional report from 1997 on NATO enlargement presciently highlighted that failing to expand NATO would lead to greater costs and increased risks to European stability, underscoring the fundamental cost-saving nature of alliances. Research from RAND itself has consistently shown that instability in any region can impose significant costs on the United States, including economic disruptions, increased migration flows, the rise of terrorism, and escalating crises that necessitate costly U.S. intervention. Collective action not only achieves substantial cost savings but also cultivates enduring strategic advantages in the face of adversaries and competitors. Recent findings from the Kiel Institute for the World Economy further illuminate this point, revealing that a Russian victory in Ukraine could impose massive costs on Germany alone. Increased German military spending and economic disruptions could reach levels up to twenty times greater than Germany’s current expenditure in support of Ukraine.
Germany would face the immediate necessity of drastically increasing its contributions to NATO and Baltic security, managing a potentially large influx of refugees, and mitigating severe trade and investment disruptions. Critically, the erosion of Western deterrence credibility, resulting from a perceived failure to support Ukraine, could lead to more frequent and geographically widespread global conflicts, causing further economic harm and severely stunting global economic growth. In January, a report from the American Enterprise Institute warned of the perilous and costly world that would emerge for the United States following a Russian victory in Ukraine. Such a scenario could necessitate an additional $808 billion in U.S. defense spending over just five years to counter the increased threat.
A comprehensive and in-depth study of these critical issues is now paramount. Policymakers, legislators, and the public alike must fully understand the trade-offs inherent in choosing collective action versus inaction when confronting aggression from shared adversaries. This understanding is essential for making informed decisions about investments in security and defense.
The End of Geopolitical Outsourcing: Europe Takes Responsibility
Europe, possessing an economy nine times larger than Russia’s, demonstrably has the economic capacity to implement a truly effective deterrence strategy. However, realizing this potential requires a fundamental and profound shift towards prioritizing investment in military strength and a robust defense industrial base capable of meeting current and future security and strategic objectives. European nations are increasingly recognizing the unsustainable nature of relying solely on the United States for their security. As Polish Prime Minister Donald Tusk stated, “Some claim that the future of Europe depends on the American elections, while it depends first and foremost on us… On condition Europe finally grows up and believes in its own strength,” signaling a clear understanding that “the era of geopolitical outsourcing is over.”
Poland, strategically located on NATO’s eastern flank, is at the very forefront of intensifying great-power competition. It serves as a critical buffer and a potential flashpoint in any large-scale conflict between Russia and NATO. Poland acutely understands the high stakes involved and the stark trade-offs between the costs of investing in robust security and the far greater costs of insecurity. In the event of a Russian victory in Ukraine, Russian forces positioned in Lviv, and Belarusian forces in Brest and Grodno, would effectively encircle Poland and Lithuania, dramatically increasing Poland’s vulnerability. While Poland’s security fundamentally rests on the collective strength of the NATO alliance, the bedrock of NATO’s Article 5 mutual defense guarantees, and extensive defense cooperation with the United States, Poland has proactively taken significant steps to bolster its own national defense capabilities. Poland has emerged as the NATO leader in military spending as a percentage of GDP, allocating 4.12 percent of its GDP to defense, with stated aspirations to reach an unprecedented 5 percent. National public discourse and a growing societal recognition of the true cost of insecurity have played a pivotal role in driving these critical decisions. Within the next five years, Poland may well surpass the United Kingdom and Germany in overall contributions to NATO’s force structure. Poland’s strategic resolve, rapid mobilization plans, ambitious military modernization programs, and steadily increasing combat readiness levels are positioning its armed forces among the best-equipped and trained within NATO for effectively countering potential Russian aggression. As a host nation to over 8,000 U.S. troops, Poland is also pioneering practical and innovative solutions to enhance deterrence while simultaneously minimizing the financial burden on the United States. Through the Poland Provided Logistic Support (PPLS) initiative, Poland actively manages maintenance and operational requirements for U.S. military equipment pre-positioned in Poland, significantly facilitating the strategic placement of Army Prepositioned Stocks. Furthermore, the Polish government has shouldered nearly all the substantial costs associated with building state-of-the-art facilities to host an American Armored Brigade Combat Team, amounting to approximately $3.6 billion. Poland has also agreed to assume a significant portion of the ongoing annual sustainment costs for these forces. This proactive approach highlights the substantial value of cost-sharing agreements with host nations, which can generate significant savings by reducing the overall financial burden on the United States.
However, Poland, alongside the Baltic States and Finland, remains an exception within NATO. These nations are setting record defense budgets in direct response to the escalating threat posed by Russia, prioritizing rapid equipment modernization and the acquisition of advanced new weapon systems. While a growing number of allies, now 23, are meeting the agreed defense spending targets, decades of systemic underinvestment in defense are proving difficult to overcome rapidly. In 2023, the Estonian Ministry of Defense estimated that the cumulative failure of NATO allies to meet defense spending commitments since 2014 has created a staggering total deficit exceeding $950 billion.
To address this massive shortfall, some nations are renewing emphasis on bilateral defense collaboration as a mechanism to enhance capabilities and share burdens more effectively. The recent Trinity House Agreement between the United Kingdom and Germany is a prime example, aiming for unprecedented levels of cooperation and integration between the UK and German Armed Forces. This agreement has the significant potential to drive broader European security efforts and capability development. Complementing the earlier UK-French Lancaster House Agreement of 2010 and the German-French Aachen Treaty of 2019, the Trinity House Agreement effectively revitalizes the “E3 Triangle” efforts to build a stronger and more capable European pillar within the NATO alliance. This renewed focus underscores a heightened awareness among key European NATO nations regarding the urgent necessity to assume greater responsibility for their own regional security and for the collective security of the alliance. Conversely, it also reflects a growing realization that even major European powers face significant challenges in independently sustaining the full spectrum of military capabilities necessary to effectively defend against multifaceted and evolving threats and to consistently fulfill all alliance commitments.
Reassessing Transatlantic Burden-Sharing for a New Era of Security Competition
Reprioritizing security across Europe necessitates a fundamental strategic reassessment of transatlantic burden-sharing between Europe and the United States. While the increasing number of NATO allies meeting defense investment targets signals a positive shift in political commitment, this alone does not guarantee significantly enhanced preparedness for effectively deterring Russia or addressing other evolving threats. The NATO Washington Summit Declaration explicitly emphasized that despite increased defense expenditure and the modernization of capabilities, “more is needed urgently to sustainably meet our commitments as NATO allies.” Reports leading up to the summit indicated that NATO requires between 35 and 50 additional brigades to fully implement its new defense plans designed to counter a potential large-scale Russian attack. The ongoing war in Ukraine has starkly revealed critical shortcomings in NATO’s existing capabilities. Alarmingly, current NATO air defenses are estimated to be only 5 percent of what is necessary to adequately protect the alliance’s vulnerable eastern flank. In addition, significant capability gaps persist across a range of critical areas, including long-range missiles, troop numbers, readily available ammunition stockpiles, robust logistical support networks, and secure digital communications systems essential for modern battlefield operations.
While NATO has agreed to a series of metrics and benchmarks over the past decade aimed at enhancing overall defense capabilities, the primary focus has predominantly been on the pledges to allocate 2 percent of GDP to defense spending and to dedicate 20 percent of defense budgets to the acquisition of new equipment and research and development. While these input-based metrics reflect national commitment levels, they are ultimately insufficient in isolation. The 2 percent GDP pledge, while important, is demonstrably inadequate to fully address the cumulative effect of long-standing allied underinvestment in defense and to effectively meet the evolving and increasingly complex threats emanating from Russia and its increasingly assertive partners. Allies will undoubtedly need to spend significantly more than the current targets. However, it is equally vital to sharpen the focus on concrete outputs and measurable readiness improvements. This shift in focus ensures that critical aspects of military preparedness, such as strategic resource allocation, the development of key capabilities, and seamless interoperability across allied forces, are not overshadowed by simple input metrics. Furthermore, broader considerations, including civil preparedness, societal resilience, and the capacity and responsiveness of the defense industrial base, must remain high priorities in any comprehensive assessment of burden-sharing and alliance readiness. A recalibrated approach to transatlantic burden-sharing should fully reflect a genuine and demonstrable commitment to tangibly increasing overall defense readiness, while simultaneously promoting a more balanced and equitable sharing of burdens and responsibilities across the alliance.
New NATO defense plans represent a major strategic overhaul of alliance defense posture, the most significant since the end of the Cold War. These plans provide a crucial framework for substantially enhancing readiness, deployability, integration, and interoperability across all allied forces, capabilities, assets, and critical infrastructure. However, these ambitious plans are still far from being “fully executable,” which is the essential prerequisite for achieving credible and sustainable deterrence. Given Russia’s faster-than-expected military reconstitution and its potential to achieve further increases in military lethality through deepening cooperation with key partners (China, Iran, North Korea, and Belarus), European allies face a rapidly closing window of opportunity to modernize their forces for potential high-intensity conflict scenarios. Yet, persistent and deeply concerning issues with aging equipment inventories, limited mobility, inadequate infrastructure, constrained defense production capacity, and insufficient resupply capabilities raise serious questions about the alliance’s ability to effectively execute these new defense plans in a timely manner. To truly optimize national contributions to collective defense, NATO must prioritize comprehensive and rigorous assessments of overall allied readiness, encompassing military, economic, and political dimensions.
The ongoing shift to a new NATO force model emphasizes standing readiness over previous cyclical force generation models. This fundamental change is designed to ensure that allied forces are consistently prepared to respond rapidly and effectively to evolving threats. This new approach can serve as a clear military requirements “shopping list” for individual nations, detailing how defense spending should be strategically allocated to address critical capability gaps. This, in turn, facilitates more effective coordination of defense investments across the alliance and optimizes overall burden-sharing outcomes.
Benchmarking burden-sharing also necessitates a thorough assessment of economic readiness, specifically understanding the long-term sustainability of national defense investments. A recent McKinsey analysis warned that continued high inflation could erode European defense budgets by a staggering $326 billion, effectively undermining projected increases and planned investments in new military equipment from 2022 to 2026. Record-high defense budgets, often driven by immediate security threats, may prove unsustainable without careful attention to long-term affordability, potentially leading to future cancellations or delays in critical weapons programs. For example, a UK National Audit Office report identified a massive $21.5 billion shortfall in the Ministry of Defense’s Equipment Plan directly attributable to inflation, representing the largest such deficit in over a decade. This starkly highlights the significant economic pressures currently affecting military capability delivery and the growing gap between stated defense budgets and actual strategic priorities. Persistently high inflation within the eurozone is effectively reducing the real purchasing power of EU defense budgets, significantly challenging ongoing efforts to overcome structural underfunding in defense. Germany’s much-publicized “Zeitenwende” initiative pledged nearly $106 billion for defense modernization, but even this substantial sum is likely insufficient to fully address the Bundeswehr’s estimated $426 billion in historic underfunding. Furthermore, Germany’s constitutionally enshrined “debt brake,” limiting overall public debt, raises serious concerns about the long-term fiscal feasibility of sustained increases in defense budgets.
Finally, a critical and often overlooked dimension of burden-sharing is understanding and rigorously evaluating political readiness. This includes assessing the political will and capacity to make national defense capabilities readily available for NATO or coalition operations when required. Gauging public and political support for providing security assistance to partner nations, such as Ukraine, and for actively participating in joint military missions directly influences a nation’s overall readiness to commit resources and accept potential risks. Carefully evaluating how nations prioritize resource allocation across competing commitments provides further crucial insights into true political readiness, including the willingness to reallocate existing funding or to increase overall funding levels specifically to meet evolving alliance needs and shared security objectives.
By comprehensively assessing these multifaceted factors – military, economic, and political readiness – NATO and its coalition partners can significantly improve their ability to anticipate and effectively plan for the reliable availability of national defense capabilities. This, in turn, ensures a more cohesive and demonstrably effective collective response to evolving collective security challenges, while simultaneously fostering stronger and more sustainable public support for defense spending and alliance commitments. To fundamentally reconceptualize transatlantic burden-sharing for this new era of security competition, the United States should initiate an in-depth and data-driven evaluation of the specific warfighting capabilities that are demonstrably needed from allies to effectively counter the multifaceted military threat posed by Russia. This process should involve a thorough stocktaking of all NATO allies’ existing military capabilities, their stated military modernization plans, and their projected defense spending trajectories. Crucially, this evaluation must also include a qualitative assessment of how allies realistically plan to utilize these capabilities, taking into full account existing political, economic, and societal constraints within each nation. Establishing a mechanism for the continuous tracking and objective assessment of NATO allies’ evolving capabilities is also an essential component of this recalibrated approach to burden-sharing.
Conclusions: A New Era of Shared Responsibility
A deeper and more widespread understanding of the fundamentally altered and significantly increased costs of security, and the potentially grave consequences of underinvestment, presents both the United States and Europe with a crucial opportunity. This opportunity lies in forging a new and more robust understanding of the “great accretion of strength” that enduring alliances can bring to bear in confronting determined adversaries in a protracted era of great power competition. This critical insight is essential for driving a strategic reassessment of transatlantic burden-sharing. This reassessment must comprehensively incorporate rigorous and objective assessments of allies’ military, economic, and political readiness to meaningfully contribute to shared common security objectives. While the era of unsustainable geopolitical over-reliance on the United States may be definitively over, the fundamental reality remains that Europe demonstrably needs the United States, and equally importantly, the United States needs a strong and capable Europe to effectively counter Russia and China and to collectively dismantle the evolving “Axis of Upheaval.” This mutual dependence is not merely a matter of shared values; it is deeply rooted in both parties’ fundamental self-interest and represents the most cost-effective pathway to long-term security and stability. Abandoning long-standing allies in this increasingly dangerous global environment would be exceedingly difficult, if not impossible, to reverse, dramatically raising costs and risks precisely when the United States inevitably finds itself in critical need of reliable and capable allies. As Winston Churchill wisely observed, “There is only one thing worse than fighting with allies, and that is fighting without them.”
The United States can no longer unilaterally rely solely on its own capabilities for effective deterrence and large-scale warfighting in the face of increasingly global and interconnected threats, particularly amidst constrained resources and competing priorities. Its ability to effectively project power and protect its global interests increasingly requires greater and more reliable reliance on allies’ enhanced readiness and willingness to proactively address shared threats and to effectively deter both Russia and China.
Allied security is now profoundly affected by geopolitical developments that extend far beyond the traditional NATO Treaty Area and the Euro-Atlantic region. This interconnectedness underscores the rising costs inextricably tied to both individual and collective security interests that now span far beyond Europe. Therefore, a strategic reassessment of transatlantic burden-sharing must also extend to establishing a robust and truly integrated cross-theater deterrence ecosystem encompassing both Europe and the strategically vital Indo-Pacific region. To achieve this, the United States must clearly and consistently articulate its expectations to European allies regarding their role and contributions in the Indo-Pacific. The U.S. should actively leverage Europeans’ increasing defense engagement with the region, encouraging greater contributions to regional security. While the United States has rightly emphasized the importance of political cooperation, resilience building, reducing dangerous dependencies on China for critical technologies and minerals, and ensuring maritime security in the Indo-Pacific, it must now significantly enhance collaboration with European allies across these and other critical areas. These include joint military procurement initiatives, the development and deployment of advanced technologies, enhanced cyber defense cooperation, and collaboration in the increasingly important domain of space-based capabilities. Intensifying political dialogue and high-level consultations with European allies specifically about the multifaceted China challenge is absolutely crucial. For European nations, failing to proactively address China as a significant and growing strategic challenge now will inevitably incur significantly higher financial, political, and strategic costs when China’s assertive behavior escalates into direct threats to European interests and global stability. This urgent reality demands a renewed and concerted effort on the part of the United States to demonstrably heighten awareness within the NATO alliance regarding the China challenge and to substantially bolster allied contributions to effectively deterring China, thereby proactively mitigating potentially catastrophic future financial, political, and strategic costs for the entire transatlantic community.
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Anna M. Dowd is a Senior International/Defense Researcher, and Stephen J. Flanagan is an Adjunct Senior Fellow at RAND, a nonprofit, nonpartisan research institution.
