NATO Members Comprise 13 of 20 Fastest Declining Defence Budgets between 2012 and 2014 Reports IHS Jane’s

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Russian defence budget doubled between 2008 and 2014, will surpass German and French defence spending combined by 2016; NATO approaching critical inflection point

Monday, September 1, 2014 1:00 am EDT

"Russian spending plans pre-date the Ukraine crisis. This is not a knee-jerk reaction"

LONDON, UK (1 September, 2014) – Of the world’s top 20 declining defence budgets between 2012 and 2014, the majority were NATO members, according to research from IHS Inc. (NYSE: IHS), the leading global source of critical information and insight.

“While the budgetary challenges facing Western defence ministries have long been apparent, it is still striking to see that 13 out of the 20 fastest declining defence budgets between 2012 and 2014 were NATO members,” said Fenella McGerty, senior defence budget analyst at IHS Jane’s.

“Over the last two years, alliance spending has fallen by $93 billion (USD),” McGerty added.

Stark contrast to NATO members, Russian Budget to be Double France’s by 2016

In contrast to NATO members, Russian defence spending has been expanding at a rapid pace for several years. In 2011, it stood at $57 billion (USD). In 2012, it overtook the UK and became the third highest spender on defence globally. This year, the budget increased to $78 billion (USD), and by 2016, it is forecast to reach $98 billion (USD) in real terms, a figure that will be greater than German and French spending combined. 

“Russia is undertaking a decade-long modernization drive that aims to modernize 70 percent of its equipment inventory by 2020,” said Craig Caffrey, senior defence budgets analyst at IHS Jane’s.

“Since 2011, Russia’s defence budget growth has averaged 18 percent a year in nominal terms and the government has plans to increase it by a further 36 percent by 2016,” he said.

Not knee jerk reaction to Ukraine crisis

While it may seem that Moscow’s increased focus on military spending is in reaction to developments in Ukraine, the drive is part of longer-term modernization effort.

“Russian spending plans pre-date the Ukraine crisis. This is not a knee-jerk reaction,” Caffrey said.

“Spending plans haven’t been revised at all since the start of the crisis. This is a long-term government policy and a political priority for Moscow.”

NATO retains spending primacy

While NATO spending has fallen by around 10 percent since 2012, the alliance still spends around $900 billion (USD) on defence annually compared with the $78 billion (USD) spent by Russia.

“Despite the contrasting budgetary trends, NATO continues to outspend Russia by a factor of 10,” Caffrey said.

“NATO’s European members alone spend around four times more on defence than Russia.”

The Next NATO

Events in Eastern Europe have injected a sense of urgency and intensity.

“NATO's Cardiff summit is rapidly approaching and so, too, is a critical inflection point in the life of the trans-Atlantic alliance,” said Tate Nurkin, managing director of IHS Jane’s.

“For the third time in the last 25 years – after the Cold War and after 9/11 – the strategic context facing NATO has shifted,” Nurkin added. “From Kyiv to Kirkuk to Kabul and beyond, long-held assumptions buttressing Western-led global security frameworks are being tested and exposed in stark and destabilizing ways. In order to stay relevant in today's anxious age, NATO will have to re-evaluate its mission, role, structure, capabilities and membership of its allies.”

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IHS (NYSE: IHS) is the leading source of information, insight and analytics in critical areas that shape today’s business landscape. Businesses and governments in more than 165 countries around the globe rely on the comprehensive content, expert independent analysis and flexible delivery methods of IHS to make high-impact decisions and develop strategies with speed and confidence. IHS has been in business since 1959 and became a publicly traded company on the New York Stock Exchange in 2005. Headquartered in Englewood, Colorado, USA, IHS is committed to sustainable, profitable growth and employs more than 8,000 people in 31 countries around the world.

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