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Norway Bucks Trend as Neighbors Curb Spending

Oct. 24, 2012 - 09:13AM   |  
By GERARD O'DWYER   |   Comments
Sailors aboard the Norwegian diesel electric submarine Utvaer prepare mooring lines as the submarine arrives at Naval Station Norfolk, Va., for a training exercise.
Sailors aboard the Norwegian diesel electric submarine Utvaer prepare mooring lines as the submarine arrives at Naval Station Norfolk, Va., for a training exercise. (MC2 Rafael Martie / U.S. Navy)
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Helsinki — Military structural reforms and tighter budgets are driving long-term spending patterns and procurement strategies among the Nordic countries.

Norway, which will increase core defense spending to $7.3 billion in 2013, is the standout Nordic nation in terms of its capacity to fund ambitious projects. Sweden, Finland and Denmark are facing leaner military budgets and government-propelled cost-reduction programs.

The post-2008 financial and economic crises in Europe have also affected the Nordic states. All but Norway have been forced to cut spending in key areas such as health, welfare and education to bolster public finances.

Budgetary prudence has fallen heavily on defense spending. Finland's core defense budget will fall from $3.23 billion to $3.07 billion in 2013, while in Sweden, spending will effectively remain static, at $6 billion. Denmark's spending on defense will fall from $4.01 billion in 2012 to $3.98 billion in 2013.

While Norway's military focus is fixed on implementing major defense programs, such as the F-35 Joint Strike Fighter acquisition, armed forces in neighboring Finland, Sweden and Denmark face contracting budgets and the challenge of doing more with less.

Finnish defense could reach a critical point if government spending fails to increase after 2015, said military chief Gen. Ari Puheloinen.

“It will not be feasible to maintain our current defense system if budgets do not rise after 2015. This is about materiel. The cost of acquiring weapon systems continues to rise as we prepare for key acquisitions for our Navy and Air Force. Decisions will have to be made at the end of the decade and in the 2020s,” Puheloinen said.

Big-ticket future expenditures in Finland include the modernization of the Army's armored personnel carriers and the acquisition of new littoral ships for the Navy and Coast Guard. Procurement will account for 28 percent of the defense budget in 2013.

In such a tight fiscal environment, the future of the Finnish Air Force's Boeing F-18C and D Hornet multirole fighters is unclear. Two midlife upgrades (MLUs) are intended to keep the fighters in service up to 2028. The bill for the completed MLU-1 and ongoing MLU-2 projects, including missiles, will run to $2.12 billion, half of what the 64 Hornets cost when purchased in the 1990s. The MLU-2 project, covering 62 aircraft, is set to end in 2016.

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The $800 million ongoing revamp of Finland's air-defense system, including long-range radars, is the biggest capital expenditure. The Kongsberg/Raytheon NASAMS II will replace the SA-11 BUK (NATO: Gadfly) medium-range system acquired from Russia in 1996. The cost to upgrade the long-range radars is 176 million euros ($227.7 million).

Norway's ambitious programs include materiel acquisitions of $6.9 billion in 2011-2014 and $9.45 billion in 2015-2019.

“Finland is very similar to Norway in population size, land and sea areas. Russia is a focal point in defense planning, and the militaries in both countries are being reorganized. The secret ingredient is oil. Norway has a $900 billion oil fund, and neither Finland nor any other Nordic nation has such an economic comfort cushion,” said Stefan Brecht, a Berlin-based political analyst.

Anne-Grete Strøm-Erichsen, Norway's defense minister, said the 2013 budget underlines the government's commitment to strengthening the country's defense credibility and capability.

“The budget ensures that our armed forces are equipped to meet future challenges. We have secured significant funding for the F-35 program for 2013 and will move forward with our plan to take delivery of the first aircraft in 2015,” Strøm-Erichsen said.

The 2011-2014 procurement budget includes increased capital expenditures, including $880 million targeted at the F-35 program, while land systems, logistics, naval systems and network defense will receive funding of $1.1 billion, $652 million, $1.53 billion and $1.1 billion, respectively.

Major expenses include final delivery of Fridtjof Nansen-class frigates and Skjold-class coastal corvettes to the Navy, along with ship-borne NH90 helicopters to frigates and the Coast Guard. Delivery of naval strike missiles to new frigates and corvettes also is planned, as are anti-submarine torpedoes. Funding is also in place to upgrade the Ula-class submarines and the Army's Archer artillery system and to procure light armored vehicles.

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The F-35 program will consume almost 60 percent, or $5.62 billion, of the materials procurement budget in 2015-2019, as the budget focus shifts from naval to land and air capabilities. In this period,

$864 million will be spent on land systems, $353 million on logistics, $988 million on network defense and $212 million on air systems.

Expenditures in 2015-2019 will add a range of armored wheeled vehicles to strengthen combat and reconnaissance capabilities, while the Army will take delivery of 24 Archer self-propelled artillery units from a $560 million project run jointly with Sweden.

Although Sweden's procurement budget for 2013 is set to rise by $45.4 million to $1.36 billion, any real value will be erased by the increased funding needs of the JAS Gripen E/F next-generation project. Sweden is to purchase 40 to 60 NG-Gripens as part of a preliminary co-financing partnership with Switzerland, which has ordered 22 units.

The acquisition of 15 UH-60M Black Hawk and 14 NH90 (Heli-14) helicopters and the procurement of next-generation submarines are among the big spending programs, along with the renewal of armored fighting vehicles.

Programs due to run in 2013 include the Army's UAV systems' acquisition project and the modernization of the Swedish Armed Forces' ground-to-air defense platform and mortar systems.

Denmark's expenditure on equipment has accounted for 25 percent, or $1 billion, of the annual defense budget spend since 2010. Capital investments since 2010 have focused on the acquisition of armored vehicles, frigates and UAV systems.

Future expenditure will cover the acquisition of armored combat vehicles and ship-borne helicopters. With the government expected to relaunch the fighter replacement program in 2014, the next five-year defense framework agreement, which will run from 2015 to 2019, may include the acquisition of 20 to 30 multirole fighters to replace aging F-16s.

Moreover, the Ministry of Defence is expected to decide by year-end regarding the helicopter type that will be used on the Navy's frigates from a short list that includes AgustaWestland's AW159 Wildcat and the Sikorsky MH-60R Seahawk.

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