WASHINGTON — When the Soviet Union fell, many of the former Warsaw Pact nations founded their new militaries on the back of leftover military equipment. And in the thaw of the Cold War, many of those same nations invested in Russian gear, often cheaper than its American equivalents.

But following Russia’s invasion of Ukrainian territory in 2014, those same countries found themselves scrambling to cut the cord with Russian military contractors and turn towards the West. But with limited defense budgets, that has proven easier said than done.

To address the issue, the U.S. State Department has, in the last year, quietly launched a new program known as the European Recapitalization Incentive Program (ERIP), a new tool developed with U.S. European Command to try and speed the process of getting allied nations off Russian gear. As envisioned, it targets Albania, Bosnia, Croatia, Greece, North Macedonia and Slovakia.

While still in its early stages, officials at State are feeling confident enough about the potential in ERIP that they expect to make a decision on expanding the program within the next few weeks, potentially opening up a new dollar stream for allied nations — one which could result in those nations buying high-end American defense goods.

“It makes sense,” said Douglas Barrie of the International Institute for Strategic Studies. “It ticks two boxes, removing Soviet-era equipment from NATO inventories and provides a win for U.S. industry."

The program serves two American priorities in one program. First, it helps getting six nations off Russian equipment, which is beneficial from a number of standpoints — cutting off a source of funding for Russia, helping interoperability with NATO allies, and increasing security by removing the need to have Russian military contractors on NATO bases in order to support that equipment.

But it also hits a key priority for the Trump administration: Increasing the sale of U.S. weapon systems abroad. While ERIP funding may be a one-time burst for these countries, it’s enough to get them going on a specific system. If they buy four American helicopters with ERIP funding, they are likely to keep buying that helicopter, not turn towards another supplier such as a European solution.

The first ERIP tranche sits at just over $190 million in reprogrammed FY 2017 funding. While the State Department declined to say what equipment is being considered, researchers at the International Institute for Strategic Studies in London shared with Defense News the likely candidates:

  • Albania - $30 million for helicopters. It is unclear exactly what Russian helicopters would be replaced in Albania, however.
  • Bosnia - $30.7 million for helicopters. Bosnia operates a series of Russian-made helicopters, including small fleets of both the Mi-8 Hip medium transport and Mi-8MTV Hip multi-role helicopters.
  • Croatia - $25 million for infantry fighting vehicles. Croatia operates around 100 BVP M-80 vehicles, which were made in Yugoslavia during the Cold War.
  • Greece - $25 million for infantry fighting vehicles. Greece has almost 400 BMP-1 Soviet-made vehicles.
  • North Macedonia - $30 million for infantry fighting vehicles. The newly renamed nation has a small fleet of Soviet-era BMP-2 vehicles.
  • Slovakia - $50 million for helicopters. Slovakia operates a fleet of 17 Russian made Mi-17 Hip H multi-role helicopters.

Core Principles

Critical to the concept of ERIP are three ideas: The first is that the funding is not an incremental plan over many years, but rather a targeted burst of cash that will get the partner nation to 20 percent of an initial operational capability with whatever they end up getting from the United States. That means the money will go towards multiple systems, complete with requisite training and maintenance capabilities, to ensure the systems can be operated in the real world.

Second is a pledge by the chosen country that they stay away from new Russian military equipment in the future, something most of the countries considered for ERIP have already said. However, those nations are not prohibited from buying items needed to maintain legacy Russian kit.

“We understand these partners have Russian legacy equipment and we’re not trying to cut them off at the knees on any of this,” a State Department official, speaking on condition of anonymity, told Defense News in April. “If you’ve got to buy a Russian spare part, we recognize that. Those capabilities are important and we’re not trying to diminish their capabilities.”

And finally there is a requirement that any nation that accepts money through ERIP will match that dollar figure with their own investments, roughly equal to whatever dollars Washington gives them – or as the State official put it, “We’re saying, we need you to put skin in the game.”

“It could be we buy two airframes, you buy two airframes. It could be you buy four airframes and we pay for the training or the upgrades or the secure comms,” the official said.

That requirement has meant a constant back-and-forth between defense embassy staff and the six nations, making sure the respective ministries understand what capabilities they should be looking at, and then defense officials going to their local governments to try and secure agreements to match the funding. It’s something the U.S. official acknowledged has been a work in progress, with only two of the six countries having officially submitted their letter of request.

“We’re changing that relationship a little bit, and we’re aware of that,” the official said. If the MoD cannot do this, they cannot make their own procurements, they cannot commit, then thank you very much, no hard feelings, but we will reprogram those funds to another country.”

However, the need for matching funds raises a red flag for both Barrie and Jim Townsend, a former deputy assistant secretary of defense for Europe now with the Center for a New American Security.

If those six nations have to borrow money to match for ERIP, it could create a spiral of debt for the poorer countries, or create a situation where a nation can’t borrow money needed for the future, Townsend warned. “Does that mean poorer nations, like Albania, are out and only the wealthy countries can take advantage? I think that would be a problem.”

Both analysts also warned that the upgrade programs need to align with the national priorities assigned to each country by NATO.

Future expansion

While the first round of ERIP still has to be finalized, officials aren’t waiting for the initial six countries to submit their letters of request and work out all the details before looking towards the future.

Sometime in late June or early July the department expects to make a decision on whether to do a second ERIP round, based on reprogrammed fiscal year 2019 dollars. If approved, officials will start identifying new projects at the end of the fiscal year.

That could include adding new countries into the mix. While the initial mix is heavy on NATO nations — Bosnia being the sole non-NATO ally on the list, if one counts North Macedonia, which is underway with the process of joining the alliance — the official said there isn’t necessarily a preference towards NATO countries.

Barrie identified Poland and Hungry as two nations that would make sense for a second wave of ERIP dollars, as well as another round for the Slovakia and the Czech Republic. And Townsend says the Baltic nations would be logical recipients, although Estonia, which doesn’t operate Soviet-era gear, doesn’t seem a great fit.

Latvia has expressed interest, per a source, but that comes with a caveat. The nation has already made a decision to procure Black Hawk helicopters to replace its small Mi-17 fleet by the middle of the next decade. Getting ERIP funding now could help speed that process up while freeing up money for Latvia to upgrade elsewhere, perhaps in ground vehicles, its next major planned procurement. However, whether State would be willing to use ERIP to support acquisition decisions that have already been made is unclear.

Notably, if the European projects works out, there are indications State could look to expand the program outside of Europe, perhaps as a way to blunt Chinese initiatives in Africa and Asia. But such decisions are down the road.

“I think it’s great and I hope that it continues and I hope the Congress knows this is a good use of taxpayer money, because it enables allies to do more,” Townsend said.

Aaron Mehta was deputy editor and senior Pentagon correspondent for Defense News, covering policy, strategy and acquisition at the highest levels of the Defense Department and its international partners.

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