An army of $ 5 billion a year. How is Romania faring on the Eastern Flank, facing Russia

• The Army’s budget is increasing year after year, constantly exceeding the $ 5 billion threshold and 2% of GDP agreed with NATO. The Ministry of National Defense receives more than the Ministry of Health or Transport.
• After Poland, Romania has the second largest military force on NATO’s Eastern Flank, the most exposed to a possible Russian aggression. But large does not mean well-equipped. The Army’s equipment is mostly Soviet and outdated.
• With their back secured by the great forces of NATO, the 9 Eastern Flank Allies represent only a fraction of Russia’s forces. That’s why this question arises time and time again: why do we still invest in the Army? It’s an equation whose meaning is becoming more difficult to explain to generations living in peace for decades, although a few hundred kilometers from home Russia is illegally annexing territories and amassing forces.
• The answer to that question may have become clearer since February the 24^th 2022, when Vladimir Putin ordered the invasion of Ukraine, having amassed over 150.000 troops at the country’s borders. With a real war at the border, Romania’s armed forces have the support of NATO’s allies: the US sent a new battle vehicles squadron, made of 1.000 troops and Stryker armored vehicles, while NATO is preparing a new battle group, lead by France in Romania.

Every year, about 1,000 lei are collected from each Romanian for the Army budget, if we were to humanize the statistics. It may seem like a lot, but only two of the nine states that form NATO’s Eastern Flank, the one facing Russia, (the so-called Bucharest 9 group – Estonia, Latvia, Lithuania, Poland, the Czech Republic, Slovakia, Hungary, Romania and Bulgaria) spend less than Romania on defense, relative to population size. For example, an American contributes to the defense budget an annual amount almost 10 times higher compared to a Romanian (over 2,000 dollars, compared to about 250).

In the last decade, Romania and Poland have constantly tried to keep the Eastern Flank at the forefront of NATO concerns, respectively the „border” with Russia’s near abroad. Officialized as part of the Bucharest 9 group, this concern for the Eastern region has a double meaning: NATO is expected to focus attention and resources here, but the states in the region are also expected to invest in the development and modernization of their own national defense.

NATO and US concern over the Eastern region was reinforced once again at the meeting in Bucharest, on May 10^th 2021, where US President Joe Biden and NATO Chief Jens Stoltenberg attented. In 2022, the US sent additional troops in Romania, as a countermeasure for the newest Russian war in Ukraine. NATO has announced it will do the same, in order to increase the military deterrence posture in the Black Sea. On the other side of the story, concerning the attachment of the Eastern Flank states to invest in their own armies, things have always been more nuanced.

The defense budget has grown steadily in recent years, especially after 2014, when NATO allies decided at the Wales summit to make efforts to allocate at least 2% of GDP to the military forces and at least 20% of the money allocated to be used for purchasing military equipment. In real money, the Romanian state’s expenditures with the Army have doubled from 2016 to 2020, exceeding 22 billion lei (over 5 billion dollars) in the 2021 draft budget.

Although the Ministry of National Defense has rarely managed to spend all the money allocated (budget execution reached 2% of GDP only in 2019, for the first time), in the last 5 years Romania has managed to invest between 20 and 35% of this money in the acquisition of modern combat equipment, always above the 20% target agreed with NATO for the percentage of the budget dedicated to investments in weapons. However, much of the Defense’s money was spent on military salaries and pensions.

Despite these increased investments, the status of the Romanian Army is far from satisfactory for modern military needs. Even if Romania is the second largest military force on the Eastern Flank, at a considerable distance from Poland, the large number of active soldiers (almost 70,000) or tanks (400) does not translate into real and modern combat capabilities. You can compare NATO’s Eastern Flank states military forces to those of Russia, in the interactive story bellow:

„The inventory is mainly composed of Soviet-era equipment, which is seen as a factor limiting capability”. It’s the description of the Romanian Army made by the International Institute for Strategic Studies (IISS), a British think-tank that produces each year the best reports on the balance of military forces around the world.

The modernization of the Romanian Army has really started only 5-6 years ago, after NATO pressure, when the state started pumping serious money in this domain. „At the time of 2014-2015, the army was so weak and underfunded that any new procurement program was a step forward”, says military analyst Claudiu Degeratu, who knows the army well from the inside after working on the defense and planning policies of the Ministry of National Defense, but also at the Romania’s mission to NATO.

Now, despite the decrepit and “sovietized” state of military equipment, the Romanian army has entered the right path, says US General (r) Ben Hodges, former commander of US troops in Europe, who is familiar with the strategic military environment in the Black Sea region. „Focusing on modernization and training is exactly the right priority. I see improvements in the Romanian Armed Forces in an effort to support realistic training and provide the military with the best equipment”, said the American general in a Panorama interview. He also appreciated the modernization of military bases at Mihail Kogălniceanu and Câmpia Turzii.

However, the big problem is that even with that money in its pockets, the Army is still running slowly. The equipment modernization plans put on paper around 2015 „have a 4-5 years delay”, says Claudiu Degeratu. „They were made for a 10-year plan. We didn’t keep it up”.

Army shopping: between „bling-bling” Patriot or HIMARS and basic needs

Where is the Army money going when they are spent on modernizing combat equipment? For several years, there have been a few major strategic procurement programs, undertaken by Romania at the highest level, in the Supreme Council of National Defense (CSAT).

Looking from outside at this procurement picture, the main expenditures stick out like a sore thumb: the ones that cost a lot and which, although they cover basic needs of the military forces, could be compared to having a few Lamborghinis in a yard full of Trabant and Dacia cars. They shine, but they do not pull up the whole fleet with them.

• Second-hand F-16 multirole fighter aircrafts, purchased from the Portuguese Air Force, remain the most important military modernization program and, in fact, the only one fulfilled so far. Romania has paid, since 2013, 628 million euros for 12 modernized F-16 aircrafts, plus equipment, logistics and training for pilots and technicians. The aircrafts came to Romania in 2016-2017, but even so, the Air Force did not have a full squadron of fighter jets. This was remedied by a new acquisition of 5 second-hand F-16 aircrafts, also from Portugal, for 280 million euros. At the end of 2021, the Army announced that it will buy another 32 second-hand modernized F-16 aircrafts from Norway. The cost of the aircrafts, plus the modernization, would exceed 450 million euros.
• Patriot surface-to-air missile defense systems were purchased directly from the US Government, as part of the most expensive Romanian military procurement contract, worth $ 3.9 billion. The Romanian army has so far received, in 2020, only the first of the 7 US systems ordered from Raytheon. The others will come in the period of 2024-2026. On NATO’s Eastern Flank, only Romania and Poland have this high-performance missile system.
• 3 HIMARS multiple surface-to-surface rocket launcher systems, also purchased directly by the US Government from Lockheed Martin Company, and the acquisition price paid by Romania was of 1.5 billion euros. The first system arrived in Romania in February 2021.

Otherwise, the big priority Army endowment programs do not fit with the schedule, and this costs us a lot of money, says Claudiu Degeratu: „There are half-failed programs, half-delayed, and some are hard to be launched. We struggle with frigates and corvettes, with trucks, with Piranha carriers that have a gap of almost 2 years, on communications, probably on air defense. Any gap leads to additional expenses, the budgetary impact is greater than the one expected at launch”.

• the Naval Forces endowment contract with 4 corvettes, which comes with the modernization of its two frigates, was unlocked in 2019, when it was awarded after a long political struggle, to the French company Naval Group, which will produce them in Constanța, in partnership with Constanța Shipyard (Șantierul Naval Constanța). However, the 1.2 billion euros contract came to a standstill once more. It’s blocked in judiciary court by various remnants of appeals, filed by the Dutch company Damen, to which the contract was initially awarded, by direct entrustment, during the mandate of Dacian Cioloș – a procedure cancelled by the PSD government. The ships will be ready between 3 and 7 years after the signing of the contract, which can take place only after the settlement of disputes in court. Even at the beginning of 2022, the contract has not yet been signed.
• Piranha V armored personnel carriers, for land forces, have started to be delivered since 2020, but the contract has a cumulative delay of more than one year. The contract for 227 8×8 APCs is worth about 900 million euros and was awarded in 2018 to the American company General Dynamics, which owns the Swiss company Mowag, the manufacturer of Piranha vehicles.
• Anti-ship missile systems are another strategic program for the endowment of the Army, which is blocked and has not even started. The systems will arrive in Romania in 2024. After reaching an agreement of almost 140 million euros with the largest European missile manufacturer, the French MBDA, the Army changed its mind in 2020 and cancelled the procurement procedure, promoting in exchange a government-to-government agreement with the US for Raytheon’s NSM missiles, a company which also delivers the Patriot systems in Romania. In April 2021, the government agreement with the Americans was signed for four anti-ship missile system, worth about 340 million dollars.
• SHORAD-VSHORAD integrated air defense systems (short-range and very-short range missiles) are another priority program for the Army, which has not started yet. The 27 wanted systems were initially estimated at 2.1 billion euros, excluding VAT, but due to delays, the Defense asked Parliament in 2020 to approve the evaluation of the program at 2.7 billion euros. It is unknown at this time if this contract will be a Government-to-government contract or an open tender.
• the modernization of 20 IAR-99 training aircrafts, in order to be used for the training of future F-16 pilots or for interventions on low-speed aerial targets, was budgeted by the Army, in 2020, for about 100 million euros, excluding VAT. A first part of the contract, worth 27 million euros, started late in December 2020, through a partnership between Avioane Craiova and the Israelis from Elbit Systems.

The Army also started buying light, armored and not armored cars, and trucks for land forces.

Other Army strategic endowment programs that have not been launched, although they have been planned for many years, include the acquisition of C4 ISTAR integrated command and control systems, the modernization of MLI-84 infantry fighting vehicles, the purchase of a minesweeper for Naval Forces and helicopters for the Air Forces. The plan includes the purchase of unmanned aircraft systems and portable anti-aircraft missile systems.

Mindset on the Eastern Flank: no matter how big you are, size doesn’t matter to Russia

Despite the many acquisitions of equipment and weapons, comparing NATO’s military balance on the Eastern Flank to Russia’s balance may be shocking at first glance: by the numbers, all the military forces of the 9 allied states are far from a challenge for Russian forces. Russia has at least three times as many active soldiers as all the countries on the Eastern Flank combined, and in terms of armaments the balance looks highly uneven: Russia has three times more ground equipment and four times as many ships and aircrafts as all 9 Eastern Flank NATO allies.

However, the calculations on the gross balance of forces make sense up to a point. Strategies and geopolitics come into play.

„National forces are small everywhere on the Eastern Flank, except for Poland and Romania, because they are small countries. The forces deployed by NATO are also in a small number, more symbolic. The American presence is modest, about 5,000 American soldiers in the North Flank, about 5,000 in our area, but they have a deterrent mission. In a negative scenario, if Russia attacks, British, American, Canadian soldiers will also be attacked”, explains Claudiu Degeratu why the size of the forces does not necessarily matter, but mostly their strategic implications. (numbers were accurate for 2021)

In order to implement this strategy of discouraging Russia, which became a priority after Crimea was illegally taken from Ukraine in 2014, NATO has been working for years to strengthen its forces on the Eastern Flank. Not necessarily by their numerical increase, but by creating rapid intervention forces, by the permanent rotation of military contingents of the great powers of NATO on the territories of the Eastern allies and by joint military exercises and trainings that take place all year around in this region. In this way, the great powers of NATO are here even though not entirely here, otherwise they would be perceived as a direct challenge and threat to Russia. Even if, on the other side, Russia has systematically amassed strategic troops and equipment in Crimea and attacked Ukraine.

„After 2016, NATO decided to strengthen the deterrent force on this Eastern Flank and to ensure a flexible response, meaning rapid reaction forces that could quickly be deployed to the area. But that means in the first 48 hours of an aggression, you have to manage on your own. There is the other option, let’s do it like in West Germany before 1989 – many troops stationed at the border”, explains Claudiu Degeratu.

The problem seen by some military professionals and claimed by Romania a few years ago is that NATO has divided the Eastern Flank in two, with a separate approach for each region: on the one hand the Baltic countries and Poland, on the north, and on the other hand – the southern part from Hungary and the Black Sea area, with Romania and Bulgaria.

The northern part of the Eastern Flank, with its center of gravity in Poland, has been prioritized immediately after the Russian invasion of Ukraine in 2014, because NATO considered it the most vulnerable to a possible Russian attack. For this region, NATO has thought of an enhanced forward presence, with an increased presence of contingents and strategic armaments of major allies.

The southern region, at the Black Sea, with its center of gravity in Romania, was approached differently, with a tailored forward presence. This meant fewer troops and armaments from the US, Britain or Germany amassed in the region and more joint military exercises to ensure a non-permanent but constant presence of allied troops in the area.

This differentiated approach, which persists even today, is a strategic mistake that Moscow could exploit, according to US General Ben Hodges. „I believe that ensuring coherence throughout NATO’s Eastern Flank is essential for an effective deterrence. It would remove the gaps and cracks that the Kremlin could exploit. There should be a single NATO forward presence, instead of a multi-level one – a ‘consolidated forward presence’ in the Baltic region and an ‘adapted forward presence’ in the extended Black Sea region. Coherence across the entire Eastern Flank would improve the entire area of SACEUR‘s operations (NATO‘s Supreme Allied Commander Europe), in terms of mission command, logistics, integrated anti-aircraft/ballistic defense and military mobility”, says the General for Panorama.

Why do we still invest money in the Army? A dilemma for a generation with the illusion of stability

With so many powerful allies around, more and more often, and not only in Romania, a question arises: why invest so much money in the army and its expensive armaments, when this money could very well go to other fields? What do citizens receive in return for this money? In Romania, for example, ministries that manage Health and Transport do not have a budget like Defense, which receives almost as much as Education. After Russia invaded Ukraine in February 2022, the answer to this question has become obvious to most people.

A simplistic and not entirely fair answer would be that being a part of a military alliance such as NATO obliges a state to respect certain standards and fulfilling them costs money. But if membership in a club of countries such as the European Union can be roughly translated into money – for every Euro paid by Romania to the common budget of the EU, the Romanian state and its citizens receive three, when it comes to a military alliance such as NATO, the positive balance is not as easily visible.

So what does a Romanian get back in exchange for the money the state is spending on the Army? U.S. General Ben Hodges has an answer by the book: „A strong defense provides an environment that allows citizens to have access to education, to raise their families, to do business, to cultivate the land, and so on. Without a safe and secure environment, no other priority in life would be possible”.

Claudiu Degeratu proposes an imagination exercise: „If you live in a neighborhood and your street is quiet, but every night there are gunshots in the neighborhood, no one will come to invest in your neighborhood, no one will buy your house if you want to sell it. The more unstable the region is, the closer you are to risks and threats, the more you need to show your defense and stability. Welfare is also linked to ensuring the security of the citizen. Any investor is asking – is there enough capacity to ensure security?”

The analyst recalls a fact that many seem to ignore: 500 kilometers from Romania and from NATO’s last fronteer, Russia has launched a territorial war in Ukraine, and in 2014 annexed a territory, the Crimean Peninsula, creating a new base to show its power in the region, from the Black Sea to the Mediterranean, by bringing massive troops to the bases there, in addition to the traditional home of the Black Sea Fleet, from Sevastopol.

In 2022, half a year after this story was originally published, the facts have become even harder to ignore. Russia has invaded Ukraine on a full scale, using most of its armed troops that had been mobilized at Ukraine’s borders.

The preventive need for the existence of modern and fight-ready armed forces is all the more difficult to explain to generations for whom the armed conflict is something out of the history books. Reality can change anytime as Vladimir Putin keeps demonstrating in the last decades.

„There is this illusion that if your salary increases, you have a house, you have a car, everything is stable, you no longer need people in uniform to defend you. The Romanians have been in this stage for about 70 years, so more than two generations, when they have not had military contact, since World War II. Now, the aggressions are diffuse, hybrid, informational, they don’t affect your physical safety and you do not see death on the street. It’s a problem of perception, the perception of a society that for two generations has not experienced war on the national territory”, says Claudiu Degeratu.

The Offset, the winning lottery ticket for military acquisitions that Romania forgot to play

Another positive aspect of expensive military acquisitions for the lives of regular citizens could be the offset packages of military contracts. Companies where the Romanian state buys expensive military equipment could be conditioned to buy Romanian military goods and services of companies in the defense industry or at least, as it happens most often in Romania, to manufacture components or even entire equipments in Romania, thus creating jobs and income for the defense industry.

In theory it seems easy, in practice it is not easy at all. Even if Romania has a law that regulates the offset and which requires that in the contracts for the procurement of military equipment there should be a 80% offset component of the contract value. Paradoxically, Government-to-government contracts are exempt from this rule, so that usually the largest military acquisitions (F-16, Patriot, HIMARS) do not contain any offset clause.

Therefore, many times in Romania, in the absence of offset, the purchase of expensive and sophisticated military equipment seems like buying a luxury car: it looks gorgeous, but does not produce anything and leaves a big hole in the budget.

The major problem, says the analyst Claudiu Degeratu, is that Romania is stuck in the pre-1989 logic, when the Romanian defense industry really mattered and produced goods, and finally had a market to sell it. „All the Romanian architecture for offset insurance, respectively the compensation for the national industry, is a failure that comes from an outdated conception based on the 20-25 years old idea that our defense industry exists and works and is good. No, our defense industry is in ruins. It cannot provide compensation contracts for an economic agent who wants to develop a contract with the Romanian state”.

The analyst has the example of an expensive contract, which involves high technology. The foreign company that sells it cannot manufacture it in Romania, because it lacks the necessary advanced technology, and in return it cannot even buy from the Romanian companies „bullets, grenades and some Soviet-style machine guns”, because these unsophisticated goods would simply not cover an offset value high enough to be worth it. Thus, the Romanian state does not recover its investment.

Romania manages, here and there, to get offset in some military contracts, but it is far from being effective in this field. As of October 2020, the offset amount from the military contract amounts to only 195 million euros.

The Piranha V armored personnel carrier contract has a so-called offset component, meaning that being manufactured in Romania, at Uzina Mecanică București, some money return to the Romanian industry. The contract for military trucks with Iveco is to be carried out the same way: after the 300th truck will be delivered by the Italians, the others will be manufactured in Romania. Also, the 4 corvettes produced by Naval Group should be built at Constanța Shipyard (Șantierul Naval Constanța). The great risk of this style of work, however, is that the production of more sophisticated technologies in Romania also involves a skilled workforce, such as capable production lines, things that often do not exist in Romania and to create them would lead to long delays.

For the time being, Romania spends a lot of money without investing. Military acquisitions are not always transformed into investments that return a tangible profit from new military equipment, in addition to the strategic and political advantage created by an Army that tries to be modern and capable of NATO standards.