In his 1948 Special Message to Congress on the Threat to the Freedom of Europe, President Truman said: “We must be prepared to pay the price for peace, or assuredly we shall pay the price of war.” Echoing this sentiment, NATO Secretary General Mark Rutte, in his inaugural speech, emphasized that to prevent war, NATO must spend more. The devastating human toll of the war in Ukraine, compounded by its staggering economic burden—with Ukraine dedicating nearly a quarter of its GDP to defense next year, over ten times the spending of European NATO allies—underscores the undeniable truth that security comes at a cost.
If Europeans fail to invest more now to deter Russia and China, the alliance will face far greater expenses and risks. A Russian victory resulting in Ukraine staying within its sphere of influence, coupled with strengthened ties to China and other adversaries, would create enduring insecurity in the Euro-Atlantic region, imposing colossal costs on the United States and its allies. The grave implications—Russia encircling NATO’s eastern flank and aligning with destabilizing powers—highlight the urgent need to bolster defense and call for a strategic reassessment of burden-sharing. The problem is that Europeans, with few exceptions, fail to grasp the immense costs such a scenario would inflict on allied security.
The global nature of the deepening geopolitical confrontation has profound implications for the cost of Euro-Atlantic security in military, economic, and societal terms. Understanding and quantifying these rising costs—and determining how allies can equitably share them—are essential for guiding necessary investments in military capabilities, infrastructure, societal resilience, and the alliance itself.
Russia’s adversarial expansionism, weaponization of energy dependencies, and gray zone tactics pose significant threats to U.S. and Western interests beyond European theater. These actions not only challenge regional stability but also strain global security dynamics. Meanwhile, China’s assertive behavior in the Indo-Pacific and coercive measures toward European countries necessitate efforts to reduce supply chain dependencies on Chinese technology and raw materials. Additionally, the growing alignment between Russia, China, North Korea, and Iran and the emergence of the Axis of Upheaval has become a “generational challenge” that demands a strong and coordinated response to mitigate long-term impacts.
These developments place an unprecedented premium on allied security not seen since the Cold War. The costs associated with these challenges are not only financial but also political and strategic, requiring comprehensive assessments and preparations to ensure enduring security and prevent ripple effects that could further destabilize other critical regions.
If Ukraine were to fall into Russia’s orbit, it would lead to significant instability in Europe, alter the regional balance of power, and heighten tensions across the continent. Such a shift might embolden Russia to further assert its influence over neighboring countries, destabilizing the broader geopolitical landscape. Additionally, it might strengthen the Axis of Upheaval resulting in far-reaching consequences, potentially affecting the Middle East and the Indo-Pacific.
Past research, though limited, underscores that the most efficient and cost-effective way to guarantee stability is to do so collectively with allies and partners. A 1997 Congressional report on NATO enlargement highlighted that not expanding NATO would incur greater costs and risks to European stability, emphasizing that alliances save money. RAND research underscores that instability anywhere can impose significant costs on the United States, including economic disruption, migration, terrorism, and escalating crises demanding U.S. intervention. Collective action not only achieves cost savings but also builds enduring strategic advantages against adversaries and competitors. Recent insights (PDF) from the Kiel Institute for the World Economy reveal that a Russian victory could impose substantial costs on Germany, with increased military spending and economic disruptions potentially reaching up to 20 times the current expenditure on supporting Ukraine.
Germany would need to significantly increase its contributions to NATO and Baltic security, manage a potential influx of refugees, and address trade and investment disruptions. Moreover, the erosion of Western deterrence could lead to more frequent global conflicts, causing further economic harm and stunting growth. In January, an American Enterprise Institute report (PDF) warned that a Russian victory would create a more perilous and costly world for the United States, potentially requiring an additional $808 billion in defense spending over five years.
A comprehensive study of this issue will be crucial—for policymakers, legislators, and ordinary citizens—to understand the trade-offs of collective action versus inaction to meet the demands of deterring and defeating aggression by common adversaries.
The End of the Era of Geopolitical Outsourcing
With an economy nine times the size of Russia’s, Europe has the capacity to implement an effective deterrence strategy. However, this requires a profound shift towards investing in military strength and defense industrial base to achieve security and strategic goals. European nations are increasingly recognizing that their security cannot rely solely on the United States. As Poland’s Prime Minister Donald Tusk stated on November 2, “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 that “the era of geopolitical outsourcing is over.”
Centrally located on NATO’s eastern flank, Poland is at the forefront of heightened great-power competition and serves as a pivotal backdrop for potential crises and large-scale conflicts between Russia and NATO. Poland clearly grasps the stakes and the trade-offs between the costs of security: In the event of a Russian victory in Ukraine, Russian forces, with divisions in Lviv, and Belarusian Brest and Grodno, would effectively surround Poland and Lithuania. While Poland’s security relies on the collective strength of the alliance, NATO’s Article 5 guarantees, and extensive defense cooperation with the United States, it has proactively bolstered its own defense capabilities. Poland has emerged as the highest military spender in NATO by GDP share, allocating 4.12 percent of its GDP to defense, with aspirations to reach 5 percent. National discussions and the growing recognition of the cost of security versus the cost of insecurity played a critical role in these decisions. Within the next five years, it may well surpass the United Kingdom and Germany in contributions to NATO’s force structure, with its strategic resolve, rapid mobilization plans, ambitious modernization programs, and increasing combat readiness levels positioning its Armed Forces among the best-equipped and trained in NATO for countering Russia. As a host to over 8,000 U.S. troops, Poland is also pioneering practical and innovative solutions to enhance deterrence while minimizing U.S. financial involvement. Through the Poland Provided Logistic Support (PPLS) initiative, Poland manages maintenance and operational requirements for U.S. equipment, facilitating the strategic placement of Army Prepositioned Stocks. The Polish government has also shouldered nearly all costs for building facilities to host an American Armored Brigade Combat Team, amounting to about $3.6 billion. Additionally, Poland has agreed to handle much of the annual sustainment costs. This highlights the value of cost-sharing agreements with the host nation, which significantly saves money by reducing the financial burden on the United States.
However, Poland, along with the Baltic States and Finland, stands as an exception by setting record defense budgets in response to the escalating threat from Russia, focusing on equipment modernization and new weapon systems. Despite 23 allies (PDF) now fulfilling their defense spending targets, decades of underinvestment are difficult to overcome. In 2023, the Estonian Ministry of Defense estimated (PDF) that the failure to meet commitments since 2014 has created a total deficit exceeding $950 billion.
To address this, some nations are renewing emphasis on bilateral defense collaboration. The recent Trinity House Agreement between the United Kingdom and Germany aims at unprecedented cooperation and integration between the UK and German Armed Forces and has the potential to drive broader European security efforts. Complementing the 2010 UK-French Lancaster House Agreement and the 2019 German-French Aachen Treaty, it revitalizes the “E3 Triangle” efforts to build a stronger European pillar within NATO. This underscores a heightened awareness among European NATO nations of the necessity to assume greater responsibility for regional security. On the other hand, it reflects a growing realization that European powers face challenges in independently sustaining the military capabilities necessary to defend against multifaceted threats and fulfill alliance commitments.
What Does It All Mean for Transatlantic Burden-Sharing?
Reprioritizing security in Europe demands a strategic reassessment of transatlantic burden-sharing between Europe and the United States. While meeting defense investment targets by more NATO allies signals political commitment, it does not guarantee enhanced preparedness for deterring Russia or addressing other threats. The Washington Summit Declaration emphasized that despite increased defense expenditure and modern capabilities, “more is needed urgently to sustainably meet our commitments as NATO allies.” Ahead of the summit, reports indicated that NATO will need between 35 and 50 additional brigades to fully realize its new plans to defend against a potential Russian attack. The war in Ukraine has revealed staggering shortcomings in NATO’s capabilities, with only 5 percent of the air defenses necessary to adequately protect its eastern flank. In addition, there are significant gaps in long-range missiles, troop numbers, ammunition, logistical support, and secure digital communications on the battlefield.
While NATO has agreed to several metrics and benchmarks to enhance defense capabilities over the past decade, most of the focus has been on the pledges to allocate 2 percent GDP to defense spending and 20 percent of defense budgets to new equipment and research and development. While reflective of national commitment, they are only measures of input. The 2 percent pledge is certainly insufficient to address long-standing allied underinvestment in defense and to meet evolving threats from Russia and its partners. Allies will need to spend significantly more. However, it is also vital to sharpen the focus on outputs. This ensures that critical aspects of military preparedness, such as strategic resource allocation, key capabilities, and interoperability, are not overshadowed. Additionally, broader considerations like civil preparedness, resilience, and the capacity of the defense industrial base should remain a priority. A recalibrated approach to burden-sharing should reflect a full commitment to increasing defense readiness, while promoting a balanced sharing of burdens and responsibilities.
New NATO defense plans represent a major overhaul since the Cold War and provide a framework for enhancing readiness, deployability, integration, and interoperability across all forces, capabilities, assets, and infrastructure. However, these plans are still far from being “fully executable,” which is crucial for sustainable deterrence. Given Russia’s faster-than-expected reconstitution and potential to achieve increased lethality through cooperation with its key partners (China, Iran, North Korea, and Belarus), European allies face a narrow window to modernize for high-intensity conflict. Yet, ongoing issues with aging equipment, limited mobility, inadequate infrastructure, constrained production capacity, and insufficient resupply raise serious concerns. To optimize national contributions to collective defense, NATO must prioritize comprehensive assessments of allied readiness, encompassing military, economic, and political dimensions.
The shift to a new force model emphasizes standing readiness over cyclical force generation, to ensure that forces are consistently prepared to respond to threats. This approach can act as a military requirements shopping list for nations, detailing how defense spending should be allocated, facilitating more effective coordination of investments and optimizing burden-sharing.
Benchmarking burden-sharing also requires assessing economic readiness by understanding the sustainability of national defense investments. A McKinsey analysis warned that continued inflation could erode European defense budgets by $326 billion, undermining projected increases and investments in new equipment from 2022 to 2026. Record-high defense budgets driven by security threats may falter without attention to affordability, leading to potential cancellations or delays in weapons programs. For example, the UK National Audit Office report (PDF) identified a $21.5 billion shortfall in the Ministry of Defense’s Equipment Plan due to inflation, the largest deficit in a decade. This highlights economic pressures affecting military capability delivery and the gap between budgets and strategic priorities. High inflation in the eurozone is reducing the purchasing power of EU defense budgets, challenging efforts to overcome structural underfunding. Germany’s “Zeitenwende” initiative pledged nearly $106 billion for defense, but this is insufficient to address the Bundeswehr’s estimated $426 billion historic underfunding. The “debt brake” limiting public debt raises concerns about the fiscal feasibility of increasing defense budgets.
Finally, understanding and evaluating political readiness to make national defense capabilities available for NATO or coalition operations is critical for optimizing burden-sharing and fostering public support. Gauging public and political support for providing assistance to partner nations such as Ukraine, and participating in joint missions influences a nation’s readiness to commit resources. Evaluating how nations prioritize resource allocation for commitments provides further insights, including readiness to reallocate or increase funding to meet alliance needs.
By comprehensively assessing these factors, NATO and coalition partners can better anticipate and plan for the availability of national defense capabilities, ensuring a cohesive and effective response to collective security challenges while enhancing public support. To reconceptualize burden-sharing, the United States should begin with an in-depth evaluation of allied warfighting capabilities needed to counter Russia’s military threat. This involves stocktaking of NATO allies’ existing capabilities, modernization plans, and projected defense spending. Additionally, a qualitative assessment of how allies plan to use these capabilities, considering political, economic, and social constraints, is essential. Continuous tracking of NATO allies’ capabilities must also be established.
Conclusions
A deeper grasp of fundamentally altered costs of security and their grave consequences would provide the United States and Europe with an opportunity to reach a new understanding of the “great accretion of strength” that alliances can bring to a confrontation of power. This insight is essential for a strategic reassessment of burden-sharing that must incorporate assessments of allies’ military, economic, and political readiness to meaningfully contribute to common security objectives. While the era of geopolitical over-reliance may be well over, the reality remains that Europe needs the United States, and the United States needs Europe to beat Russia and China and break the Axis of Upheaval. This mutual dependence is both in their self-interest and cost-effective. Abandoning allies would be exceedingly difficult to reverse, dramatically raising costs when the United States finds itself in need of its allies. As Churchill wisely noted: “There is only one thing worse than fighting with allies, and that is fighting without them.”
The United States can no longer rely solely on its own capabilities for deterrence and warfighting amid global, interconnected threats and constrained resources. Its ability to project power requires greater reliance on allies’ readiness to address threats and deter Russia and China.
Allied security is deeply affected by developments beyond the NATO Treaty Area and Euro-Atlantic region, highlighting the costs tied to individual and collective interests that extend beyond Europe. A strategic reassessment of transatlantic burden-sharing is also essential to establish a robust cross-theater deterrence ecosystem for Europe and the Indo-Pacific. To achieve this, the United States must clearly articulate its expectations to European allies regarding the Indo-Pacific and leverage their increasing defense engagement with the region. While the United States has stressed in the past political cooperation, resilience building, reducing reliance on China for critical technologies and minerals, and maritime security, it must now enhance collaboration with Europeans in these and other areas including military procurement, advanced technologies, cyber, and space. Intensifying political dialogue and consultations with allies about the China threat is crucial. For Europeans, failing to address China as a challenge now will incur significant costs when it escalates to a threat. This demands a renewed, concerted effort from the United States to heighten awareness within the alliance and bolster ally contributions to deterring China, thereby mitigating future financial, political, and strategic costs.
– Anna M. Dowd and Stephen J. Flanagan (Anna M. Dowd is senior international/defense researcher and Stephen J. Flanagan is an adjunct senior fellow at RAND, a nonprofit, nonpartisan research institution.)
