The Norwegian government's decision to add an additional $230 million to its defense budget for 2017 will secure spending in the Norwegian Defense Forces's (NDF) Long Term Defense Plan while critically protecting the military's modernization and procurement programs.
The increase will lift the level of Norway's overall defense budget in 2017 to more than $6 billion. Of this amount, procurement will account for $1.5 billion while infrastructure will consume $370 million.
The defense-spending hike has been problematic for Prime Minister Erna Solberg, whose center-right minority coalition government is politically fragile and under pressure.
Opposition leaders have criticized Solberg for resorting to using record levels of capital, held in the state's sovereign wealth vehicle, the Government Pension Fund (GPF), to both meet deficit targets in the 2017 national budget and stimulate growth in Norway's oil revenue-dependent economy.
However, cross-party support for the defense budget increase was energized by a number of key factors. These included the need to keep pace with Russia's military strengthening in the High North. Moreover, Norway is concerned over the prospect that US investment in maintaining security in Europe and the High North region could weaken under a Trump administration.
The new extra funding measures will serve as the initial step in a process to add almost $20 billion to NDF budgets over the next 20 years, said Defense Minister Ine Eriksen Søreide.
"When we introduced the new Long Term Defense Plan we said that we had to first make sure that what we already have actually works. That is exactly what this budget aims to do. We still have a long way to go, but this is an important first step towards building a more capable and sustainable Armed Forces for Norway," said Søreide.
Significantly, in terms of procurement and new acquisitions affordability, the additional spending provision addresses the need to offset for the Norwegian krone's sharp fall in value against the US dollar. For the first time, Norway's 2017 defense budget will include funding increases that directly target the growth in the cost of military equipment.
According to Søreide, this provision will serve to halt the continuing decline in purchasing power within the defense budget, and "ensure better long term sustainability for the Armed Forces".
The NDF's acquisition of a new F-35-based fighter fleet will remain a high-priority area of budgetary spending going forward. The MoD is in the process of securing authorization from the national legislature, the Storting, to order a further 12 F-35 combat aircraft out of the planned total of 52 units to be bought.
If approved, the purchase plan would bring the total number of aircraft authorized to 40, enabling Norway to participate in the proposed multinational block-buy initiative.
As part of the fighter acquisition program (FAP), the MoD has sought a special funding allocation of around $1.1 billion to cover existing commitments regarding the acquisition of the F-35 and related equipment and infrastructure.
"This is proving a difficult budget for Solberg's government. There is even a slight possibility that the government could fall if the new budget fails to win enough support from opposition parties. What is more likely is that the government may continue to dip into the sovereign wealth fund to protect core national programs, and especially spending on national defense," said Tomas Dietz, a Frankfurt-based industry analyst.
To meet a budget deficit estimated at 8 percent of the country's GDP, the Norwegian government plans to withdraw up to $25 billion from the $820 billion Government Pension Fund (GPF) in 2017.
"There are certain national interests, and defense is one of them, where it is understandable that the government will have a need to dip into the wealth fund to a greater degree. What is troubling is the record pace and level at which the government is using monies from the fund," said Torstein Tvedt Solberg, a Labor party member of the Storting's Committee on Finance.
By elevating military spending, the government is confirming its promise to Norway's defense industry sector that it stands to benefit from a larger share of the NDF's expanded procurement budget, said Dietz.
"Norway will need to acquire or replace important elements of its national defense structure, including weapons systems, over the next 10 years. While foreign bidding interest for contracts will stay strong, there will be a higher government focus on ensuring more participation from native suppliers," Dietz said.
The MoD's accelerated purchase of three new helicopter-capable Coast Guard ships underlines the Norwegian government's evolving defense-industrial support policy. Intended to replace the existing Nordkapp-class vessels, the three ships are to be built in Norway.
The NDF's future shopping list, which is heavily weighted by capital programs to reinforce capabilities in the High North, includes the acquisition of CV-90 combat armored vehicles, armored reconnaissance systems and artillery equipment. The NDF is running a new main battle tank life-extension program and installing combat support systems on the Army's Leopard 2 chassis.
Medium- to longer-term procurement plans will also include the acquisition of a new air defense system, in addition to the purchase of multi-role drones, long-range communications equipment and remotely operated weapon stations for MLU SISU Armored Personnel Carriers.
Aside from the F-35, big ticket programs will include the acquisition of a new submarine class and upgrades to vessels in the Navy's existing Ula-class sub fleet. The Navy is also looking to acquire the Evolved Sea-Sparrow Missile II system. Deliveries of NH90 maritime helicopters for the Navy's front-line frigates are also planned.
