Norway - Military Budget

The Norwegian authorities are planning an annual increase in defense spending of 8 billion kroner ($731 million) from 2025 to 2031, doubling the government's initial plan to increase defense expenses to 2% of GDP, the local broadcaster reported on 04 June 2023. In early May 2023, Norwegian Prime Minister Jonas Gahr Store said Norway planned to increase defense spending to 2% of GDP and reach the level discussed within NATO by 2026. A few days later, Norway's defense commission head Knut Storberget said it was necessary to increase defense spending "to an unrealistically high level" because the current state of affairs in this area was unsatisfactory.

Norway announced 18 March 2022 it would provide an additional 3 billion Norwegian kroner ($340m) this year to strengthen its military forces in the north near the Russian border. “Even if a Russian attack on Norway is not likely, we must realise that we have a neighbour to the east that has become more dangerous and more unpredictable,” Norwegian defence minister Odd Roger Enoksen told a press conference. The extra funds will be used to beef up naval presence in the north, intensify training for both soldiers and reservists and increase stocks of ammunition, fuel and equipment.

The Norwegian Government presented a core defense spending budget of USD 6.5 billion in 2017, an increase of 7.5% from the year before. The Norwegian defense budget accounted for 1.62% of Norway’s GDP in 2017, which is still below the NATO target of 2%. Norway, however, is among the nations in NATO that spend the most on defense per capita; USD 91,400 in 2017. Norway spends about 25% of its defense budget on investments, which is above the NATO target of 20% (2016).

Norway's total defense expenditure values US$6.8 billion in 2018 and is expected to reach US$8.3 billion by 2023. This can be attributed to military modernization initiatives and training programs that are expected to be executed during the period 2018-2023. A considerable portion of the budget is anticipated to be directed towards the procurement of military aircraft such as the F35 fighter aircraft, the Norwegian All Weather Search and Rescue Helicopter (NAWSARH) program, maritime patrol aircraft, Advanced Medium Range AirtoAir Missiles (AMRAAM), the soldier modernization program, cyber security, and the purchase of military tactical trucks. In addition, the defense budget is expected to be driven by the country's participation in peacekeeping initiatives. During 2014-2018, the average capital expenditure allocation stood at 29.4% of the total defense budget, Norway vowed in 2015 to increase its military spending by as much as half a billion USD to boost defense capability around its northern border with Russia citing a so-called "Russian threat"; meanwhile, the country increased its arms exports to the US by as much as $10 million, which is apparently being used in conflict zones such as Iraq. The country's Defense Minister Ine Eriksen Soreide, said Norway would spend 3.6 billion kroner ($477 million) on building Norway's first anti-aircraft battery and modernizing its squadron of German-made Leopard 2 tanks, among other defense projects.

On 01 October 2015, the Chief of Defence presented his Strategic Defence Review regarding the future development of the Norwegian Armed Forces. This defined a financial reference framework or baseline for this review by calculating the costs of continuing the agreed-on structure in a 20-year perspective (2015–2034). The baseline has been calculated and detailed using the Norwegian Defence Research Establishment’s tools for long-term structural cost calculations. The same tool was used in the other structural calculations in this review. A key element of the calculations is future defence-specific cost growth. Both operational and investment costs increase as a result of the need to maintain the Armed Forces’ relative impact.

The Chief of Defence therefore proposed that this demonstrated real growth in defence costs is included as part of the defence planning. To support long-term balance between missions, structure and resources, the defence-specific cost growth must be recouped.

The financial baseline confirms that the Chief of Defence has a difficult starting point for his Strategic Defence Review. Compared with a 2015-level budget, the agreed-on structure is estimated to require funding of roughly NOK 180 billion over 20 years. However, this structure will not meet the defence and security policy challenges described in the Norwegian Minister of Defence’s formal request. The financial challenges for the agreed-on structure are unevenly distributed over the period. From today to 2020 the increase in demand will run to roughly NOK 39 billion.

In the short term, the challenge is primarily related to the costs of operating the agreed-on structure in accordance with the current ambitions. Among other things, the cumulative backlog in materiel maintenance and spare parts will amount to a total of NOK 2.5 billion. A lower annual budget level resulting from the Government’s debureaucratisation and efficiency-raising reform has been taken into account. If nothing is invested back into the defence sector, the effects of the reform overall will amount to over NOK 33 billion over 20 years.

Real growth in the cost of procuring and operating modern military materiel, the defence- specific cost growth of maintaining defence capabilities, comprises over NOK 50 billion for this 20-year period.

In the longer term, the challenges are related to very cost-intensive investment projects and the corresponding increased need for funds for operation. The increased demand related to operating, modernising and renewing the agreed-on structure comprises more than NOK 90 billion over 20 years.

The Government proposed to allocate NOK 34.9 billion for defence in 2010. The Northern regions, international peace operations and the veterans are given priority. The budget represents an increase of NOK 1.47 billion and a real term increase for the defence sector of 395 million above the wages and inflation rate. In accordance with the long-term plan, a further NOK 290 million is released through cost-effectiveness measures, structural changes according to the long-term plan and reduced costs from measures to stimulate voluntary retirement. This means an increase in purchasing power for the defence sector of NOK 685 million.

"The Government continues to strengthen the Armed Forces, and the budget illustrates the Government's commitment to the ambitions of the long-term plan. I am very pleased that we have already increased the budget with NOK 500 million of the NOK 800 million increase by 2012 as agreed in the long-term plan. The high budget level signifies a maintained strategic focus on and military presence in the Northern regions, and it denotes a continuation of the high level of contributions to international peace operations under the auspices of the UN, NATO and the EU," said Defence Minister Anne-Grete Strøm-Erichsen.

The Northern regions are the Government's prime area for strategic investment. The Armed Forces' presence in North Norway, with the Navy and Coast Guard, but also air and land forces, is given a high priority. Exercise Cold Response is the Armed Forces' most important exercise and will take place in Troms and Nordland in Northern Norway.

The budget for international peace operations sees a significant increase in order to maintain Norway's high level of contributions to operations abroad. Afghanistan will continue to be Norway's most important international peace mission, and the focus will be on building Afghan capacity. Norway's contribution with a field hospital and well drilling unit to the UN mission in Chad and the Central African Republic (CAR), MINURCAT, will continue until May 2010 as planned. Norway's contribution with a Fridtjof Nansen class frigate to the EU's maritime operation outside Somalia will be terminated early 2010. However, the Government will follow the challenge of piracy closely, and will continuously consider further Norwegian contributions to anti-piracy operations.

The budget is in accordance with the long-term plan, which prescribes a financial boost of the defence budget of up to NOK 800 million by 2012. With the increase of NOK 100 million in this year's budget, NOK 500 million will have been allocated by 2010 already. In addition, the Government proposes an increase of allocations for international peace operations of NOK 220 million, and an allocation of NOK 50 million for a new compensation scheme for veterans from international operations.

The Armed Forces are still going through a process of modernisation, and the Government recommended that priority be given to the introduction of new capabilities, including the Fridtjof Nansen class frigates, Skjold class missile torpedo boats, the C-130J transport aircraft, NH-90 helicopters and the new coast guard vessels.

The government proposed an increase of the operating budget of NOK 455 million, or 1.87 per cent, amounting to a total budget of NOK 25.2 billion. This represented a further increase in the level of activity, addressing the tasks and challenges in Norway's adjacent sea areas. At the same time, the level of Norway's substantial contributions to international operations will be maintained, in accordance with the long-term plan. The Government continues its special focus on veterans, and proposes to increase the allocations to the Armed Forces to cover the costs of a new compensation scheme for personnel who suffer from psychological strain deriving from their service in international operations. The government also proposes a budget increase for the national fortresses and fortifications of NOK 11.5 million, and recommends maintaining the high level of funding allocated in 2009 for military music.

The Government proposed a total investment budget of NOK 9.7 billion, including an increase in armaments investments of NOK 65.6 million to a total of NOK 7.7 billion. The Government signals a further strengthening of the armaments investment budget in the long-term planning period. In accordance with the long-term plan, considerable investments will be made to continue the process of the restructure and modernisation of the Armed Forces.

The annual defence budget for 2000 was $2.9 billion or 5.8% of central government total expenditure. Operational costs represent $2.0 billion including costs involved in peacekeeping missions, and investments constitute $0.9 billion. The fundamental challenge to Norwegian defence planning during the 1990s was the gap between defence funding and requirements consistent with a defence ambition of a balanced defence. Since 1985, the defence budgets have shown a steady decline compared to the general central government spending. In 1985, a total of 8% of central government spending was used for defence. In 2000, the share had dropped to 5.8%. The defence budget share of gross domestic product (GDP) had dropped from 3.1% to 1.9% from 1990 to 2000. During the 1990s, this budget development has been close to the average in NATO. For 2000, the average for NATO is 2.2% and new member nations are requested to allocate more than 2% of their GDP to defence.

A new overlapping period of structural reorganisation started in 2005 and lasted until 2008 as a result of resolution number 42 in Parliament (2003-2004). Goals for the modernisation from 2005-2008:

• The modernisation continues by increasing the Armed Forces' operational capability.
• Move a minimum of 2 billion NOK from the logistics and support services from 2004 into operational activity and investments in materiel.
• Reduce expenses so that the Armed Forces spend 0,9 million NOK less than in 2004. The military organisation (including personnel abroad) will consist of a maximum of 15 300 man-labour years as soon as possible and at the end of 2006 at the latest. This will be reduced even further to 15 000 by the end of 2008.
• Increase funding for operational activity by 1,5 billion NOK.
• Strengthen materiel investments by more than 1,3 billion NOK and reduce investments in property by up to 1 billion compared to the level in 2004.

Governmental skepticism of defense was reflected in flat budgets for the five years 2002-2007, meaning in real terms, decreases in funding. This was at a time when Norway accumulated a vast 380 billion dollar surplus in its &oil fund8. An additional factor was that the Minister of Defense, Anne-Grete Strom Erichsen, was one of the weakest cabinet members. She was a former Mayor of Bergen with no previous defense experience and was completely overshadowed in intergovernmental debates by the strong personalities of the Foreign Minister (Jonas Gahr Stoere), the Finance Minister (Kristin Halvorsen, head of anti-NATO party, the Socialist Left (SV)) and the Development and Environmental Minister (Erik Solheim also SV).

By 2007 newspaper editorials compared the current funding levels (in terms of GDP) to defense spending in the 1930s, which was historically low and left Norway ill prepared to deal with the German invasion in April 1940. The Norwegian CHOD, General Sverre Diesen headed the MOD Defense Study (released in late 2007 along with a concurrent study conducted by largely civilian defense experts). The Studies reached the same conclusions on the impact of current funding, namely that a continued flat defense budget will require cuts in some equipment purchases, require international cooperation to save money, the closure of many bases and the consolidation of Norway,s joint headquarters, and create limitations on the effectiveness of the military both in international operations and in Norway. The civilian defense study stated that without increases in the budget Norway will be hard pressed to defend its interest in the Arctic region, will be unable to respond to crises in Norway if parts of the military are engaged in international operations and will find it difficult to justify the purchases of frigates, fast patrol boats or fighter aircraft that currently are planned or under consideration. The studies called for the purchase of new fighter aircraft and frigates but recommended canceling the fast patrol boat program.