The Economics of Foreign Military Bases

By: Sam Vaknin, Ph.D.

Also published by United Press International (UPI)

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Written May 16, 2002

Updated March 2005

The US military spent the first quarter of 2005 evaluating the economic and social impacts of the closure of 425 domestic bases. It seems to have dedicated no second thoughts to the relocation of its foreign outposts. Yet, the effects on local economies and populace can be as devastating and destabilizing - if not more so.

Conflicts in neighboring countries can be a serendipitous affair. Ask Pakistan. Even Macedonia, battered as it was by the war in adjacent Kosovo in 1999, benefited from NATO largesse, later supplanted by KFOR spending. It is estimated that the allied forces expended well over $40 million a month on purchases in the Balkans during the bombing of Serbia. This is a meager percentage of the total cost of the war (c. $34 billion) - but it constituted a major boost to the regional economy. Macedonia's GDP at the time was less than $3 billion.

The phenomenon may be recurring now in the Central Asian former Soviet republics. In its May 4, 2002 issue, "The Economist" estimated that Kyrgyzstan enjoyed an infusion of at least $16 million in American expenditures on fuel, gravel, food, and beds. In return, it allowed the West to use its crumbling infrastructure, both civilian and military - roads, airports, bases and railways. It is now home to a multinational force of 1900 exorbitantly well-paid soldiers, pilots, engineers, and support staff.

Kyrgyzstan is an impoverished country with less than $1.5 billion in GDP. Its authoritarian president, Askar Akaeyv and his ring of cronies own and operate a swathe of businesses. International profligacy is bound to prop up his regime by boosting the local economy and his own pecuniary fortunes.

According to the RIA Novosti Russian news agency, Kyrgyzstan offered to swap its debts to the West for military bases long before the events of September 11. Stratfor, a strategic forecasting firm, says that then Azerbaijani president, Heydar Aliyev, did the same.

President Nursultan Nazarbaev of Kazakhstan hinted - last time this February 2002 - that he, too, may welcome some kind of American military presence on his soil. With more than $12 billion in foreign investment stock in 2001 - one half of which by American oil firms - he may feel vulnerable to Russian attentions.

In March 2002, the White House promised Islam Karimov, the Uzbek president, and America's staunchest newfound ally in the region, $160 million in bilateral aid - mainly for the use of bases in Uzbekistan. More than 1500 US air force personnel are stationed in the Khanabad air base.

The administration's fiscal year 2003, 2004, and 2005 budgets request envisioned an average $19 billion for fighting the war on terrorism abroad. That proved to be inadequate. A supplemental appropriation bill was submitted as early as March 2003. Another $3.5 billion were required for "economic assistance, military equipment and training for front line states". Yet another $121 million were allocated to "anti-terrorism assistance to other states", $4 million for "technical assistance to foreign government's finance ministries to help cut off terrorist funding", and so on.

Foreign military presence in destitute countries has always had a profound effect on both their economies and their politics. It also often substitutes for domestic investments in the military. Even in prosperous Europe, American presence, in the framework of NATO, allowed the Europeans to cut back on defense spending.

In some parts of the world the foreign military and its attendant procurement and consumption are - or used to be - the main economic activity.

The contraction of American forces in Okinawa, Japan, following a series of scandals provoked by crimes committed by American GI's - forced the Japanese government to pour billions of dollars in public works into the local economy to compensate for the loss.

When the Philippines closed down the American Clark air base and Subic naval base in 1992, it lost billions in revenues from long-term lease payments and onshore consumption by military personnel. Moreover, the Philippines regarded the American presence as a security guarantee against the increasingly predatory practices of China. With their protectors gone, the Filipinos had to increase spending on the navy alone by a sorely scarce $6.5 billion in 1997.

Still, some countries are ideologically opposed to foreign military presence on their soil. In protest against what it regards as imperialist occupation, Cuba has cashed only one of the checks it has received from the United States covering the - admittedly symbolic - annual lease payments for the Guantanamo Bay naval base, where more than 150 alleged al-Qaida fighters are currently being interned.

Similarly, Saudis - as opposed to their royal family - decry the presence of American bases on their "sacred land". Somalis affiliated with the warlord Mohamed Aidid made their views about American naval bases in their country bloodily clear in the battle of Mogadishu in 1993. The US is currently negotiating with the self-declared independent state of Somaliland for rights to use its ports.

According to a Defense Department report quoted by the left-wing "The Monthly Review" on March 2002 and an Army College Study quoted by the "Los Angeles Times" on January 6, 2002 - prior to September 11, more than 60,000 US military personnel were deployed at any given time in more than 100 countries. These figures exclude permanent stationary forces, replete with their dependants, stationed in Germany, Italy, Bosnia-Herzegovina, Kosovo, South Korea, Japan, Saudi Arabia and dozens of other places.

The Defense Department's Base Structure Report, 2001, lists bases and installations in 44 countries and territories - but this excludes many bases with heavy US presence (e.g., within multinational forces).

Average tours of duty abroad lasted on 1996 - 135 days a year in the army, 170 days a year in the navy, and 176 days a year in the air force. Army soldiers were deployed overseas on average once every 14 weeks. The numbers have sharply increased during the wars in Afghanistan and Iraq and in their wake.

By March 2002, the USA has stationed well over 60,000 soldiers in new bases - from Bulgaria to Qatar and from Turkey to Tajikistan. According to the Pentagon, the US now has "status of forces" agreements - which regulate American military presence overseas - with 93 countries.

Such "forward presence" requires massive outlays. The bulk of it is spent at home, with exuberant domestic defense contractors. But even the leftovers disbursed in foreign lands are enough to lift recipient economic from their dismal torpor. This is especially true where the US military is used - implicitly or explicitly - to safeguard unilateral or bilateral economic interests, such as oil pipelines or oil fields - as is the case in the countries bordering the Caspian Sea, or in Colombia.

The New York Times obliquely noted on December 15, 2001, that:

"The State Department is exploring the potential for post-Taliban energy projects in the region, which has more than 6 percent of the world's proven oil reserves and almost 40 percent of its gas reserves."

But the economically beneficial influence of foreign military presence is not limited to emerging or transition economies. According to "The Regional Impact of Defense Expenditure" by Derek Braddon (published in "Handbook of Defense Economics"), during the 1980's, NATO troops and their families stationed in West Germany - a total of 400,000 people - generated $10 billion in expenditures. More than 230,000 people were - directly and indirectly - employed by the bases. A similar number of Soviet troops in East Germany accounted for 1 percent of its industrial output.

Those were the days!

Note on Security Guarantees for the Republic of Macedonia

On the strength of a Greek veto, Macedonia did not receive an invitation to join NATO, while Albania and Croatia, the two other members of the Adriatic Charter Group did.
As partial compensation, the USA may sign a "technical-military" agreement with Macedonia, but it will NOT include "security guarantees".
Why so?
1. Security guarantees are granted exclusively in the wake of a war or a conflict and as a means to ascertain the implementation of an agreed settlement between the adversaries (e.g., a ceasefire or a peace agreement).
Excellent introduction to security guarantees
2. Security guarantees are granted in the framework of an international treaty. Such a treaty must be approved by 80 members of the Senate. There is no chance that Macedonia will garner such support in Congress. The Greek lobby is too strong and Macedonia is too inconsequential and immaterial to the geopolitical and military interests of the USA.
How the US signs Treaties and Agreements
So, what will likely happen?
1. The USA will, perhaps, sign a technical-military agreement with Macedonia. Such agreements are very common, mean little, and constitute NO GUARANTEE to the signatories' security. Even Serbia has a technical-military agreement with NATO!
2. The USA will then pressure Macedonia into changing its name and entering NATO.
In effect, technically, Macedonia has RECEIVED AN INVITATION to join NATO in the Bucharest Summit. But the invitation is both conditional upon the resolution of the name issue and suspended until the dispute is resolved.
US security guarantees to Israel
US security guarantees to Japan (multiple agreements)
US-UK Mutual Defence Agreement
Other US security guarantees
Inter-American Treaty of Reciprocal Assistance
Mutual Defense Treaty (US-Philippines)
US Bilateral Treaties and Other Agreements
USA REFUSES to give Israel security guarantees in 1963:
Israel: U.S. Foreign Assistance
"4. Israel's Security
Clinton's commitment to Israel's security needs included a huge caveat. Security guarantees to Israel, according to the Clinton Parameters, "need not and should not come at the expense of Palestinian sovereignty, or interfere with Palestinian territorial integrity." For example, if Israel needed to retain an early-warning station on a West Bank hilltop, this principle could be used to preclude an Israeli claim. Essentially, it placed Palestinian national sensitivities above Israeli security needs. In contrast, in the Gaza Strip and the West Bank, Bush allows for Israel to continue to control airspace, territorial waters, and land passages, "pending agreements or other arrangements." This includes continuing Israeli control of the Philadelphia corridor between Gaza and Egyptian Sinai."
Security & Defense
July 23, 1952 — Agreement relating to mutual defense assistance.
October 23, 1975 — Agreement regarding payment for tooling costs of accelerated production of M-60A1 tanks.
April 6, 1979 — Agreement concerning construction of air base facilities.
April 6, 1979 — Agreement concerning funding of air base facilities.
December 10, 1982 — General security of information agreement.
November 29, 1983 — Agreement creating the Joint Political Military Group and Joint Security Assistance Program.
December 14, 1987 — Memorandum of Agreement concerning the principles governing mutual cooperation in research and development, scientist and engineer exchange, and procurement and logistic support of defense equipment, with annexes and attachment.
April 21, 1988 — Memorandum of Agreement regarding joint political, security and economic cooperation.
May 24, 1988 — Mutual logistic support agreement.
April 1989 — Memorandum of Agreement between the Strategic Defense Initiative Organization and Israel’s Defense Ministry to develop a $35 million computer facility as part of the Arrow missile program.
September 8, 1989 — Memorandum of Understanding regarding transfers of materials, supplies and equipment for cooperative research and development programs.
January 22, 1991 — Agreement on the status of United States personnel.
June 1991 — Agreement pertaining to the Arrow Continuation Experiments (ACES), the second stage of the joint U.S.-Israel Arrow missile program.
October 18, 1991 — Memorandum of Understanding for a loan of a multi-sensor integrate system for the purpose of test and evaluation.
November 28, 1991 — Agreement on cooperation to combat illicit narcotics trafficking and abuse.
April 30, 1996 — Counterterrorism cooperation accord to enhance capabilities to deter, prevent, respond to and investigate international terrorist acts or threats of international terrorist acts against Israel or the United States.
July 18, 1996 — Memorandum of Agreement concerning the tactical high energy laser (THEL) advanced concept technology demonstration (ACTD).
April 30, 1996 — Counterterrorism cooperation accord
September 3, 1996 — Agreement for technology research and development projects.
January 28, 1998 — Treaty on mutual assistance in criminal matters.
February 10, 1998 — Acquisition and cross-servicing agreement with annexes.
February 27, 1976 — Memorandum of Agreement concerning assurances, consultations and United States policy on matters related to Middle East peace.
February 27, 1976 — Memorandum of Agreement concerning the United States role at any future Geneva peace conference.
March 26, 1979 — Memorandum of Agreement relating to assurances concerning Middle East peace.
March 26, 1979 — Agreement relating to the implementation of the Egyptian-Israeli peace treaty.
October 1, 1982 — Agreement relating to privileges and immunities for United States military members and civilian observers of the Multinational Force and Observers on leave in Israel.
October 31, 1998  — Memorandum of agreement concerning ballistic missile threats.

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