What is the price tag on Finland’s NATO membership?

In July, NATO Heads of State will meet at the Washington Summit to agree on the organisation’s future direction. The summit will also mark the 75th anniversary of the Alliance. For Finland, this will be the second summit as a full member of NATO. The Finnish delegation will be led by President Alexander Stubb.

Jens Stoltenberg, Secretary General of NATO, visited Finland on the eve of the summit in June 2024. At press conferences, Stoltenberg and Stubb kept praising the way Finland has integrated smoothly into NATO over a short period, reinforcing the Alliance’s defence. During Finland’s first year as an Alliance member, more information has become available on the impacts of NATO accession on Finland. Many questions remain open, however.

One of the open questions is the financial impacts of the Finland’s NATO membership. There has been little or no mention of either the costs or the potential economic benefits in discussions about NATO, and any estimates have been general. The government proposals that concern applying for NATO membership and adoption of the Accession Protocol repeatedly note that, as all cost impacts in every branch of administration cannot be quantified, more accurate estimates will be produced as the accession process progresses.

In this blog, I look at the costs on the basis of the information that is publicly available at the moment. Public information on the economic impacts of Finland’s NATO membership remains fragmented and uncertain. While a precise estimate cannot be made on its basis, it appears that the total costs incurred from the NATO membership will amount to hundreds of millions or even billions.

Direct costs exceed estimates

Among other things, costs directly associated with the NATO membership are incurred from participation in the financing of NATO’s common budget and the secondment of personnel to NATO’s agencies and military command structure. There will also be more NATO-related matters to process in Finland, requiring more administrative personnel and improved information security and other security measures on the premises. While some of these are one-off costs, most will be continuous.

In its proposal on NATO accession, the Government estimates that the costs incurred from the membership and joining the Alliance’s administrative bodies and command structure will be approx. EUR 70 to 100 million a year. Based on the 2024 budget proposal, the costs will exceed these estimates. In the administrative branches of the Ministry of Defence and the Ministry for Foreign Affairs alone, the budget proposal contains appropriations for NATO-related costs amounting to almost EUR 99 million. In addition, many other administrative branches have itemised smaller costs related to the NATO membership.

The direct costs of Finland’s NATO members are likely to increase in the future. The contributions to NATO’s common budget, which are often referred to as NATO membership fees, are currently more than EUR 25 million a year. As a new member, Finland does not yet pay its full GDP-based contribution (0.9057% of total) to the NATO Security Investment Programme (NSIP), which means that this cost will go up in the years to come. In addition, significant budget increases have been agreed upon in NATO. According to NATO’s plan, the civilian and military appropriations – and also Finland’s contributions – would increase by about 45%, and the NSIP appropriation by almost 170%, by 2028. Should this plan go ahead, it would mean additional expenditure of tens of millions of euros for Finland.

Indirect costs exceed direct ones

In addition to the direct costs, indirect costs are incurred from the NATO membership. Accession means that Finland will participate in NATO’s collective defence efforts and operations, capability projects and meeting of the readiness requirements. The membership links Finland to NATO’s defence planning process, in which capability targets are set for the member states. Significant investments will also be required in building up host nation support.

While the Government proposal on NATO accession states that fulfilling these obligations will result in major additional costs, it gives no estimate of the amount of these indirect costs. Drawing on public sources, however, some observations on the indirect costs and their magnitude can be made.

In 2024, Finland decided to participate in two NATO peacetime collective defence missions: Mine countermeasures group in the Baltic Sea and the North Sea and the Air Shielding mission in Romania, Bulgaria and the Black Sea. According to a Government report, a cost of EUR 7.7 million is incurred from these operations, and they can largely be carried out by personnel directly employed by the Finnish Defence Forces.

Should Finland increase its participation in the future, for example, by sending troops including reservists or conscripts to the Forward Land Forces in allied countries in the future, the costs will also go up significantly.

At the meeting of NATO Defence Ministers in June 2024, the other Allies gave their backing to establishing a Land Component Command and the presence of Forward Land Forces in Finland. Rather than being stationed in Finland permanently, these forces will conduct exercises here repeatedly. No public information on the costs or their sharing between Finland and the contributing countries is available.

Thousands of reservists to be standing by for NATO Response Force

The government is also currently preparing for Finland’s participation in NATO Response Force. It has been suggested in public that a military contingent of 4,000 to 5,000 could be deployed in the Response Force. This number would mainly consist of reservists who would conclude a standby agreement of three to five years. No estimate has been given of the costs associated with the Response Force.

By comparison, Finland participated in the EU Battle Group’s standby period between 1 January and 30 June 2024, for which purpose Finland deployed a military contingent of 30 people, most of whom were reservists. A government report to Parliament put the costs of having the contingent in readiness at EUR 7.451 million. Of this amount, approx. EUR 6 million were personnel costs incurred from training, salaries and standby allowances, among other things.

The contingent standing by for the EU Battle Group may not be directly comparable to the NATO Response Force. Yet, if the cost of having a contingent of 30 or so personnel standing by for six months amounts to several millions, raising, training, equipping, paying wages and allowances to, and allocating the necessary crisis transport capacity for a troop of several thousand will produce very significant costs.

The most significant costs arise from capability targets and host country support

Presumably, the Response Force troops are part of the capability targets set for Finland in NATO’s defence planning process. The exact content of the targets is not disclosed to the public. However, NATO’s Commander responsible for developing capabilities has stressed that increasing military mobility will be important for Finland.

Before NATO accession, Finland’s defence planning and capability development focused on military defence of the national territory. This still remains our main priority. Based on information in the public domain, however, the NATO membership means that the Finnish Defence Forces must improve their capability for participating in the collective defence of the entire Alliance. According to the previous Commander of the Finnish Defence Forces, this will impact the Defence Forces’ equipment, troop structure and personnel needs. Developing new capabilities also requires a lot of money.

Finland must additionally develop its ability to receive support from the Allies in a crisis situation, for example by improving its infrastructure. The Ministry of Defence has estimated that developing the so-called host nation support in the next few years will be the most significant expenditure item associated with NATO, in addition to the capability targets. No estimates are available of the magnitude of these costs, however.

The membership is costly, but what does this money buy?

Publicly available information consequently indicates that the total cost impacts of Finland’s NATO membership will amount to hundreds of millions of euros, or even billions. As a NATO member, Finland is also committed to maintaining its defence appropriations at more than 2% of the GDP. According to the Ministry of Defence’s estimate, two big capability development programs, the F-35 fighter procurement and Navy’s Squadron 2020 project will ensure that Finland meets this target until 2026 but subsequently, new inputs in the defence budget will be needed.

Costs will be inevitable if Finland genuinely aims to leverage its NATO membership to improve its national security. By participating in collective peacetime defence missions and developing its capabilities for defending the entire Alliance, Finland demonstrates its preparedness to help its allies. This is the only way to ensure that, as promised in fine speeches, Finland will be a provider rather than a consumer of security in NATO. This will also help to secure the assistance of other countries, should a crisis occur in Finland. The host nation support must also be provided for, ensuring that Alliance troops can be received if necessary.

From the perspective of central government finances, the key issue is not only the amount of money spent but also the share of the costs that will be covered by additional funding. The Ministry of Finance has stressed that all additional resources, also for defence budget, must be assessed critically in the current economic situation. If the costs incurred from NATO membership are managed by reallocating resources, which tasks will lose money? In particular, the allocation of resources to cover the indirect costs will require careful planning so that tehy will strengthen rather than weaken the Finnish Defence Forces ability to fullfil it’s basic mission, the defence the Finnish territory.

So far, the costs of the NATO membership have not loomed large in public debate. This is partly due to the fact that the information related to its economic impacts is fragmented and non-specific. On the other hand, a strong consensus on joining the Alliance has meant that there has been no incentives to draw attention to the potentially large costs.

Different perspectives, even critical ones, are necessary in the debate on NATO membership, however. Rather than weakening Finland as a NATO member, open and diverse discussion will strengthen us. It will also support better decision-making which addresses both economic and strategic perspectives. This way we can ensure that the NATO membership will as a whole be a beneficial arrangement for Finland that improves our security.