Viewing cable 06VILNIUS1110
Title: LITHUANIA'S NEW BUDGET INCREASES DEFENSE SPENDING,

IdentifierCreatedReleasedClassificationOrigin
06VILNIUS11102006-12-14 13:47:00 2011-08-30 01:44:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Vilnius
VZCZCXRO5404
RR RUEHIK RUEHYG
DE RUEHVL #1110/01 3481347
ZNR UUUUU ZZH
R 141347Z DEC 06
FM AMEMBASSY VILNIUS
TO RUEHC/SECSTATE WASHDC 0860
INFO RUEHZG/NATO EU COLLECTIVE
RUEKJCS/SECDEF WASHINGTON DC
RUEKJCS/JOINT STAFF WASHINGTON DC
UNCLAS SECTION 01 OF 02 VILNIUS 001110 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV MARR LH
SUBJECT: LITHUANIA'S NEW BUDGET INCREASES DEFENSE SPENDING, 
BUT LAGS BEHIND NATO COMMITMENTS 
 
 
¶1. (SBU) Summary.  Minister of Defense Juozas Olekas told the 
Ambassador that Lithuania's 2007 budget meets the Defense 
Ministry's goal of programming an increase in defense 
spending as a percentage of GDP of .05 percent, to 1.25 
percent.  While this is technically accurate due to modest 
official forecasts of GDP growth, defense spending is rising 
more slowly than the budget as a whole and too slowly to meet 
Lithuania's defense transformation needs.  End Summary. 
 
Defense spending increases less than other spending 
--------------------------------------------- ------ 
 
¶2. (SBU) Lithuania's Defense Minister told the Ambassador 
December 13 that he was "satisfied" with Lithuania's recent 
defense allocation, but added that the government has 
committed to supplemental defense allocations with revenues 
from the anticipated sale of the Mazeikiu Nafta oil refinery. 
 Lithuania's 2007 budget allocates 1.115 billion litas (USD 
413 million) to the Defense Ministry and an additional 5 
million litas (USD 1.85 million) to other defense spending 
based on the NATO definition, representing a 14.5 percent 
nominal increase in defense spending.  This is less than the 
overall increase in budget expenditures of about 21 percent. 
The budget also allocates 4 million litas to civilian 
assistance projects administered by the MFA in Ghor province, 
where Lithuania leads a Provincial Reconstruction Team. 
 
Economic growth outpaces growth in defense spending 
--------------------------------------------- ------ 
 
¶3. (U) The GOL has publicly committed to meet NATO's 
unofficial defense spending floor of two percent of GDP by 
increasing spending as a percentage of GDP by .05 percent per 
year.  Had the budget met this goal since Lithuania joined 
NATO, defense spending would be 1.32 percent of GDP in 2007. 
In fact, defense spending as a percentage of Lithuania's 
surging GDP has been falling.  Defense spending for 2006 will 
likely be only 1.20 percent of GDP, rather than the 1.28 
percent that was programmed, down from 1.42 percent and 1.27 
percent in 2004 and 2005, respectively.  This is largely 
because Lithuania's GDP growth will exceed the 2006 budget's 
forecast of seven percent in real terms.  (Nominal GDP growth 
is forecast to be 14.5 percent in 2006.)  Similarly, real 
defense spending in 2007, forecasted at 1.25 percent of GDP, 
could turn out to be lower (or higher) depending on the 
economy's performance in 2007.  The budget forecasts a 6.3 
percent rise in real GDP (10 percent rise in nominal), which 
would be the smallest economic expansion in Lithuania since 
2002, and is below estimates by the Economist Intelligence 
Unit and IMF. 
 
Defense Ministry:  more money needed to meet goals 
--------------------------------------------- ----- 
 
¶4. (SBU) Lithuania's Ministry of Defense has kept up spending 
to support its overseas commitments and to make sure that 
donated equipment is employed effectively.  Lithuania will 
take over funding of the Ghor Province PRT from the United 
States beginning January 2007.  As a result, Lithuania's 2007 
budget for international operations is slated to reach 90 
million litas (about USD 33 million), approaching Lithuania's 
informal limit for operations of ten percent of total defense 
spending.  Much of the increase will go to U.S. defense 
contractor Kellogg, Brown and Root, which the Lithuanians 
have contracted to provide support to the PRT at least until 
November 2007.  Also, Lithuania has budgeted for upcoming 
training, shipping, fuel, spare parts and cryptography 
equipment for two minesweeper ships to be transferred under 
the DOD Excess Defense Articles program. 
 
¶5. (SBU) Lithuania's defense spending is not rising fast 
enough to meet some of its other needs.  Post's Defense 
Attache has noted the curtailment of training ambitions over 
the past year, including the cancellation of the Lithuanian 
Navy's participation in the BALTOPS multinational maritime 
exercise because of the lack of funds for fuel.  Similarly, 
enrollment has been steadily declining, due to lack of 
funding, at many of the courses provided by the 
Reconnaissance School.  In other cases, the Lithuanian Armed 
Forces have acquired weapons systems, such as 120mm mortars, 
but have not funded the spare parts necessary for maintenance 
or the training required for crews.  The defense budget 
shortfalls also have a negative effect on the planned 
modernization of logistics capabilities.  As Lithuania works 
to stand up a second deployable battalion task group by 2009, 
it will struggle at current funding levels to create the 
necessary combat service support structures to sustain such a 
unit in the field. 
 
 
VILNIUS 00001110  002 OF 002 
 
 
Comment 
------- 
 
¶6. (SBU) Despite its modest size, Lithuania continues to be a 
stalwart ally.  At the same time, to meet NATO's need for 
interoperable, sustainable, and deployable forces, the GOL 
needs to provide enough resources to ensure that its 
transformation and modernization needs are met -- which in 
our estimation requires more funding than has been 
forthcoming.  We will continue to press this issue with 
Lithuanian interlocutors at all levels. 
CLOUD