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Cablegate: Draft Polish Defense Budget, More For

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 WARSAW 004124

SIPDIS

E.O. 12958: N/A
TAGS: PGOV ECON PREL PTER PARM PL
SUBJECT: DRAFT POLISH DEFENSE BUDGET, MORE FOR
MODERNIZATION, LESS FOR FOREIGN MISSIONS


1. SUMMARY: Poland's Parliamentary Defense Committee offered
a glimpse of future defense spending when it approved the
$5.6 billion draft defense budget for 2006 on December 15.
This represents a 3.3% increase (adjusted for inflation) over
2005. Significant elements of the draft include $1 billion
for modernizing the armed forces and a 24% drop in funding
for military missions abroad in keeping with Polish plans to
reduce troop numbers in Iraq from 1,450 to 900. Deputy
Defense Minister Stanislaw Koziej underscored that the draft
defense budget for 2006 ensures development of the armed
forces while maintaining international commitments. Apart
from the draft defense budget, Poland also plans to spend
about $284 million on its F-16 program. END SUMMARY.

2. This report employs an exchange rate of 1 U.S. Dollar to
3.23 Polish Zloty (PLN).

---------------------------------------------
Defense Spending Expected to Increase by 3.3%
---------------------------------------------

3. The draft 2006 defense budget that the Defense Committee
of the Sejm (lower chamber of Polish Parliament) approved on
December 15, 2005 puts defense spending at PLN 18.064 billion
($5.6 billion). This constitutes 1.952% of the 2005 GDP (PLN
925.4 billion or $ 286.5 billion) and thus meets the
requirements of the Law on the Restructuring, Technical
Modernization and Financing of the Polish Armed Forces.
Defense spending in 2006 should exceed 2005 levels by 3.3% in
real terms. In 2006, the Ministry of Defense (MOD)
anticipates increasing "property expenses," i.e. military
equipment acquisition and development programs. This
"spending on technical modernization" will amount to over PLN
3.6 billion ($1.1 billion) and constitute 20% of MOD's 2006
budget. Because of the planned increase in general defense
spending and expenses on technical modernization, Deputy
DefMin Koziej labeled the 2006 draft defense budget "pro
development."

--------------------------------------------- --------
Draw Down in Iraq Means 24% Less for Foreign Missions
--------------------------------------------- --------

4. Deputy DefMin Koziej noted that Poland plans to reduce its
presence in Iraq while preparing to assume command of the
International Security Assistance Force (ISAF) in Afghanistan
in 2007. Poland projects its expenses for the Iraq mission
to drop from PLN 217 million ($67.2 million) in 2005 to PLN
131.5 million ($40.7 million) in 2006. General Mieczyslaw
Cieniuch, Deputy Chief of the General Staff, noted that
projected expenses assumed no more than 900 Polish troops in
Iraq in 2006. Overall, the draft 2006 defense budget calls
for spending PLN 233.6 million ($72.3 million) on foreign
missions, a 24% decrease from 2005.

--------------------
More Money for F-16s
--------------------

5. In 2006, Poland expects to increase spending on its F-16
program to PLN 916.1 million ($283.6 million). These
resources are not part of the defense budget, but will come
from a state budget reserve that is designated for that
program. As Deputy DefMin Koziej explained to the Defense
Committee, this reserve was originally planned at PLN 466
million ($144.3 million) but had to be increased by PLN 450
million to cover the Value Added Tax (VAT) on the first eight
aircraft that Poland is scheduled to receive in 2006. Koziej
added that the government was working on an amendment to the
Law on the Financing of the Multi-Role Aircraft Program that
would increase expenses on that program by an amount equal to
the sum of the VAT.

--------------------------------------------- -------
Defense Priorities and Foreign Obligations Satisfied
--------------------------------------------- -------

6. Deputy DefMin Koziej outlined this budget's
accomplishments:

-- meeting goals of the Prague Capabilities Commitment (PCC),
NATO response force (NRF) and EU forces,
-- technical modernization of the armed forces with a focus
on high readiness units,
-- continued engagement of Polish troops in peacekeeping and
crisis missions abroad,
-- further professionalization of the armed forces and
improvement of soldiers' welfare.

Koziej added that this budget advances the modernization goal
of having one-third of Poland's armed forces fully
interoperable with NATO by 2008. However, to add
perspective, he noted that Polish defense spending per capita
is 5 times lower than the NATO average and 3 times lower than
the EU average. Moreover, spending per soldier, again
according to Koziej, is 3 times lower than NATO's average and
2 times lower than the EU average.

7. COMMENT: Poland's 2006 draft defense budget seems to
exemplify the resource conflict between modernization and
foreign missions often cited by MOD. Accordingly, the
current draft was presented as an effort to reconcile this
tension by cutting costs in Iraq so as to prepare for future
expenses in Afghanistan while slowly ramping up modernization
efforts. Investments in foreign missions may have some
negative impact on the progress of modernization, but the
experience of foreign missions may also advance the pace of
modernization by forcing the Poles to focus on developing
capabilities and acquiring material necessary to conduct
actual operations. Maintaining the current legacy force
structure may be, after all, a greater hindrance to
modernization than deployments abroad. END COMMENT
HILLAS

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