Focus: War in Europe - How much is all this costing - and who will pay the final bill?

The gap between the small and big powers' financial and military contribution to the Balkans conflict is getting wider
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The Independent Online
hey are both full members of Nato yet neither has sent a single warplane to aid the Balkan air campaign, nor have they any intention of doing so. Iceland and Luxembourg do, however, have a good excuse: they have no air force to send.

With lives at stake in Kosovo, which country should bear what fraction of the military and financial burdens of the Balkan war is hardly at the top of the military agenda. On Friday, some of the West's most senior generals gathered in a drab 1950s complex outside the Belgian town of Mons to discuss who would send which personnel and what equipment for Operation Allied Harbour. And, while the talks were secret, staff at the Supreme Headquarters Allied Powers Europe were happy to confirm one thing: "The costs of the operation," said a spokesman emphatically, "were not under discussion."

But as the air campaign reaches its fourth week, the imbalance between the contribution of the big and small military powers is growing. And the ramshackle system for funding the war is raising concerns in finance ministries on both sides of the Atlantic.

"System" is, in fact, a rather generous term for such burden-sharing as there is in the Balkan war. Nato's normal peacetime operations are paid for under a complex formula designed to reflect the wealth and ability to pay of the alliance's 19 members. But for the air and humanitarian campaign there are no such rules, leaving individual countries to foot the bill for the forces they choose to offer up. The result is a huge discrepancy between the US, with its gigantic contribution, and the efforts of the alliance's less powerful nations. As one Nato official put it: "Obviously, the contribution of those countries flying planes or dropping bombs is enormously superior to those that aren't."

Nor are the figures at stake insubstantial. The Ministry of Defence is reluctant to put precise figures on the British cost of the campaign, although the Treasury insists that they can be contained within the ceiling of the contingency reserve, worth pounds 1.2bn in 1999-2000, pounds 1.9bn in 2000- 2001, and pounds 2.4bn the following year.

According to John Llewellyn, chief global economist for Lehman Brothers, the cost of each month's aerial campaign is around $3bn (approaching pounds 1.9bn). That assumes the launch each day of, on average, 30 cruise missiles (costing $1m each) and 150 aircraft sorties, each of which would fire one missile or drop one bomb (each costing $100,000). It also assumes the loss of 20 Nato planes at an average cost of $35m each and the deployment of 30,000 military personnel.

Humanitarian costs are put considerably higher, with $12.5bn for rehousing and aid. The one-month air and humanitarian campaign which has almost been completed should, Mr Llewellyn estimates, total around $15bn.

Concern is growing across the Atlantic, where the Centre for Strategic and Budgetary Assessments estimates that the first 15 days of the air campaign cost America alone $500m. With no sign of an early end to the conflict and the prospect of ground troop deployments growing, the total cost is likely to mushroom. A ground war could, according to one estimate, cost $20bn, and that could be dwarfed by the cost of postwar reconstruction.

Financial experts cast doubt on most of the figures and suggest that accurate calculation is almost impossible. The cost, for example, of missiles depends on how swiftly they are replaced or, indeed, whether they are replaced at all. Some weaponry or equipment would have to be written off eventually anyway because it would become obsolete. And how do you calculate the costs of wear and tear on an aircraft carrier? The manpower costs are complex to estimate, too. "Obviously, there are redeployment costs," said one official, "but if they weren't in the Balkans they would still be on the payroll."

Still, the disparities between contributions are wide, so is it fair that the US and, to a lesser extent, Britain, should bear a massive proportion of the costs? In Whitehall alarm bells are ringing, and one source argued: "Especially if we are talking about a war that goes on for some time, there must be scope for debate about who bears the brunt of the costs".

That has not yet been officially discussed, although there are some ad hoc solutions. For example, the humanitarian campaign requires cash as well as equipment and Portugal - which has sent just three F-16s to the Balkan campaign - has offered $500,000.

At Friday's conference, a little subtle pressure may have been applied to those countries which have offered little, to do their bit. But another problem makes burden-sharing in any true sense unlikely. Not even Nato expects to know the actual expenditure incurred by its members, because of the secrecy of defence departments. "We will never know the true cost," said one Nato official, "because governments are wary of releasing the information."