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Analysis: The economics of foreign bases

By SAM VAKNIN, UPI Senior Business Correspondent

SKOPJE, Macedonia, May 16 (UPI) -- 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 more than $40 million a month on purchases in the Balkan region during the bombing of Serbia. This is a meager percentage of the total cost of the war (about $34 billion) -- but it constituted a major boost to the regional economy. Macedonia's gross domestic product at the time was less than $3 billion.

The phenomenon may be recurring in the Central Asian former Soviet republics. In its May 4 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 home to a multinational force of 1,900 exorbitantly well-paid (by Kyrgyz standards) soldiers, pilots, engineers and support staff.

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Kyrgyzstan is an impoverished country with less than $1.5 billion in GDP. Its authoritarian president, Askar Akaev, 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 Sept. 11. Stratfor, a strategic forecasting firm, says that the Azerbaijani president, Heydar Aliev, did the same.

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

Last March, 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 1,500 U.S. Air Force personnel are stationed in the Khanabad air base.

The administration's Fiscal Year 2003 budget request envisions $19 billion for fighting the war on terrorism abroad. A supplemental appropriation bill will be submitted by next March. Another $3.5 billion is required for "economic assistance, military equipment and training for front line states." Yet another $121 million will be 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.

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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 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 al Qaida fighters are interned.

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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 United States is 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 Jan. 6, prior to Sept. 11, more than 60,000 U.S. 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 a heavy U.S. presence (e.g., within multinational forces).

Average tours of duty abroad lasted in 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 war in Afghanistan and in its wake.

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By March 2002, the United States has stationed more than 60,000 soldiers in new bases, from Bulgaria to Qatar and from Turkey to Tajikistan. According to the Pentagon, the United states has "status of forces" agreements -- which regulate the 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 economies from their dismal torpor. This is especially true where the U.S. 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 Dec. 15, 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 1980s, 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.

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