Russia Is Testing NATO’s Resolve. What Are Its Options?

Steve Odland: Welcome to C-Suite Perspectives, a signature series by The Conference Board. I'm Steve Odland from The Conference Board and the host of this podcast series. And in today's conversation, we're going to talk about NATO, the North Atlantic Treaty Organization: What is it? How does it work? What impact has it had on international relations?

Joining me today is Sara Murray, managing director of The Conference Board International. Sara, welcome to the program.

Sara Murray: Thank you for having me, Steve.

Steve Odland: And Sara, you're sitting in the heart of NATO country in Belgium, and you get a firsthand view of everything that goes on at NATO headquarters and in the middle of all of the member states. But let's, for our listeners, let's just go back to the beginning. What is the North Atlantic Treaty Organization? When was it founded and why?

Sara Murray: Thanks so much. It is a complicated picture, but it really matters that we understand it. So NATO stands for, as you said, the North Atlantic Treaty Organization, and it was founded all the way back in 1949, right after World War II. Now, the idea behind NATO is pretty straightforward. It was a response to the tensions with the Soviet Union, and the Western nations wanted a collective defense system, meaning if one country is attacked, the others defend it. So it's considered an attack on all.

The founding treaty was actually signed in Washington, DC, but as you said, today the headquarters are in Brussels, Belgium, and it really remains the cornerstone of Western security and defense policy.

Steve Odland: And this seemed like a really important deal back in 1949. Most of the world had just exited a difficult situation with world powers challenging the other for control. And it appeared that the Soviet Union was going to follow down that path. So it was meant to be a deterrent, particularly in the new nuclear era. And then once the Soviet Union fell, the member states of NATO said, well, we really need to question the purpose, didn't it? And they sort of backed off on spending and everything else. But here we are again.

Sara Murray: Yeah, I think NATO is more relevant than ever before. And we're seeing a lot of NATO in the headlines. You're right, it started with 12 founding members in 1949. But since then they've added like 20 members.

We had the Cold War era. Where we had Greece, Turkey, West Germany, and Spain join. Then the post-Cold War, so Poland, the Baltics, Romania, Slovakia, and others. Then we saw Finland in 2023 and Sweden in 2024 in direct response to Russia's actions in Ukraine.

And maybe I should just zoom out a little bit, Steve. Like why are NATO and Russia, in conflict? Why does NATO matter so much in this Ukraine war? And it's because Russia sees NATO as a direct threat. And that alliance, as I just mentioned, has steadily grown and increased outward, eastward, since the Cold War into former Soviet and Warsaw Pact countries like Poland, Estonia, and Romania.

And even though those countries joined on a voluntary basis, it really has fueled deep Russian resentment. And in 2008, NATO said that Ukraine and Georgia could join NATO or would eventually become members. And that's when the Russian leadership drew a red line and they said they actually said to US officials, if you let Ukraine join, this would be viewed as a hostile act.

So just that's the backdrop, apparently there were conversations that that would never happen, that Russia say that the US said that would never happen. But I think at the time it was more about German reunification rather than NATO not expanding. So that's the context.

Steve Odland: Yeah, so you started with 12 states, and you've now expanded to 32 member states. 30 of those are in Europe, two in North America, as you mentioned. And it was a collective defense, not offense, but defense. But the problem with that is that Russia now views this as offensive or potentially offensive. And particularly their border states, the Baltic states of course, and Ukraine and some of the other Eastern European states now have become. NATO members. And so, their point of view is that they're threatened by this because all the states around them now are members of NATO.

So they don't view it as a defense organization. They view it as a potential offensive situation. So you can see how there's room for misinterpretation on their side.

Sara Murray: You can. But yeah, I think the way that NATO is governed, it runs on consensus. So every member has an equal say, and they must agree on decisions, whether it's military or political. At the top, you've got the North Atlantic Council. So that's led by the Secretary General Mark Rutte, who is the former Dutch prime minister. He acts as like the face of NATO.

Then you've got the Supreme Allied Commander in Europe. That's a position that's always held by a US general. So that tells you something about America's role in the Alliance. But NATO don't go out and create war. I think the oversight is about they collectively defend if attacked. And I think the oversight is very much the ambassadors, the defense ministers of those countries, they meet to decide on military actions, strategy, diplomacy. And again, the way that it's put together is it's a force that will come together collectively if attacked. Rather than, your point, Russia see it as an offensive thing, but it's not like NATO is going out and creating war.

Steve Odland: Yeah, now there are 14 articles that are part of the treaty. Can you just walk through them?

Sara Murray: Yeah.

Steve Odland: Not in huge depth.

Sara Murray: No, I won't go through every one, but I've clustered them. I think it's a great place to go next. Articles one to three, that's like peace, democracy, each country building its own defense capabilities. Notice the word "defense."

Article Four is for consultation. So then if a country feels threatened, they call everyone and they have a talk. Article Five is the big one. If they are attacked, if one country is attacked, it's considered an attack on all. Article Six defines where that applies. Interestingly, it's either North America, typically, or Europe, so it's not the rest of the world, things that could be happening there.

Then the other articles, seven to 14, are things like how countries can join or how they can leave, how the treaty works with the UN charter, it's the legal, the ratifications, and things like that.

Steve Odland: Yeah. And there's a political purpose and a military purpose you talked about. The military purpose, which is defensive only against potential aggression by, originally, the Soviet Union and now Russia. There are also political and trade purposes that have come from this. Talk about that.

Sara Murray: Yeah, so you're right. NATO is not just a military alliance, it's a political forum. So politically, NATO exists to promote democratic values. So it's about building trust. It's allowing countries to consult on security threats. That's when Article Four comes in. Militarily, it's about the collective defense. And the military decisions are governed by the military committee, executed by NATO's command structure.

What I find interesting is that each member retains the sovereign control of its forces until they commit to a NATO mission. And at that point, it's NATO strategy.

Steve Odland: Yeah. Now you mentioned America's outsized role in this. And you can understand historically in 1949, most of the other member states' resources were fairly depleted after World War II, and America was really the strongest remaining state in that. Things have evolved over time. Europe has recovered, obviously, in resources, but there still has been this outsized contribution by the USA in NATO.

And if you look at the amount spent on defense by the US, it's equivalent to the next nine nations combined, including China and Russia. So, talk about funding for NATO, because that has evolved over time, as well.

Sara Murray: Yeah. First of all, I think, as we've seen, the US have done a very good job to influence and persuade the NATO members to put more defense spending, to really significantly increase that. And we have seen a lot of those countries doing that. And I think we're going to see even more of that, particularly after the recent incidents. So I think that's happening.

The problem that we've got is while there's a commitment already to increase the spending, there's a lag for all of that military equipment being produced. That's the risky point that we're at at the moment. But I think all of the members have become increasingly aware that they need to be more decisive, that they need to take this more seriously and they need to change the spending from a ballooning welfare state to securing their defense.

That said, within NATO there are certain obligations, and there are collective obligations under Article Five. Right? So Article Five is invoked when a country is attacked. Each country decides how to respond. So in that kind of situation, it doesn't necessarily mean it's an automatic war, and it doesn't mean that every country needs to send troops.

So some member countries, their contribution could be air defense systems or intelligence or humanitarian aid. It's flexible, but a firm response. So what we've seen over the years is the US has always really had a very sizable military contribution to NATO, and it's really been saying, look, we want others to have just as much, right? And not only give the intelligence or the surveillance. They need to do more.

Steve Odland: Yeah, now this whole spending thing has evolved over time. In 1949, with the original states, there was not an explicit defined percentage of GDP committed.

Sara Murray: Correct

Steve Odland: That only came into being in 2014 when Russia annexed Crimea, and then they established it as this 2% level. And then they were given, they gave each other a decade to get there. Where do we stand today? How many states roughly are at the 2%? And how many are not?

Sara Murray: Four percent has now been the target, and what we've seen is significant increase in spending, certainly, by the countries that are closest to the borders of Russia. Poland, for example, leads the way, I think it's at 5%, it was the largest percent of GDP. And then we've got countries that are further away, like Spain, for example, that don't probably even have a percentage. But they have all collectively agreed that 4% needs to be achieved.

There has been massive improvements, certainly, since the second US administration has come in. But I think there's talk that maybe even that needs to be increased even further. Certainly, those that are closer to Russia, they're the ones that you know, really seeing the threat. We've got Poland and Finland. They're preparing to turn their borders into wetlands so that the Russian tanks will be prevented from advancing. Lithuania's also digging a 30-mile-wide ribbon of defenses on its borders with Russia and Belarus, and minefields and bridges set to blow up in cases of invasion.

We are seeing also more leaflets. The EU has sent leaflets to all the EU citizens on how to prepare in the case of war and how to stockpile rations to at least get through the first 72 hours. So there's also, as well as the spending commitments, there's also been a lot more of a program to make the case to the citizens of Europe how important this is.

Steve Odland: Yeah, and it depends on where you sit as to your view of all of the possibilities here. I think certainly in North America, you have a different, the people have a different view. I mean, it's further away, there's a large ocean in between. It seems a little bit more academic. Although—and the memories of certainly World War I, but also World War II, have faded—you're sitting there in Belgium, which was the nexus of the last couple of world wars. I mean, throughout the 20th century, it was a battlefield. I mean, it's really kind of nerve-wracking, isn't it?

Sara Murray: It is, but also I think it was less academic for people in the US, If you think about it. I mean, Article Five's been triggered once, and that was 9/11. And all of the NATO members, as a show of solidarity came together to support the US. NATO controlled US airspace straight after. Not every country decided to send troops to Afghanistan, but a lot did. And that became one of the longest NATO missions that we've seen. So that was an example of, when you're in the club, when something happens, everyone comes together.

Nowadays, we are seeing, you're right, it's more further away from the United States. But I think the question on people's minds in Europe is if something happens, as we're starting to see more escalation, we know that the US feel everyone should pay their fair share. There have been steps to do that. But if something happens tomorrow, what contribution would the US make? And as I said, it doesn't have to be identical contributions. Every member decides what they're going to do, but what solidarity will the US show when it looks increasingly more likely that we're entering into very difficult and dangerous times?

Steve Odland: We're going to take a short break, but don't go away because when we come back, we're going to talk about what's happening right now and what are the next steps with NATO.

Welcome back to C-Suite Perspectives. I'm your host, Steve Odland, from The Conference Board, and I'm joined today by Sara Murray, managing director of The Conference Board International.

Okay, so Sara, before the break, we were talking about the triggering of Article Five and what would happen and so forth. That seemed to be, as you said, an act more of a, well, that all hopefully never happened, but it has happened once, and it was on the US soil, not in Europe, and it was 9/11, the attacks in New York City, in Washington, DC. Now there's talk again about triggering of Article Five, first of all in and around Ukraine, but most recently. Poland and the Baltics. Talk about that.

Sara Murray: Yeah, indeed. First of all, and maybe I should just say that Ukraine is not a NATO member even though they wanted to join. So attacks on Ukraine don't trigger Article Five. And also, a country that's at war cannot become a NATO member, which I think is interesting. But if Russia strikes NATO territory, and that's what the incidents that we've seen recently with Poland and with Estonia, that could qualify as an attack on NATO. And so what we've seen recently is Poland and Estonia have invoked Article Four, so that's the "Let's talk. We feel insecure. We feel our security is at risk."

So first in early September, we saw these Russian drones enter into Polish airspace. Apparently there were more than a dozen. Three were shot down, several crashed into Eastern Poland. That was a significant breach of NATO airspace since the war began in Ukraine. And what we saw was NATO scrambled Dutch planes, German planes, French jets to reinforce the area.

Then just a couple of days ago, Estonia followed with Article Four because three Russian jets violated its airspace. And again, Estonia have said, this is unprecedented, this is brazen. This is only the ninth time that Article Four has been used in NATO's history, but two of them were in the last two, three weeks.

Now, Article Five has not yet been invoked, but it's close. NATO's top general is saying that they're still trying to determine intent, which I think is really interesting because drones crossing into sovereign airspace—that can still be seen as a violation of national security, and one drone might be a mistake, but I think 12 is not right.

So what the moment what's going on is this huge debate inside NATO about red lines, especially as more and more of these are becoming more frequent.

Steve Odland: Well, it's not just drones. There, there have MiG fighters sent by Russia into and over Poland and Estonia. You also have military bases being built on the Russian side of the border with Finland that each hold 10,000 personnel. These are huge military installations being built up and down the border with Finland. It appears that Russia is taking on a very offensive role while they continue to prosecute their campaign to reabsorb Ukraine.

So you have this situation, and you've had the US president reach out, hold out olive branches, do everything that he could to try to end the situation in Ukraine. Which has been met with polite response, but no action. And in fact, an intensification of all of their actions, both in Ukraine and now along the NATO border. It would appear that they are thumbing their nose at all efforts to create peace, and in fact, trying to incite a reaction here, which would justify their action. Am I reading this incorrectly?

Sara Murray: Yeah, I think first of all, the scale and the timing of all of these, right before the Russian-Belarusian military drills, strongly suggests that it was meant as provocation. Poland's Prime Minister, Donald Tusk called it the closest thing we've seen to open conflicts and since World War II. The other theory is that this might be happening to shift the focus of NATO and its members onto defending itself rather than bolstering Ukrainian defense. So I think what is happening is Russia is testing NATO's unity, especially as US support for Ukraine softens and Europe debates and tries to build up for its next steps.

So I think Russia want to see, will NATO hold the line? Will it escalate, or will it hesitate? So I think these breaches, they're not just military tactics, it's that geopolitical stress test.

Steve Odland: Well, you live in Europe, you've traveled all over. Our members are businesses, companies throughout Europe. And of course, I've done the same. And I don't know that either one of us has encountered anyone who wants to go to war with Russia. And so it's everybody's sort of biting their nails saying, what is going on? We don't want to do this. We've had enough of war, and yet you can't ignore it cause, to your point, they're probing defenses and intent. And if you ignore it, and if you say, well, we're unwilling to go to war, well, where does it end?

Does Russia then reannex all of the border countries, and do we allow it to happen? And then you have memories of the 1930s and Sudetenland and all of that. I mean, it just seems to go round and round, doesn't it?

Sara Murray: I think it does, and I think that's the tightrope that NATO's walking at the moment. It is sending more air defense to Poland and Estonia. It's doing more joint surveillance missions. It's debating the rules of engagement for drones. It's thinking about economic sanctions or supporting Ukrainian strikes on Russian drones. What NATO's done is it's tried to show unity and speed. But it's got to balance escalation risks carefully.

I think the goal at the moment is to show strength without starting a war. This obviously reinforces why NATO exists. It's not just Cold War nostalgia, it's very much a living, working alliance. But here's the catch: If Article Five is invoked, NATO has to agree unanimously. Right now, it's trying to avoid open confrontation. So, it's very, very tricky times, and I think we're in a new era of European defense and one that people are taking incredibly, incredibly seriously.

Steve Odland: Yeah, and even if Article Five was triggered, and even if there was a unanimous vote, it's unclear whether NATO have the resources to actually engage. Whereas Russia has been essentially at war in some fashion or another, essentially their economy is a wartime economy. They've had a draft, they've had troops active, first it was in Afghanistan and then other areas in that region. But also now in Crimea and Ukraine for over a decade.

They're hardened. They're on their war footing. They've got this alliance now with China and, to some extent, India and Iran, for supply of all of the goods, technology, drones. They also then have a constant flow of currency for the sale of their natural resources and oil to those same other countries who are non-hostile to them at the moment.

And so you have this economy, which is being funded. They have cash, they have the means. Essentially what they built is a war machine. It has little else that they have built. all the Western, I shouldn't say all, but most of the Western companies have left Russia. And so there's no more economic step down from there. At the same time, you have NATO countries really not up to the same level and resources. They're not on a footing. They don't have the arms. You could argue that the United States is best equipped for that, but it would really have to carry the whole thing at the moment.

So, I think what you hear Rutte and others in NATO saying very loudly is, Hey, we need to get our act together here. We need to get our military supplies and tanks, airplanes, missiles, the whole armament, we need to get up our supplies. And they have been depleted as they've been contributed to Ukraine. And so there's a lot of work, there's a lot of expense, and there's a lot of time that needs to be invested in order to get NATO even prepared to consider an Article Five.

Sara Murray: Exactly, because as I mentioned earlier, even if Article Five is triggered, again, the response will be different depending on each country, but also depending on the resources that they have. So the only obligation today is that each member must respond, but they each decide how.

And again, those that have troops will send the troops. Others that have logistics or surveillance will do that. Whether that's enough to deal with the actual attack is the question. And I think that's also why, despite the fact that European countries are increasing their spending, they still look or have a dependence on the US as one of the members that would be able to help most significantly in the military space. And they still reference the idea of NATO, which is that no ally stands alone. It's solidarity, it's not sameness.

And that's the problem. So timing, it would benefit Russia to do something now, knowing the context of all of those member states that they're in, that they're not necessarily prepared. And that's the risk. And that's unfortunately one of the ugly scenarios that could take place in front of our eyes. So, if deterrence fails, then we've got multi-front superpower conflict on our doorsteps. And after 80 years of peace in Europe, I think that's something that no one would've thought possible. But I think the realization is dawning more and more that Europeans need to prepare this likelihood, that indeed it could happen.

Steve Odland: Yeah. And you mentioned the strategic possibility that the activity in Poland, Estonia, Finland are to distract NATO from Ukraine so that that can be completed. On the other hand, there's another argument that says that Ukraine is, and the reason that they have not sealed the deal there, but that they've drawn it out, is to continue to wear down the inventories of all defensive products, armaments from NATO into Ukraine, such that they could then pounce and actually affect takeovers elsewhere.

So, there's probably only a few people who really know the answer to which of those is accurate: Neither, both. But at the same time, since I suspect nobody's a mind reader, it's up to NATO to demonstrate that it is committed to this defense pact and to get prepared, as you say. So it is really an uncertain time. And a bit of a frightening time, because this is not 1939. This is a period where it's heavily nuclear-based and technology-based, and it's a different era.

Sara Murray: It is. And the deterrence is being tested. Russia is definitely probing the thresholds that NATO have. And also, if you think about it, the drone warfare that you know from the recent incident, as well, it's cheap, and it's hard to stop. So NATO, as well as military equipment and the jets and all the tanks, I think they also need to think about investing in lower-cost defense to counter things like drones.

They need to show unity. They need to show speed. They need to show, crucially, this reaffirmation of Article Five unity, because that's what deters war. So they have to show decisiveness, collective responsibility. Any weakness that they show gives an opportunity, and that would be a very serious and very scary prospect.

Steve Odland: All right, we're going to leave it there. Sara Murray, thanks for being with us today.

Sara Murray: Thank you for having me.

Steve Odland: And thanks to all of you for listening to C-Suite Perspectives. I'm Steve Odland, and this series has been brought to you by The Conference Board.