''Security policy in an era of budgetary constraint''

Mr Merritt,
Mr Weilemann,
Excellencies,
Ladies and Gentlemen,

I should like to start by thanking Giles and Peter for having arranged today’s conference, and for having offered me the opportunity to deliver this keynote address.

In 5 months time, in November, NATO Heads of State and Government will meet in Lisbon. At that Summit meeting, we will approve the Alliance’s new Strategic Concept. This new Concept will lay out the Alliance’s vision for the next decade. But it will also be pragmatic. It will acknowledge the political and economic realities we face.

At a time of budgetary constraint across the Alliance, defence budgets are already coming under increasing pressure. The budget crunch is an unpleasant reality – but it is also an opportunity. An opportunity to make NATO more efficient, and more effective.

An opportunity to make the Alliance even better suited to tackle the unpredictable security environment that confronts us. And an opportunity to bring NATO and the EU closer together.

In my remarks today, I want to focus on three points. First, how a stable, free and open market economy enhances our security. Second, why it is even more important to share the security burden in times of economic difficulty. And third, how we can spend smarter so that we get greater return from our defence dollars and euros.

My first point is the importance of keeping the fundamentals of a free and open market economy. In the early 19th century, the French economist and politician, Frédéric Bastiat, stated that “if goods don’t cross borders, then armies will”. And that assertion remains true today.

Trade encourages countries to acquire wealth through production and exchange, instead of through conquest. It encourages cooperation. And it discourages conflict, as countries do not want to jeopardise the stability and prosperity that free trade brings.

For most of our nations, the last 20 years have been a period of unprecedented economic growth. Globalisation has been a major factor in that economic growth. It has been typified by the free flow of information, of people, of goods, of ideas, of technology, and of services. Globalisation has greatly improved our prosperity and our general wellbeing. And it has led to a remarkable degree of economic interdependence between our nations.

It is no coincidence that during this same period of globalisation, the Stockholm International Peace Research Institute found that conflicts have reduced by nearly half -- from 33 to 17. And today, none of these remaining conflicts is a state-on-state conflict.

Quite simply, nations that trade together don’t go to war against each other because the consequences are too severe. And we benefit from a virtuous cycle – with increased trade encouraging increased security which in turn leads to further trade and prosperity.

This virtuous cycle has been perfectly demonstrated here in Europe. After the end of World War Two, under the security umbrella provided by NATO, former enemies became friends. European nations were able to embark upon an ambitious economic and political integration project, which eventually became the European Union. And after the end of the Cold War, the European Union, together with NATO, were able to spread peace, progress and prosperity throughout our continent.

The ability for countries to trade, for companies to do their business, and for people to earn a living, is very much dependent on a stable and secure international environment. And it is especially dependent on free trade routes. Trade routes through the so called “global commons” – air, sea and land, and increasingly also through space and cyber space. We need to devote sufficient resources to maintaining these free routes if we want to maintain our economic prosperity.

But we need more. We must not only keep these routes open. We must also secure their full potential. And ensure that free trade flourishes.

Therefore we must avoid protectionism. At times of financial crisis and economic recession, it is often tempting to adopt “buy local” policies, or put up trade barriers to protect national businesses or jobs. This is a temptation we must resist, because experience shows that such moves are counter-productive.

From an economic point of view, protectionist measures offer only a false sense of security to businesses and jobs that are no longer viable. But the consequences of protectionist measures are often felt most severely in those countries and regions that are already fragile.

And there they will only amplify some of the most serious security threats that we have already had to deal with in recent years – such as energy security, water security, food security, piracy, violent extremism and terrorism.

There is a lesson to be learned. If we move away from free market principles in response to the current economic crisis, then we are likely to find ourselves confronted by more fragile economies, vulnerable states and regional instability. If, on the other hand, we maintain a free and open market, we will not only create strong economies and improve economic wellbeing, but also improve security and stability.

But economic prosperity is not just a question of wise economic choices. Economic prosperity also requires wise security choices.

How, for example, can we protect our populations and critical infrastructure from terrorism? Or our territories from missile strikes? Or our societies and financial systems from cyber attacks? Or our shipping from pirates? How can we protect not only economic activity but also human life, if we don’t have the right capabilities?

And this leads me to the second point I wish to make this morning, how to share the security burden within our Alliance.

By sharing the burden within NATO, individual Allies can achieve a far greater level of security than they could achieve through any national approach -- and at far lower cost. But this collective insurance policy requires the regular premiums to be paid. NATO membership does not come for free. There are responsibilities and obligations that each Ally needs to meet – including financial obligations.

All Allies, on both sides of the Atlantic, need to demonstrate the political will to continue to invest in defence – and to invest their fair share in NATO.

At the moment, all Allies are having to cope with the serious effects of the economic crisis. However, we need to be aware of the potential long-term negative effects if we implement defence cuts that are too large and disproportionate.

In more than half of our NATO member nations, real defence expenditure is already lower now than in 2008. Moreover, the decrease in defence spending in those nations is greater in percentage terms than the decrease in their national GDP.

Ladies and Gentlemen,

European Allies, in particular, must resist the temptation to use the economic crisis as an excuse for letting the transatlantic defence spending gap widen any further.

Already today the United States spends three times more on defence per soldier than Europe: more than three hundred thousand Euros as opposed to only one hundred thousand per soldier in Europe. And the US spends five times more on equipment and Research and Development per soldier than Europe; one hundred and twelve thousand Euros as opposed to only twenty-three thousand Euros. These figures indicate a huge technology and capability gap across the Atlantic.

Within Europe, there is also an alarming gap in Research and Development spending between nations. There is a five-to-one ratio between the highest and lowest European investors in R&D.

We must work hard to close these gaps. Because if we don’t, our ability to operate together will be affected. And that could well have serious consequences for our political cohesion.

We must be careful not to allow the capability gap to grow into a credibility gap. That means we must resist unilateral actions. It means that we must ensure cohesion across the Alliance in our defence decisions. And it means that we must resist the temptation to cut back on long-term investments in high-technology capabilities.

We should not continue to invest our scarce resources in fixed infrastructure and soldiers who are essentially stuck in their barracks. We should re-direct our investments towards more flexible, mobile and modern armed forces – armed forces that we can actually use.

We must focus on cutting fat, and building up muscle.

Of course, some of these decisions will not be easy. And they will require political courage.

But that, too, is part and parcel of burden sharing. It will allow us to deliver a more modern, more efficient, and more effective Alliance. And if we were able to do this, then we would turn the budgetary constraints into something really positive.

My third and final point is that NATO Allies must get a greater return from their defence dollars and euros. So let me share with you some specific ideas on how I think we can spend smarter, and with greater effect.

Clearly, every nation should continue to provide an appropriate and fair share of combat forces. But we cannot expect all nations to cover the full spectrum of capabilities, such as strategic airlift, combat helicopters or fighter aircraft - not least because these capabilities are becoming increasingly expensive.

Through a combination of collective approaches and multinational solutions, we can deliver more and better. For example, more common funding could help smaller nations to share expensive capabilities they would otherwise be unable to afford. Common funding could also help to deliver an even greater focus on training, communication and interoperability.

Similarly, through role specialisation and prioritisation, we can encourage nations to focus their investment in specific areas, rather than spread their resources thinly across an entire range of capabilities.

At the same time, reorganisation and rationalisation can help us to bring down the expensive fixed overheads associated with infrastructure and personnel. The NATO command structure is one area where there is considerable potential for streamlining. NATO’s agency structure is another – and in our own Headquarters, here in Brussels, I have already started to reallocate limited resources from support areas to more operational priorities.

All these measures can help us to bring down costs – and to spend our defence dollars and euros smarter. But I believe there is yet another way of delivering more with less – by building a true strategic partnership between NATO and the European Union.

NATO and the European Union are two of the world’s most important institutions. They share 21 members. They have complementary skills. And no other strategic partnership would offer so many benefits – both operationally and financially.

Operationally, thus far, close cooperation on the ground has been developed mainly through ad hoc arrangements. But there is an urgent need for more coordination at the institutional level and between staffs. I believe we should seriously consider cross participation at our respective operational meetings – and not just limit ourselves to those under the so-called Berlin-plus arrangements.

In Kosovo, KFOR and EULEX work together well, but we need to match this cooperation here in Brussels so we can develop, and align, our long-term policies with regard to the Western Balkans.

Similarly, the good cooperation at the tactical level between our assets deployed on counter-piracy operations off the Horn of Africa needs to be matched by joint NATO-EU political consultations on how to address the causes of piracy, rather than just the symptoms.

But it is in Afghanistan, that improved institutional cooperation would bring the most significant operational benefits. We, both NATO and the EU, need to understand that our respective roles in Afghanistan are not just complementary – they are actually mutually reinforcing. We are both there under the same UN mandate.

And the success of each of our missions depends, to a very large extent, on the success of the other. Greater institutional cooperation – the true strategic partnership that I would like to see -- would help to deliver the “unity of effort” that is required for success in Afghanistan.

Financially, too, a NATO-EU strategic partnership would be a major cost-saver, especially in the area of military capabilities. We have already seen with the Strategic Airlift Capability Initiative that cooperation between NATO and the European Union is possible. Ten NATO nations, nine of which are also EU nations, as well as two EU non-NATO partner nations, have combined their efforts and operate three C-17 large body transport aircraft.

Both NATO and the European Union now have a capability they would otherwise not have had – and significant savings are achieved. Through this collective approach, participating nations have saved on operating costs, on command and control, on logistics and on maintenance costs. This is a perfect example of spending smarter.

Similarly, through our combined efforts to improve the availability of mission-capable helicopters we have improved our operational capability, avoided duplication, and shared costs. With NATO focussing on the upgrade of the helicopters, and the European Union focussing on the pilot training, we are able to maximise the return on our scarce resources.

But these two examples are rare – and I believe, we can, and we should do more. In many cases, NATO and the European Union share the same capability requirements – so let us identify the priority areas and agree that wherever possible, any capability work in one organisation shall be open to all members of the other organisation too.

We have made some progress. We have created a NATO-EU Capability Group – but this is essentially a forum for information exchange. We now need to move it to the next stage – where this Group becomes a forum for active cooperation. And where mutual cooperation is no longer the exception, but the norm.

Finally, let me make one further suggestion that I believe would help us to reach that stage. At our Lisbon Summit in November, NATO is likely to launch a new capabilities initiative to address critical shortfalls. The European Union shares many of these shortfalls – so what better way to proceed than by inviting EU nations to join this initiative.

Ladies and Gentlemen,

It is well known that the Chinese use two brush strokes to write the word 'crisis.' One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger -- but recognise the opportunity.

I can think of no better way to describe the significance of the current economic crisis. We need to be aware of the dangers of making the wrong decisions in our defence spending. But we must also realise that we have a rare opportunity to make NATO truly fit for the 21st century.

By focussing on open market economic principles, by sharing the defence burden more equitably, and by spending smarter, we can deliver real security and an even more effective Alliance at lower cost. That is good news for Allied governments -- and it’s even better news for our taxpayers.

Thank you.

Questions and answers

GILES MERRITT (Co-moderator): Secretary General, thank you very much for what I am convinced is going to go down as a very significant address, that people in the defence and security sector will be referring to, closely, I think, in the months to come, as being a sign post as to where we have to go.

You've kindly agreed to take questions. Before we get onto the questions and answers, and I will ask in a moment my co-moderator, Peter Weilemann, to ask for a show of hands to give us an idea of how many people would want to come in.

I'm very keen to ask Larry Hirst, who's the chief of IBM on this side of the Atlantic, to present to you the report with the ten recommendations, not only to NATO, but to the UN and the EU, that we put together with this ground-breaking Internet debate that was held in February called the Jam Session where 4,000 people from 124 countries took part in a five-day conversation on security policy issues.

On average each of those 4,000 people spent at least three hours discussing on the Internet what we ought to do and the result was ten clear recommendations, including establishing a civil side to NATO because of the growing importance of NGOs and civil society in the whole security arena.

But Larry, my I ask you, IBM who are very close partners in this venture, and I've asked Larry if he would come and present a copy of the report to you as Secretary General of NATO.

(APPLAUSE)

GILES MERRITT: Thank you very much, indeed, Larry.

I'd just like to launch the question and answer with a question of my own. And it's really a very simple one, Secretary General. You've described the sort of blueprint that the new Strategic Concept must be. My question is, is that blueprint also a sort of nitty-gritty detailed roadmap of how we tackle the various problems that you set out, or do we need something parallel to the Strategic Concept that is full of detail?

So that's my question, but please, don't let... may be get an idea of how many people... Peter, over to you.

Yes, let's take the questions. I'll think we group them up. And if we could have microphones to... could I get an idea... one, two, three, four... nobody over here. Okay. This is the questioning side of the room. Let's have a microphone to the lady in red, first of all, and then we'll go to the back. Peter, will you...

Q: My name is Anya Videnska(ph). I work for Expert Magazine Russia. I have a question to pose to Secretary General because you said you praised trade, you said that if goods don't cross borders then armies do, so how would then this perspective you estimate last week restrictive additional measures of European Union towards Iran and the opinion Council expressed do a (inaudible) of how you say it.

GILES MERRITT: Thank you. Let's take one more question and then ask the Secretary General to address three questions and then we'll take another round.

Q: Good afternoon, Martinez de Rituerto with El País. You've said to us you are the head of an international organization that is NATO. I know because we have you are speaking here. How do you see that NATO can cooperate with the European Union that is not an international organization and who should be your counterpart on the European Union's side in which 27 members are not always sharing the same ideas about difference on foreign policy? Thank you.

GILES MERRITT: Secretary General.

ANDERS FOGH RASMUSSEN (Secretary General of NATO): First of all, may I thank you warmly for the report. I will study it with great interest. I look very much forward to that. And I also appreciate the initiative to include civil society in the formulation of recommendations on security policy. So thank you very much. I look forward to reading the report.

To the questions: Now, I can assure you that the Strategic Concept will not be a nitty-gritty document. On the contrary we will stick to general principles to make sure that it is a readable, but also implementable document, which leads me to the exact answer to your question.

I envisage that the Strategic Concept will be followed up by a more detailed implementation document, which will go further into technical details. But I think it's important that the Strategic Concept is an overall general document which give the outside world, as well as NATO's own stakeholders, a very clear impression of what is the overall goal, what are the core tasks for the Alliance, and then afterwards we can follow up in details. That's the way I see it.

Next, if I understand your question correctly about Iran, you indicated that there might be a contradiction between imposing sanctions on...

Q: (Inaudible...)

GILES MERRITT: I think you'd better get a microphone if you want to ask a follow-up question.

ANDERS FOGH RASMUSSEN: (Laughs). Yes, but in the meantime I can proceed to the last question... okay.

Q: No, indeed, because I see it a bit of contradiction because you said that if, now we quote, that if goods don't cross the borders army do, and so it's very somehow scary because last week Council declared additional... they are not measures, additional measures aiming energy sector of Iran and it was very badly received there. So how you see it?

ANDERS FOGH RASMUSSEN: Well, so I understood your question correctly, that you think there is a kind of contradiction. On the contrary, I do believe that the way the international community has now decided to move forward as regards Iran, serves the purpose to avoid military action, so to speak, and I strongly support the political and diplomatic approach. I do hope that an increased political and diplomatic pressure on the Iranian leadership will lead to the conclusion in Tehran that the only way forward is to comply with the UN decisions and stop the enrichment of uranium and stop the nuclear aspirations.

So I do hope that this political and diplomatic pressure will lead to a peaceful solution to this problem.

And finally, the NATO-EU cooperation. Well, I think we have to acknowledge that the European Union is right now in, you might call it a transition phase, through the implementation of a new treaty, the Lisbon Treaty.

I attach strong importance to a strengthened relationship between NATO and the European Union. So what I have done is to engage in dialogue with all institutions in the European Union. Obviously with the High Representative Ashton, but also with the new Permanent President of European Council, Van Rompuy, as well as the Commission President, and finally also the President of the European Parliament. So I think I have covered everything.

GILES MERRITT: Thank you very much. Peter, would you like to take the next round of questions?

PETER WEILEMANN (Co-moderator): So who will be the next? Come again, over there.

Q: Yes, Julian Hale of Defense News. A couple of questions. One on... you spoke about EU-NATO, a forum for active cooperation. Are you talking about a formal decision-making body and how would that be achievable given the Turkey-Cyprus problem. How would you go about doing that?

And the second question, do you have any particular areas where joint

Q: Well, yes, Brooks Tigner, Jane's Defence. Mr. Rasmussen, you said that requirements let us identify the priority areas and agree to any cap work on one side should be opened up to members of the other. Very good idea. But what does that mean if it doesn't lead to concrete results? So could you give us some ideas about concrete areas of cooperation you have there.

And secondly, it rises up again to the EU-NATO spat over Turkey. You said in a previous speech that perhaps the EU should consider letting Turkey into the EDA as an observer. That would go a long way towards smoothing relations there. So I'm wondering if there shouldn't be some behind-the-scenes pressure by the EU on... NATO on Turkey to accept that and the EU to put pressure on Greece to allow Turkey into the EDA. This might go a long way toward capability development.

Thank you.

GILES MERRITT: Brooks, would you like to repeat that question slowly and loudly because the acoustics in here are not perfect.

Q: True, the acoustics are very bad in here. I repeat, you've said that each side should let the other into its capability discussions. That's a very good idea, but what does it mean in concrete terms? Do you mean just consulting on capability plans or joining in on joint projects? What would be a concrete thing?

And some way toward that would be resolving this EU-NATO problem. Turkey would like to belong to the EDA, or at least as an observer status. Do we not need some kind of behind-the-scenes pressure, EU and NATO, on Greece and Turkey to at least allow that small step toward capability cooperation?

Thank you.

GILES MERRITT: Thank you. Are we taking one more question?

PETER WEILEMANN: We can take a third one over there.

Q: Thomas Lauritzen from the Danish Newspaper Politiken. Secretary General, you warn especially European allies against making cutbacks now that might be counter productive. It became public a few days ago that your own home country, Denmark, is preparing exactly the kind of cutbacks that you're warning against by pulling out of several high tech NATO projects such as the AGS. What's your reaction to that and your recommendation to the Danish government?

PETER WEILEMANN: Okay, so maybe the next round we have also some additional participants, not only journalists. Looks like a press conference here. Please.

GILES MERRITT: Perhaps I could add one more question to that, and that is, Secretary General, that the Ministers that NATO deals with are Defence Ministers and they're the victims of budget cuts. What such a political mechanism can you envisage that would bring the Finance Ministers onto your side?

ANDERS FOGH RASMUSSEN: I can tell you, based on experience, that Finance Ministers never establish alliances with anybody, so...

(LAUGHTER)

...and wisely so. So there's no go for that project. But more seriously speaking, I do believe you have a point and I have to stress that NATO is not just about Defence Ministers. We have also regular meetings among Foreign Ministers. We have regular meetings among Heads of State and Government, and I know that in the past there's been, I think, at least one meeting for Ministers of Finance.

And it makes sense in times of budgetary constraints also to engage Ministers of Finance so that politicians realize that this is not just about the financial bottom line. This is also about the security bottom line. And these things should be considered.

So, I think you have launched an idea which we could explore further.

In practical terms how could we further develop the NATO-EU cooperation? One example, and it's really frustrating for me as new Secretary General of NATO to experience that, and we have on a regular basis, not that often, but on a regular basis, we have a joint meeting between the NATO Council and the EU Political and Security Committee. NAC-PAC meetings they are called.

We're only allowed to discuss one single issue. Bosnia-Herzegovina. It's an important issue, I do not complain about discussing that. But having all these people gathered around the same table it seems nearly embarrassing that we are not able to discuss Afghanistan or counterpiracy or Kosovo or whatever it might be.

So I find it frustrating. And also embarrassing that two important organizations cannot let their representatives, high-level representatives, discuss issues that are of obvious common interest.

(Laughs). And it was raised by some ambassadors during the last meeting, and then we got to the well-known, and well, now I'm not attacking anyone, because we know what is the root problem, but I just described what happened. Namely, that Turkey agrees to consultation on all these important issues, but in the format we have established, which does not count Cyprus. And then it provokes a reaction from Greece who says yes, okay, we consulted on this, but then Cyprus must also participate. So back to scratch.

And I'm very outspoken about this and definitely not diplomatic. I may even receive complaints from involved parties, but I have to tell you the truth, and this is the reason why I have urged the European Union to make some moves, to make sure that Turkey could get some arrangements with the European Union.

I think it would be fair that Turkey got an arrangement with the European Defence Agency. Just like Norway. Norway is also a NATO country and non-EU country. Norway has got an arrangement with the European Defence Agency. Why not Turkey?

(APPLAUSE)

ANDERS FOGH RASMUSSEN: It isn't fair. And likewise, the European Union could conclude a security agreement with Turkey. That would also facilitate improvements of our cooperation.

And finally, the European Union could to a greater extent involve non-EU contributors to EU missions in decision-making. Just like NATO. I mean, we have an ISAF mission in Afghanistan and 18 countries outside NATO contribute to our mission. And we involve these 18 non-NATO partners on a regular basis not only in decision-making, but also decision-shaping.

But the EU doesn't involve non-EU contributors to the same extent. And as an example, the EU mission in Bosnia-Herzegovina. Turkey is the second largest contributor to that mission, but not involved in decision-making and shaping. Why not? It's not fair. I have to say that.

So this is the reason why I urge the European Union to move in order to get all this right.

ANDERS FOGH RASMUSSEN: And then with the interesting defence costs. Yes, well, so even in Denmark they have to cut. And I understand, of course, why all governments right now are confronted with these budgetary constraints. And let me stress before I give the exact answer to this, that I'm definitely not going to interfere with domestic politics in any allied nation. Including my own home country. And I promised before I left Denmark that after having left my country as Prime Minister I would not interfere with Danish politics, as long as Denmark lives up to her NATO obligations. So.

(LAUGHTER)

This question is about the NATO common project Allied Ground Surveillance. And again, without interfering with decisions to be taken in Denmark or any other allied country, I have to say, to cut back on this project would be the wrong move.

Allied Ground Surveillance is a system which provides our soldiers with better security and more effectiveness. And furthermore, it is an example of a multinational project where countries, through collective solutions, can acquire a capability that they would otherwise not be able, it would not be affordable if we don't pool resources together.

So to cut back on such projects, such NATO projects, is really a move in the wrong direction. And I understand very well the temptation to cut back on common NATO projects and then instead spend money at home in support of local communities.

But I have to say defence and security is not a job creation project. And I think we owe it to our soldiers to provide them with the best possible security. And faced with budgetary constraints, we should also ensure coherence within our Alliance and not abolish the common projects. Common projects, multinational solutions are the way forward for our Alliance.

Thank you.

GILES MERRITT: Time is beginning to get very short. If there are any more questions now is the time to put them and if they could be very short and sharp because I want to add one of my own.

Q: Thank you. My name is James Wyllie, University of Aberdeen. I'm afraid it won't be too short, my question, but I'll do my...

GILES MERRITT: I'm afraid it has to be.

Q: I'll do my best.

GILES MERRITT: Well, please do.

Q: I would like to thank the Secretary General for his speech, but I feel I've probably heard it before somewhere. I've been watching NATO for about 30 years and I must say that the notions of liberal economics, of a more equitable burden-sharing, of role specialization and of NATO seeking a new partnership with someone else have been around for about 30-odd years and there's nothing actually particularly new about them. I'm not saying they're bad things. All I'm suggesting is there's nothing particularly 21st Century about them.

What I was hoping for was some indication of whether NATO's primarily strategic outlook in the years ahead will be global rather than regional? Because on that depends what we spend our scarce euros, pounds and indeed dollars on when it comes to defence procurement.

GILES MERRITT: Thank you very much. Let's take three other questions and then I'll add in my own. There was one other hand there, I thought. If not, I'll add in my own, which is that Secretary General, just before you arrived we heard from Ambassador Rogozin a really rather impassioned plea expressing Russia's wish to be much more closely involved in the security policy making process and to talk much more closely with Russia. When you arrived in Brussels, I think you caught everybody's attention by saying that a new relationship between NATO and Russia was absolutely crucial and was a cornerstone of your office.

If you could just briefly tell us where you think the Russia relationship is going, as well as the global question, I think that would be a perfect and fitting end to a very interesting appearance.

ANDERS FOGH RASMUSSEN: Yes, that's right. My very first address in this very room was about the NATO-Russia relationship because I attach strong importance to that relationship. I do believe that the development of a true strategic partnership between NATO and Russia would contribute in a very valuable way to an overall improvement of security and stability in our part of the world.

And it is my strong belief that basically we are faced with the same security challenges, and therefore we should also cooperate in addressing these security challenges.

And actually, I think we have achieved quite some progress. Last autumn, in the wake of my speech, we launched new initiatives within the NATO-Russia Council. And in December the NATO-Russia Council at Foreign Ministers level, agreed on a joint project called... a joint assessment of the 21st Century common security challenges.

And this is a very important project because it is the basis, I would say, for everything else that we can carry through a joint assessment of the security challenges. If we can agree what are the security challenges then we can also map out areas in which we could develop practical cooperation.

This work is still progressing. And we expect it to be concluded by the end of this year. But we have already initiated some projects of practical cooperation.

But I do believe that we share interests in areas like Afghanistan, so we should develop cooperation as far as Afghanistan is concerned. We share interests in counterterrorism. Russia, herself, has suffered from terrorism. We should strengthen our cooperation in that regard. Counternarcotics. During my visit to Moscow I realized how high on the agenda counternarcotics is among politicians and also in the general public. We should strengthen our cooperation in that area. Counterpiracy, obviously, and also missile defence.

We are faced with the same real missile threat, and we are currently considering within NATO how we can develop a missile defence system not only to protect our deployed troops, but to protect territories and populations.

I want a transparent process where we have a dialogue with Russia as to how we could possibly cooperate on missile defence. It gives military sense because we could make the whole system even more efficient if we cooperate, but it also makes political sense because if we could cooperate on missile defence then it would become obvious to all people in Russia that our missile defence system is really a defence system. It is not directed against Russia.

So both from a military and political point of view it makes sense to embark on practical cooperation as regards missile defence. And we have already had the first consultation in the NATO-Russia Council and we envisage further consultations.

So in short, I am quite optimistic about progress in the relationship between NATO and Russia. Having said that I do realize that we have also areas where we disagree, like Georgia, our open door policy. We'll have to handle that with an open mind. But basically I see progress and I want it to move in the direction of a true strategic partnership. And I hope that Russia would realize that if Russia is threatened it's definitely not from the West. And we have no intentions whatsoever to attack Russia, and I would expect that Russia has no intention to attack us.

GILES MERRITT: Indeed. Thank you very much, indeed, Secretary General. Now, that brings us to the close of this session. This afternoon we'll be talking about the two-way street in defence procurement across the Atlantic. We'll also be talking about the way forward on Afghanistan.

Right now, at the same time as lunch, there is... we're hosting the launch of the latest SIPRI Yearbook which is being presented by SIPRI, the Stockholm Institute's Director, Bates Gill, just off the main hall.

But I think with that I'd like to thank the Secretary General very much for coming here today. I wish him well with the reading of the ten recommendations of our Jam Session because we were very grateful both to NATO and to the European Commission for the financial support they gave to us for this one. And we hope very much that the NATO acts run full on next year's venture, which we're hoping to develop further as a global security conversation.

Thank you very much, indeed, Secretary General for coming here today.