NATO Defense Financing Act

To provide financial lending mechanisms to assist North Atlantic Treaty Organization allies in modernizing their military forces, and for other purposes. 1. Short title This Act may be cited as the NATO Defense Financing Act 2. Findings Congress finds the following: (1) Many United States allies, including some North Atlantic Treaty Organization (NATO) members, continue to operate Soviet era military equipment. This equipment is outdated, unreliable, increasingly unsafe and is unable to effectively integrate and operate jointly with United States military forces. (2) The inability of some NATO allies to fully operate alongside United States military forces decreases NATO combat effectiveness and places additional strain on the United States military. (3) Some NATO allies are compelled to buy spare parts and services from Russian providers to keep their Soviet-designed equipment functional. These NATO allies desire to operate modern Western military equipment, but have limited financial resources available to purchase expensive new equipment. (4) Following the end of World War II, the United States faced a need to help allies rebuild their militaries, which it addressed by providing substantial financial assistance through the Mutual Defense Assistance Act of 1949 ( 22 U.S.C. 1571 Public Law 82–165 (5) Given the return of great power competition (6) The United States does provide some military equipment to NATO allies through the foreign military financing program and other grant assistance, but that assistance is insufficient to meet allies’ needs. (7) To supplement existing grant assistance, providing foreign military financing loans to allies—at rates competitive with those already available on commercial markets—to purchase NATO interoperable military equipment supports allies’ modernization requirements. (8) As described in Article 2 of the North Atlantic Treaty, in addition to providing security to allies, NATO was established to promote democratic institutions and values by strengthening their free institutions, by bringing about a better understanding of the principles upon which these institutions are founded, and by promoting conditions of stability and well-being 3. Statement of Policy It is the policy of the United States to— (1) deter aggression against North Atlantic Treaty Organization (NATO) allies by Russia or any other adversary; (2) assist NATO allies in acquiring and deploying modern, NATO interoperable military equipment and reducing their dependence on Russian or former Soviet-era defense articles; (3) ensure that NATO allies meet alliance defense commitments, including through adequate investments in national defense; and (4) work to maintain and strengthen the democratic institutions and practices of all NATO allies, in accordance with the goals of Article 2 of the North Atlantic Treaty. 4. Foreign military loan authority (a) In general Subject to the notification requirements under subsection (b), the President, acting through the Secretary of State, is authorized— (1) to make direct loans under section 23 of the Arms Export Control Act ( 22 U.S.C. 2763 (2) to charge fees for such loans under paragraph (1), which shall be collected from borrowers in accordance with section 502(7) of the Congressional Budget Act of 1974, and which may be used to cover the costs of such loans as defined in section 502 of the Congressional Budget Act of 1974. (b) Notification A loan may not be made under the authority provided by subsection (a) unless the Secretary of State submits to the appropriate congressional committees a certification, not fewer than fifteen days before entering into an agreement to make such loan, that— (1) the recipient country is making demonstrable progress toward meeting its spending commitments in accordance with the 2014 NATO Wales Summit Declaration; (2) the government of such recipient country is respecting that country’s constitution and upholds democratic values such as freedom of religion, freedom of speech, freedom of the press, the rule of law, and the rights of minorities; and (3) the recipient country has demonstrated fiscal stability, a commitment to a free market economy, and the financial capacity to meet the terms of the loan proposed to be provided by the United States. (c) Repayment A loan made under the authority provided by subsection (a) shall be repaid in not more than 12 years, but may include a grace period of up to one year on the repayment of the principal. (d) Appropriate congressional committees defined In this Act, the term appropriate congressional committees (1) the Committee on Foreign Affairs and the Committee on Appropriations of the House of Representatives; and (2) the Committee on Foreign Relations and the Committee on Appropriations of the Senate.

Summary: NATO Defense Financing Act This bill authorizes the President to make direct loans to countries that joined the North Atlantic Treaty Organization (NATO) after March 1, 1999, for the purchase of U.S. defense articles. The President may (1) make such loans with lower interest rates than required by statute, and (2) charge fees associated with such loans. Before making such a loan, the Department of State shall certify to Congress that the receiving country (1) is making demonstrable progress toward meeting its NATO defense-spending obligations, (2) is respecting the country's constitution and upholding democratic values, and (3) has demonstrated a commitment to a free market economy and the capacity to meet the loan's terms.