WASHINGTON—At the 2025 NATO Summit in The Hague, allies agreed to increase their defense spending to 3.5 percent of gross domestic product (GDP) and their defense-related spending to 1.5 percent of GDP by 2030. Specifically on the latter figure, NATO leaders decided that “Allies will account for up to 1.5 percent of GDP annually to inter alia protect our critical infrastructure, defend our networks, ensure our civil preparedness and resilience, unleash innovation, and strengthen our defense industrial base.” This combination of defense and defense-related spending is how NATO arrived at the now often-quoted figure of 5 percent of GDP.
But beyond those general categories named in the communiqué, NATO provided no further details as to which elements of national GDP should be included in the accounting for the 1.5 percent. Just as the 3.5 percent of GDP defense spending goal is tied to NATO military planning, so should the 1.5 percent be focused on specific ways to enhance the Alliance’s broader defense and security posture.
The percentages may sound small, but the sums involved are quite large. With a combined NATO GDP of around $55 trillion, 1.5 percent adds up roughly $825 billion. Focusing on only the non-US allies, 1.5 percent of their GDP of $26 trillion still generates a sum of $390 billion. It is therefore important for the Alliance to be clear how these very large amounts should be defined within the overall spending categories if NATO defense and security are to be most effectively achieved.
Ahead of this year’s NATO Summit in Ankara in June, the Alliance should establish guidelines as to what will be included in the relevant categories, and it should require nations to utilize common approaches to collect the relevant information. Most importantly, the spending categories should be designed so that the goal is neither unattainable nor already met. The objective should be to incentivize allies to make the most effective contributions to NATO’s common defense.
Below are six recommendations for NATO to inform the establishment of such spending guidelines:
1. Include private-sector spending that enhances defense
A fundamental question is whether private-sector spending should be included alongside government spending. Many of the categories identified in the communiqué as part of the 1.5 percent are substantially private-sector activities, including much of the spending on critical infrastructures and networks, as well as corporate spending on the defense industrial base. Accordingly, as a starting point, private sector spending to “protect” critical infrastructures, “defend” networks, and “strengthen” the defense industrial base should be included in calculating the 1.5 percent. Governments would need to establish procedures to collect this data from their private sectors.
2. Identify critical infrastructures
NATO should establish a list of agreed critical infrastructures, starting with those most relevant to military operations. That would include airports, rail, seaports, roads, electric grids, pipelines, and hospitals. It would likely also include the internet and other telecommunications. For example, private sector spending on such infrastructure that enhances the Alliance’s military mobility capabilities or replaces Chinese telecommunications equipment should fall within the 1.5 percent. Other categories are also important—including water and waste treatment, as well as internet data centers—and worth consideration for inclusion. Following the first point, spending from both governments and the private sector on protecting critical infrastructures should be counted toward the 1.5 percent of GDP.
As part of undertaking this review, NATO will need to determine how spending on its seven categories of national resilience should be counted, as several involve the critical infrastructures identified above. The seven core resilience areas are continuity of government, resilient energy, managing population movement, food and water security, mass casualty response, civil communications, and civil transportation. Of these categories, energy, food, water, mass-casualty response, civil communications, and civil transport will also each involve private-sector spending necessary to “ensure resilience.” Such capital spending by the private sector should also be included in the 1.5 percent.
3. Include protection of critical infrastructure against both cyber- and physical attacks
NATO countries vary in their cybersecurity requirements for critical infrastructures. In determining the 1.5 percent, spending by private-sector entities pursuant to regulatory requirements, such as the interstate electric transmission requirements in the United States or the NIS2 cybersecurity requirements in the European Union, should be included. Likewise, for any critical infrastructures identified by NATO as important to military operations, cybersecurity spending should be included even if not already covered by regulatory requirements.
Protection against kinetic attacks should also be included. This would include spending, for example, to protect undersea and land-based cables and pipelines, as well as spending for stockpiling of materials and repair and rebuilding capabilities for the critical infrastructures most relevant to national defense. Not all spending on critical infrastructures will count, however: NATO will want to determine how to define spending to “protect” critical infrastructures as opposed to ordinary capital and operational spending.
4. Define “defense industrial base,” as well as “strengthen” and “innovation”
The Hague summit communiqué does not set out what is included in these important terms. The defense industrial base, for example, includes both governmental and private sector activities and, like the critical infrastructures, the relevant entities and activities need to be identified. That will likely be an ongoing activity, as the defense industrial base has been expanding to include nontraditional suppliers in areas such as unmanned vehicles and space.
Within that context, NATO will likewise want to define what is meant by “strengthen.” Capital spending by the private sector that expands the defense industrial base—for instance, for a new ammunition plant or an expanded capacity to produce weaponry or enhanced space capabilities—should count as part of the 1.5 percent. Similarly, innovations such as military use of artificial intelligence and drones that strengthen NATO’s defense capabilities need to be identified and counted.
5. Determine how enhancements to important supply chains should be counted
NATO has established a “Defense-Critical Supply Chain Security Roadmap,” approved in June 2024, and the Alliance’s “Updated Defense Production Action Plan,” released in February 2025, includes as an action item the need to “protect our defense-critical supply chains.” The 1.5 percent category should include both governmental and private-sector spending to increase the availability and security of the critical raw materials identified on the NATO list of twelve defense-critical raw materials. A starting place for this category would be expenditures for mining, processing, and stockpiling of defense-critical raw materials. Another area of high significance for defense-critical supply chains might be expansion of industrial capacity for microelectronic production.
6. Establish a process to guide the 1.5 percent pledge expenditures
To accomplish the best use of these funds, NATO will need to ensure effective high-level direction akin to the NATO Defense Planning Process for military requirements. One way to do this would be to task NATO’s Allied Command Transformation with developing guidelines that could be implemented at NATO headquarters, with guidance to nations by the assistant secretary general and with NATO permanent representatives providing national input.
