HELSINKI — Norway needs to boost manpower and increase funding for advanced defense systems and equipment to pose a credible deterrent to Russia's growing military presence in the High North, according to the Norwegian Armed Forces' (NAF) 2014 Annual Report.

Entitled, "The World in Change," the report reinforces the need to create a more robust defense based on long-term sustainable targets and backed by higher spending on equipment and personnel, and core military units that provide increased mobility, flexibility and firepower.

Russia's aggression in Ukraine underlines the need and urgency to invest more heavily in defense-building measures, particularly in the High North, said Norway's defense chief, Adm. Haakon Bruun-Hanssen.

While Russia poses no "immediate threat" to Norway, the Kremlin's "considerable military expansion" in the High North will be Norway's biggest military challenge going forward, Bruun-Hanssen said.

"Our budgets are tight in relation to our current activity levels, and more is being demanded from the armed forces. There are higher expectations from our politicians, the public, and not least from our NATO allies. We face an immediate imbalance between the level of our ambitions and the economic resources that we have at hand," Bruun-Hanssen said.

Estimates of how much more the NAF will require to cover future equipment and operating needs vary from an extra US $200 million to $400 million annually.

A higher level of funding is not only required to finance core operating units, the Annual Report observes, but also to support an increasing need to contribute to NATO or UN-led international operations, as well as the elevated demands for domestic multibranch and multinational joint exercises with NATO and Nordic nations.

"We can [adequately supply] the operations we conduct in Norway and abroad, but I am not satisfied with our reaction capability when it comes to meeting the biggest challenges that we may face. This applies to both responsiveness, availability and the robustness of our troops," Bruun-Hanssen said.

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The NAF's spending power has been negatively affected by the weakening of the krona against major currencies since the defense budget for 2015 was set down in October at 43.82 billion kronor, carrying a US $6 billion currency exchange value at that time.

Following currency gains against the krona since January, the 2015 budget's US dollar value has fallen to around $5.4 billion, eroding the purchasing power of a 3.4 percent increase in the 2015 budget.

This is particularly noticeable for international procurements denominated in foreign currencies.

The NAF is discussing with the Ministry of Defense those areas within the military that need reorganization and increased funding.

In October, the MoD directed the NAF to provide a Military Advisory Report to the government that would set out defense challenges, capability targets and funding objectives. The report is due by Oct. 1.

In her February address to the Oslo Military Society, Norwegian Defense Minister Ine Eriksen Søreide conceded the difficulty facing the government in bolstering defense spending.

According to Søreide, the uphill battle to reach NATO's target of 2 percent of GDP is undermined by a tougher economic climate and the Norwegian Exchequer's need to curb spending across all departments. Norway spends between 1.2 and 1.3 per cent of its GDP on defense.

"The goal of halting the decline in defense budgets and working toward a minimum defense spending level of 2 percent of GDP within 10 years is a very demanding one for most of our allies. We, too, have a way to go before reaching the 2 percent level. But we stand by the target," Søreide said.

The 2014 Annual Report prioritized future capabilities and the NAF's ability to not only afford advanced military equipment but have the organization and manpower levels to fulfill all elements of its Total Defense mission.

The MoD-directed efficiency drive, which started in 2002 and is due to run to the end of 2016, is expected to produce $8.4 billion in savings over the 14-year period. To date, savings have been channeled from lower- to higher-priority areas, and have been used to partly finance force modernization programs.

"We must make certain that the operational units are adequately staffed. The chief of defense and I have a constructive dialogue on this. And we must continue renewing and investing in new equipment and plan for major purchases of material, not only in the near future but 15 to 20 years ahead," said Søreide.

Savings from the cost-efficiency crusade since 2008 have been used to support key acquisitions, including the Army's $1.22 billion purchase of new CV90 armored combat vehicles.

Looking forward to big ticket item purchases, the government has reached a decision in principal to acquire new submarines to replace the Navy's Ola-class fleet.

"We can no longer fund that kind of procurement by reducing volume or through efficiencies. If we want submarines, we must make room for them in the budget, and we know that could mean lowering other priorities," Søreide said.

The MoD has hired consultants McKinsey & Co. to evaluate the potential to generate greater cost-efficiencies across the military organization. The spotlight will mainly fall on staffing, support and administration.

"We're not going to touch operational activity and capability. On the contrary, we're doing this to strengthen operational capability," said Søreide.

The NAF's Annual Report noted the increasing demand on military resources connected to Russia's defense buildup in the High North. Seventy-four Russian aircraft were identified in international airspace along Norway's coast in 2014, compared with 58 in 2013.

Moreover, there was increased surface and underwater activity by Russia off Norway in a year when the Russian Navy is believed to have tested three new types of submarines in High North waters.

Russia's High North forces have also started to deploy new missiles with greater range and precision as it strengthens its Northern Fleet, Bruun-Hanssen said.

Despite Russia's growing presence, Bruun-Hanssen does not regard Moscow's raised levels of investment, weaponry and manpower as a direct threat to Norway.

"It's somewhat different for Norway than it has been for the rest of Europe. We have witnessed the modernization of Russia's armed forces since 2008. We have seen a gradual increase in activity, of aircraft and vessels, and the arrival of new aircraft and vessels, as well as the new weapon systems that are in use. By contrast, the increase in Russian activity in the Baltic Sea has been more sudden," Bruun-Hanssen said.

Norway, said the defense chief, has a consistent and predictable presence in the High North, and is accustomed to having Russia as its nearest neighbor. "Russia behaves in a very predictable and measured way toward Norway, and this remains largely the case," Bruun-Hanssen said.