European Drawdown

This briefing report provides information on the total estimate of potential residual value of U.S. installations being returned to European host countries and the status of the residual value negotiations between the United States and Germany. So far, the United States has recovered only a small portion of its total estimated residual value claim in Europe, estimated at $3.8 billion. Most of this estimate comes from installations being returned in Germany, where the U.S. investment is pegged at $3.4 billion. State Department officials said that negotiations on a settlement with Germany have begun but that much hard bargaining remains ahead. They also said that the $3.4 billion figure is a starting point for negotiations, but they consider it significantly more than the United States can expect to receive ultimately. The negotiations are being carried out at a time of severe financial constraints on Germany, resulting in part from aid being provided to Russia, the Ukraine, and Eastern Europe. The United States has received about $3 million in cash from Germany for a small number of properties returned before 1991. Unable to negotiate additional satisfactory cash settlements with Germany, the U.S. military has started to turn to payment-in-kind. That is, the German government will fund military construction projects to be carried out by German companies instead of paying cash for U.S. facilities and improvements at U.S. installations being returned.

GAO found that: (1) the United States has recovered only a small portion of its total estimated residual value claim in Europe; (2) the U.S. investment in Germany is estimated at $3.4 billion; (3) most of the potential residual value in Germany comes from returned installations; (4) although recent high level discussions with German officials have opened channels for negotiating a settlement, the State Department does not expect to receive a large monetary settlement as a result its negotiations; (5) Germany will not be able to repay much of the claim due to financial constraints as a result of its outstanding foreign assistance obligations; (6) the United States has received about $3 million in cash from Germany for a small number of properties returned before 1991; (7) the U.S. military is focusing on payment-in-kind settlements in which the German government will fund military construction projects rather than paying in cash for returned U.S. installations; (8) since April 1993, U.S. negotiators have concluded payment-in-kind agreements with the German government totalling $197.7 million; (9) the value of Army and Air Force payment-in-kind agreements will be applied against future settlements; and (10) the U.S. military intends to continue focusing on payment-in-kind settlements in future negotiations with Germany.