Analysis: Can Nato reinvent itself as a powerful force in the modern world?

The transatlantic alliance is extending its sphere of influence into the former Soviet Union - but it is floundering in search of a new role

In Prague this week for the summit of Nato leaders, the American delegation has taken over no fewer than seven floors of the city's Hilton hotel. By contrast, the Netherlands is making do with just one.

As ever at Nato gatherings, there is only one nation that really matters but this time President George Bush's visit to Prague will help determine whether the alliance that won the Cold War can survive the current, uneasy peace.

Marginalised by Washington in the wake of 11 September, the alliance has been searching for a role ever since. In the week after the atrocity in New York, Nato did something it had never done before in its 50-year history, invoking its mutual defence clause in support of the United States. America's answer was a polite rebuff as it went to war in Afghanistan without the help of Nato.

Since then, the 19-nation transatlantic alliance, which had already defied one chorus of predictions of its demise after the fall of the Berlin Wall, has been floundering. The Prague conclave is designed to be nothing less than a relaunch – what is now being billed as a "transformation summit".

Today's heads of government meeting will be richly symbolic as Nato formally extends its sphere of influence deep inside the borders of the former Soviet Union, bringing the former satellite states of Latvia, Lithuania and Estonia into the fold as well as the Warsaw Pact stalwarts of Romania and Bulgaria, plus Slovakia and Slovenia.

For these countries, joining Nato signifies acceptance by the West, a step on the road to EU membership or – in the case of the Baltic states – a copper- bottomed guarantee against the (now implausible) possibility of invasion by Russia. But are they joining a true military alliance with global reach or a glorified talking shop? And will they contribute more than overflying rights, bases in areas of growing strategic interest, and a certain degree of political cover to US objectives?

The answers, inevitably, lie in Washington and over the past year more than one school of thought has developed in the US capital. The Pentagon's formative recent experience was the 78-day air campaign in Kosovo in 1999, which emphasised both the overwhelming military superiority of the US and its Nato allies' capacity for trying to meddle in operations.

Tensions between Washington and Nato headquarters were barely disguised at the time and have since been revealed in full colour by the memoirs of Wesley Clark, who was then Nato's supreme allied commander. In recent months, their European partners' misgivings over the vexed issue of Iraq have done little to change the Americans' perception of their troublesome qualities. The German Chancellor, Gerhard Schröder, infuriated Mr Bush with an election campaign highlighting opposition to war, and France wrangled long and hard over the wording of a UN resolution.

At the Pentagon, the hawks argue that the US must never again pool control of operations with nations that contribute so little. Yet the diplomats in the State Department value a big multinational institution which is so clearly dominated by Washington.

The brutal sidelining of Nato by the US has thrown into question the very purpose of Nato, forcing the Administration to decide whether or not it wants to maintain a transatlantic alliance. The answer to that is yes – or as one European diplomat put it more cynically: "The Americans can't invite in seven new members, and then just walk away."

At the heart of the new blueprint for Nato, conceived by Donald Rumsfeld, the US Defence Secretary, is the creation of a 20,000-strong rapid response force able to operate anywhere in the world at a week's notice, and capable of tackling terrorist threats or rogue states. Thus, Nato would move from being a defensive alliance rooted in the North Atlantic theatre to an organisation which would be able to go anywhere to take on the new threats, which as Mr Bush put it yesterday, were "very different from those it was founded to confront". These include terrorism and those involving nuclear and biological weapons.

The Nato secretary general, Lord Robertson of Port Ellen, sees this as proof of US engagement. He said: "There was a perception that America would no longer want to put in ground troops; Americans would be fighting in the skies, Europeans in the mud. There were indications, when the US said they would not put ground troops into East Timor or Sierra Leone, that the Americans were retreating. The response force is the answer to that."

Nato is revamping its Cold War command structure, has abolished 142 of the alliance's 467 internal committees, and is developing a new partnership with Russia. To the surprise of most diplomats, Lord Robertson has even been approached by China with a request for dialogue. Whether this will be enough to reinvent the alliance remains to be seen. In the long-term, Nato faces a classic squeeze if the US fights big campaigns alone or with selected allies only, and the EU realises its ambitions of taking over smaller-scale peacekeeping operations.

On one front, Nato has had a reprieve because Europe's military plans are mired in a diplomatic quagmire, as Turkey – an alliance member and an EU hopeful – blocks a deal guaranteeing the EU access to Nato's planning capabilities.

Yesterday, the alliance agreed to extend its mission in Macedonia beyond the end of its mandate on 15 December but, in the longer term, this type of low-level military operation should be the EU's work. Whether the new US recipe for Nato as a bulwark against terrorism and "asymmetrical threats" can revive the organisation depends on several factors. First, Nato needs commitments to narrow the vast gap in capabilities produced by the fact that Nato's 15 European nations spend $500m (£318m) a day on defence compared with $1bn by the US.

In Europe there are acute shortages of precision-guided munitions, air-to-air refuelling capabilities, special forces and other highly mobile units, and big transport planes. Some Nato nations have found themselves relying on the hire of Antonov transport planes from Ukraine, although a recent inquiry by the alliance discovered that these are now all under contract to Japanese electronic toymakers freighting Christmas goods to Europe.

Above all, Nato needs to ensure that its equipment is inter- operable so that groups of nations can undertake joint operations with Nato as a clearing house, rather than a sponsor. As one Nato diplomat put it: "If we want to take part in missions, we have to make sure that we are able to respond. If Nato has not transformed, it is obvious what the decision will be."

It remains unclear whether, on a practical level, an alliance of 26 nations that takes decisions by consensus will be able to agree on missions for a Nato response force. Opinions on this are divided because, with just 19 countries, Nato's decision-making during the Kosovo campaign was tortuous. The seven newcomers may reduce military cohesion since only two have much military hardware. Most officials expect most work to be done informally in the corridors before going to the ruling North Atlantic Council. One diplomat said: "At least there is one dominant player in Nato – the US – which can usually whip the others into line."

The key will be whether the US truly engages with the new Nato, giving allies a significant stake in campaigns and consulting them before decisions are taken. Anything less will consign the world's most powerful military alliance to a lingering and long-predicted demise.

How the Alliance works

Each Nato member has a permanent delegation at headquarters just outside Brussels. The North Atlantic Council is the supreme decision-making body, led by the secretary general, Lord Robertson of Port Ellen since 1999. But the US keeps control through the appointment of the Supreme Allied Commander Europe, invariably an American. General James Jones was named in July to succeed General Joseph Ralston. The military command has its headquarters in Mons, southern Belgium, home to the Supreme Headquarters Allied Power Europe, or Shape. Regional headquarters are in the Netherlands and Italy, with bases all over Europe. Having kept the peace in the Cold War, Nato went to war for the first time in 1995, when it intervened in Bosnia. It bombed Yugoslavia in 1999 and has peace-keepers in the Balkans.