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NATO: CNBC explains

The North Atlantic Treaty Organization is a political and military alliance between 26 European countries, the United States, and Canada. Founded in the aftermath of World War II, the organization was established for three purposes (according to its own version of its founding), "deterring Soviet expansionism, forbidding the revival of nationalist militarism in Europe through a strong North American presence on the Continent, and encouraging European political integration."

With these goals in mind—10 European countries signed the North Atlantic Treaty with the U.S. and Canada in 1949. This treaty was notable for its fifth article, which determines that "an armed attack against one or more of them ... shall be considered an attack against them all."

The NATO emblem sculpture at the organization's headquarters in Brussels.
John Thys | AFP | Getty Images

NATO served a defensive purpose throughout much of the Cold War, but after the fall of the Soviet Union, the organization turned to stabilizing Eastern Europe and expanding its membership. Over time, NATO began to embrace a more global outlook, writing in its 2010 Strategic Concept that the alliance "is affected by, and can affect, political and security developments beyond its borders."

What does NATO do?

The alliance is currently engaged in five global operations and missions: securing peace in Afghanistan, maintaining a presence in Kosovo, monitoring the Mediterranean for terrorism, combating maritime piracy off of the Horn of Africa and providing assistance to the African Union.

The organization's involvement in Afghanistan "constitutes the alliance's most significant operational commitment to date," according to the group, as it has led the region's International Security Assistance Force since 2003.

Past operations saw NATO involvement in Bosnia and Herzegovina, Macedonia, Iraq, Libya and even the United States after Hurricane Katrina. For a complete list of NATO operations and missions past and present, click here.

How is it funded?

NATO is primarily sustained through indirect funding and direct donations to NATO budgets. The former includes voluntary resource donations by member countries to specific NATO operations and missions. The direct donations, meanwhile, contribute to elements of the group budget that could not "reasonably be expected to be made available from national resources," according to NATO.

These direct donations go toward NATO's civil and military budgets and the NATO Security Investment Program, and they are determined by a cost-sharing formula tied to each country's gross national income. Per the 2014 version of this formula, the United States is slated to pay about 22 percent of each of these budgets.

According to NATO the 2014 military budget is €1.4 billion (more than $1.8 billion).

Who is in NATO?

According to the 1949 Treaty, NATO members may unanimously invite "any other European state in a position to further the principles of this treaty and to contribute to the security of the North Atlantic area to accede to this treaty." Below is a list of all 28 current NATO members and when they joined.

Country Membership Year
The United States1949
Belgium 1949
The United Kingdom1949
Czech Republic1999

Source: Source: NATO

—By CNBC's Everett Rosenfeld