But as USAF / RAF etc report to Sovreign Govts then we can safely assume they don't use transponders on non NATO excursions when flying close to other countrys borders.
Why would you assume that? I only made reference to 'NATO' because that is what the OP said and it was a NATO rep that I spoke to. The rep made no mention of the RAF, USAF etc flying without transponders, so not sure why you'd conclude that to be the case.