One of the co-authors of the report, Petter Stalenheim, said global military spending is once again approaching the levels of the peak of the Cold War in 1987 and 1988.
"After the Cold War, world military spending went down quite drastically," Stalenheim said. "It started increasing again in 1998, and now it's only 6 percent lower than the level at the height of the Cold War."
The report says most of the spending -- some 47 percent of the total -- is by the United States. The U.S. military budget rose 12 percent in 2004 -- to $455 billion.
Much of Washington's spending is tied to the U.S.-declared war on terrorism, which includes operations in Iraq and Afghanistan.
The next largest spenders after the United States are Britain, France, Japan, and China.
Russia also remains among the world's top spenders. Russia's 2004 national defense budget increased almost 5 percent -- to $19 billion.
In dollar terms, that puts Russia in eighth place -- behind Germany and Italy. But SIPRI researchers said such a ranking does not fully reflect Russia's military power. That is because more weaponry can be produced for the equivalent of $1 in Russia -- where costs of labor and materials remain low -- than in Western Europe.
The SIPRI report also finds that China and India are big spenders on their militaries.
Simon Wezeman, another co-author of the report, said China wants to use its growing economic power to buy high-tech weapons systems from Europe, but is prevented from doing so by a U.S. and European Union arms embargo against it.
Wezeman said China wants the embargo lifted because it is unhappy with buying weaponry almost exclusively from Russia. The Chinese fear Russian systems they purchase today will become obsolete in another decade because Russian military research and development has largely stagnated since 1989.
"One of the reasons for the Chinese to be so pushy [about trying to get] the lifting of the European Union embargo on China may very well have to do with the fact that the Chinese would like to get their hands on some of the European technology, on specific engine technology and electronics to be used in Chinese-developed systems or in modified versions of what they can get from Russia," Wezeman said. "Without that kind of technology, the Chinese really see themselves in 10 to 15 years with systems which work fine today but are then completely outclassed."
India, too, wants a more powerful and modern military.
Wezeman said the last few years have seen India increasingly seeking to be a regional power, capable of projecting its forces throughout the Indian Ocean region if need be. However, until recently, India's ambitions were limited by being under an arms embargo for having tested nuclear weapons.
"Just a couple of years ago, in 1998, they tested nuclear weapons, and they were immediately placed under an embargo by the U.S., and also by a number of European countries. Which basically meant that India couldn't get any piece of equipment, either complete systems or components, from those countries," Wezeman said. "That situation has changed almost completely, to the extent that at this moment the U.S. and also the Europeans see India not so much as a country that has done a bad thing with nuclear testing, but as a country which is a strategic ally, mainly in the war on terrorism."
The SIPRI report uses information that is publicly available from governments or other research institutes.
But Stalenheim said that in the cases of countries that tend to disguise some military spending as nonmilitary activity, the researchers have had to make adjustments to reflect those countries' real -- rather than officially declared -- activities.
"SIPRI only works with open sources, and the main source for information is public information from governments, answers to our requests, and so on," Stalenheim said. "In the case of Russia, China, and a few other certain countries, we know that there are a lot of other things that should go into defense that is not in the official defense budget. So then we add things to get it closer to our definition [of what constitutes military spending]."
The increased global military spending comes as the world saw 19 armed conflicts in 2004, each with more than 1,000 battle deaths.
Those conflicts include six in Africa (Algeria, Burundi, Rwanda, Uganda, and two conflicts in Sudan); six in Asia (Kashmir, Myanmar, Nepal, Sri Lanka, and two conflicts in the Philippines); three in the Middle East (Iraq, Israel-Palestine, Turkey); three in the Americas (Colombia, Peru, the war on Al-Qaeda); and one in Europe (Chechnya).