Military spending reached US$1.035 trillion last year - or US$162 for every inhabitant of Earth - compared to US$956 billion in 2003, the institute revealed Tuesday in its annual report.

In real terms, spending was just marginally below what it was at the height of the Cold War in the late 1980s.

American military spending rose rapidly between 2002 and 2004 as a result of massive budgetary allocations to fight ``the global war against terror'' - primarily in Iraq and Afghanistan - SIPRI noted. ``The main explanation for the current level of, and trend in, world military spending is the spending on military operations abroad by the US, and to a lesser extent, by its coalition partners,'' it said.

Washington alone outspent the entire developing world in military goods, accounting for 47 percent of the worldwide figure. But the Bush administration's high financial burden may simply be the price for having opted to fight its war in Iraq with little institutional backing, especially from the United Nations, it said.

``The US today possesses supreme power by most reckonings but was limited in what it could achieve in Iraq without institutional backing and is labouring under heavy costs as a result,'' said SIPRI head Alyson Bailes.

Some countries were seeing the benefits of cooperation, she said, and so it would be ``hasty to assume that the unilateral rather than the multilateral approach to wielding power will shape the globe's future.''

Shunning North-South cooperation in order to meet transnational threats, Bailes added, meant that ``sadly, many actions of the US and other `northern' powers since 2001 seem rather to have polarized attitudes further. The events of the past few years have done little to bring global solutions closer.'' There were 19 major armed conflicts in 2004 each with more than 1,000 battle deaths per year.

Most are longstanding and only three - the conflict against al-Qaeda, the conflict in Iraq and the conflict in Darfur - are less than 10 years old.

``Paradoxically, the long-standing and recurrent nature of many conflicts may make them less visible internationally,'' said SIPRI in the report, citing ``scant media attention'' accorded in 2004 to conflicts in Nepal and Uganda.

The institute also noted that there were several initiatives to limit the use and proliferation of weapons of mass destruction, with a special emphasis on North Korean and Iranian nuclear programs.

In pre-war Iraq, said SIPRI, American and allied claims that the country possessed such weapons ``were inaccurate and unsupported by the available evidence.''

But the removal of Saddam Hussein combined with a Libyan decision to abandon weapons of mass destruction and ballistic missiles ``created a unique opportunity to make progress towards the goal of establishing a WMD-free zone in the Middle East.''

But while the world was watching out for weapons of mass destruction, ``conventional arms races are unconstrained.''

AGENCE FRANCE-PRESSE