The report did find, however, that there is a catch. New technologies mean that the West in general and the United States in particular are losing their technological edge, the report found. Countries such as Russia and China have been showcasing new systems and technological advances that show the balance of power may be shifting.

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The 2016 Military Balance report examines closely, for example, Russia's modernization of its armored fighting vehicles and China's new ballistic missile systems, as well as the less traditional problem of deterrence in cyberspace.

"Access to military-relevant high technologies is growing and this leveling of the technological playing field presents governments with a challenge not just to keep pace with the latest technology and monitor its proliferation but also cope with the blurred boundaries between civil and military technologies and offensive and defensive military systems," John Chipman, director general and chief executive of IISS, said at the launch of the Military Balance 2016 report in London.

"Western military technological superiority, a core assumption of the past two decades, is eroding," Chipman added.

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Moreover, the overall balance of power in military spending appears to be shifting. Last year, the IISS Military Balance noted the rise of the Asian powers, a trend still evident in the 2016 report. This year, the report makes an additional observation: the Persian Gulf region may well see its own shifting balance of power, driven in part by the lifting of sanctions on Iran, low oil prices and continued conflict in nearby states.

That region already has one of the biggest defense budgets, according to IISS: Saudi Arabia, whose $81.9 billion budget is the third-largest found in the report and among the largest budgets as a percentage of GDP in the entire world. There have been some disputes over whether Saudi Arabia's defense budget is actually so large, however, as the IISS figure also contains wider funding for the Interior Ministry. Requests for comment from the ministry were not immediately returned.

Contrasted with rising powers, defense budgets in Europe clearly seemed to be stagnating if not dropping. Britain saw its defense budget drop from $62 billion to $56.2 billion, for example, despite still relevant threats such as the Islamic State in Syria and Iraq. Just four out of 26 European partners of NATO now meet the agreed spending aim of 2 percent of GDP, leaving a gap of almost $100 billion to reach the target.