Worldwide military spending jumped 5.9 percent in 2009 to $1.5 trillion, according to a new report that underscores the long-term decision of many countries to prioritize defense. This is despite a recession that shrunk the global economy 2.2 percent.

The US remains by far the biggest military spender, followed by China, the Stockholm International Peace Research Institute (SIPRI) said in its annual report on worldwide military expenditures, released June 2. Last year saw the steepest jump in worldwide military spending since the start of the Iraq War in 2003.

See the full list: IN PICTURES: World's Top 10 Military Spenders

But, as the world’s military spending increased nearly 50 percent over the past decade, the biggest military budget increases were seen in small, oil-rich countries flooded with new wealth.

From 2000 to 2009, Chad increased its military budget 663 percent, Azerbaijan increased 471 percent, and Kazakhstan increased 360 percent.

“It creates potential dangers,” Sam Perlo-Freeman, one of the report’s authors and the head of SIPRI’s military expenditure project, said in a telephone interview from Stokholm Thursday. “Although there is nothing inevitable about arms races leading to war, it can potentially be a warning sign.”

Turning oil into arms

Oil discovery often increases military spending, Mr. Perlo-Freeman says, because – unlike taxes – the revenues carry little political cost, the oil and gas infrastructure justifies increased protection, and the development of natural resources tends to exacerbate tension and conflict.

In Nigeria, for example, SIPRI found that “the massive environmental damage caused by oil extraction and the lack of benefit to oil-producing regions has generated grievances.” Chad, as well, has increased military spending in an attempt to quell domestic conflict. Chad’s oil infrastructure was built up with cheap loans from the World Bank. The global lending agency pulled out of the project when it became clear that the government was spending oil revenues on defense instead of development, says Perlo-Freeman.

In Central Asia, Azerbaijan has used oil revenues to beef up forces along its border with Armenia, which has traditionally had a stronger army and enjoys strategic terrain advantages. The International Crisis Group said in a report last year that Azerbaijan's stronger military could put the fragile truce with Armenia under threat.

“Azerbaijan has been playing catch-up with Armenia,” says Perlo-Freeman, noting their conflict over the disputed Karabakh region.

US and China top spenders

In absolute terms, the US and China increased military spending the most over the past decade.

China, which regards its military budget as a state secret, spent an estimated $100 billion on it in 2009, a 217 percent increase from 2000, according to SIPRI. The only other Asian country in the top 15 was India, which spent $36.3 billion on its military in 2009.

The US spent $661 billion on its military in 2009, a 75.8 percent increase from 2000. While current US military spending is still a carryover from the years of George W. Bush, President Barack Obama shows no signs of cutting spending. The Nobel Peace Prize winner excluded security-related expenditure from a planned three-year squeeze in discretionary expenditure. At a recent hearing before Congress, Secretary of Defense Robert Gates talked about efforts to trim the fat but the proposed Defense Department baseline budget for fiscal 2011 is $708 billion.

Engaged in two wars, the US led the decade of increases, but it was joined by 16 additional nations in the G20.

In 2009, Timor-Leste led the world with the biggest increase in military spending, upping its budget 54 percent. Uruguay, Cyprus, and Lebanon were also big spenders, with each country upping their military budget more than 20 percent this past year.

Biggest drops seen in Iraq, Georgia

While oil-rich countries saw big budget increases over the whole decade, 2009 alone saw a decrease in gas prices that therefore somewhat slowed the rising trend of military budgets in oil-dependent economies. The fall in oil prices in 2009 most affected the military spending of oil producers Iraq (down 28 percent), Venezuela (down 25 percent), and Oman (down 16 percent), according to SIPRI. "But the long-term trend of oil and other natural resource revenues driving increased military spending in many developing countries seems set to continue," the report states.

The largest relative real decrease in 2009 was in Georgia, whose military spending fell 39 percent from exceptionally high levels in 2008 due to the conflict with Russia in South Ossetia. In the decade leading up to the war, however, Georgia had one of the world's most rapid increases of military spending.

“Their rapid expansion was building up to a conflict,” says Perlo-Freeman. “Essentially having failed in the war, they would appear to have decided that the military option isn’t going to work anymore.”

IN PICTURES: World's Top 10 Military Spenders

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