Asia's defense spending overtakes Europe's: IISS

Sukhoi-30 aircrafts drop bombs on the targets during the Indian Air Force (IAF) fire power demonstration exercise ''Iron Fist 2013'' in Pokhran, Rajasthan February 22, 2013.

LONDON (Reuters) - Asia's defense spending overtook Europe's for the first time last year, the International Institute for Strategic Studies (IISS) said on Thursday, reflecting China's military rise and shrinking European economies.

In its annual report on the world's militaries, it said China's defense spending in real terms rose 8.3 percent between 2011 and 2012, while in Asia as a whole, spending rose 4.94 percent last year.

At the same time, nominal defense spending among European NATO members had shrunk to around 2006 levels due to budget cuts, the IISS said in "The Military Balance 2013".

"Indeed, the increase in Asian spending has been so rapid, and the defense austerity pursued by European states so severe, that in 2012 nominal Asian spending ($287.4 billion) exceeded total official defense spending not just in NATO Europe, but across all of Europe, including spending by non-NATO European states," it said.

The IISS, however, played down Washington's planned "pivot" to Asia, saying that it had announced only limited new military deployments there while reducing in its forces in Europe. "But as far as Asia was concerned there was less to this rebalance than first appeared," the report said.

It also noted the United States continued to dominate defense spending, accounting for 45.3 percent of the global total.

Asian countries have been steadily raising defense spending, using resilient economic growth to fund militaries able to cope with an increasingly complex regional environment.

"China is now clearly the second-largest defense spender in the world," it said, adding that if it could sustain economic growth, it could match U.S. levels between 2025 and 2028.

North Korea, which conducted a third nuclear test last month, continued to add to its military capabilities.

Among these, the report said, were a plutonium stockpile sufficient for four to 12 nuclear weapons, a uranium-enrichment program that could add enough fissile material for an extra one or two weapons a year and an array of short and medium-range ballistic missiles.

It also had the world's third-largest chemical weapons arsenal and possibly biological weapons.

The multiplicity of threats in Asia, as different countries take action to counter others, mean "there is substantial evidence of action-reaction dynamics taking hold and influencing regional states' military programs," the IISS said.

India, whose heavy reliance on imports makes it one of the largest defense markets for foreign suppliers, continued to build capabilities geared towards both Pakistan and China.

Japan and South Korea, meanwhile, were trying to build their defenses against North Korea's nuclear and missile programs.

(Editing by Andrew Roche)