VILNIUS (Reuters) - Lithuania, Latvia and Estonia intend to triple annual spending on arms and military equipment to $670 million by 2018 from 2014 due to fears of Russia following its annexation of Ukraine's Crimea region, an IHS Markit report said on Thursday.
By 2020, it said, the combined overall defense budgets of the three Baltic republics will reach an estimated $2.1 billion, more than double that when the countries entered NATO in 2004 and the fastest such growth in any region worldwide.
"We have seen political confrontation between Russia and the West in the past 2-1/2 years escalate to military assertiveness and we do not see this ending anytime soon," said Alex Kokcharov, principal analyst in the country risk division of IHS Markit, a prominent research and analysis firm.
"This confrontation will likely include elements of military intimidation, making immediate Russian neighbors concerned."
Estonia, Latvia and Lithuania were annexed by the Soviet Union in 1940 after the outbreak of World War Two, but regained independence when the Communist colossus disintegrated in 1991, and are now members of both NATO and the European Union.
The IHS Markit report, which gave no sources, said Latvia and Lithuania would account for the biggest increase in military spending through 2018.
After Russia's annexation of Crimea in 2014, Latvia and Lithuania agreed to raise military spending to reach NATO's informal target of 2 percent of GDP by 2018, something that Estonia has already achieved.
The three Baltic republics each host detachments of about 150 U.S. soldiers, who were deployed immediately after Russia annexed Crimea. The Americans are augmented by occasional rotations of troops from other NATO allies. Deployments will grow to about 1,000 soldiers per country next year.
Lithuania protested at Russia's transfer of nuclear-capable missiles to its western Baltic outpost of Kaliningrad this month, calling it an aggressive move against the whole of Europe. The Kaliningrad enclave is sandwiched between Lithuania and Poland, both NATO and EU members.
Reporting by Andrius Sytas; Editing by Simon Johnson and Mark Heinrich