Along with a variety of other weapons, the US will supply Pakistan with 36 upgraded versions of the F-16 fighter aircraft for $1.4 bn, a variety of missiles and bombs for them for over $640m, and $52m worth of upgrades for self-propelled howitzers.

In Saudi Arabia, it will be modernising the kingdom's AH-64A Apache helicopters, a deal worth $340m, and providing new military communications equipment, the report said.

Meanwhile, the United Arab Emirates is buying Seasparrow ship-to-air missiles from Washington for $106m.

Iran's nuclear ambitions appear to have led to Washington's regional allies stocking up on weapons in recent years.

Economic interests

Richard Grimmett, the senior national defence expert at the Congressional Report Service and main author of the study, noted a major shift in political and economic interests driving post-Cold War era international weapons sales.

"Today that motivation
[for arms sales] may be based as much on economic considerations as those of foreign or national security policy"


Richard Grimmett, report author

During the Cold War, he argued, the underlying rationale for US arms sales was to ensure adequate arms supplies to friendly states.

"Today that motivation may be based as much on economic considerations as those of foreign or national security policy," Grimmett said.

But some of the old international tensions do seem to remain, Russia boosted its worldwide arms sales by $1.2bn, ending 2006 in second place with 21.6 per cent of the market.

It signed a deal worth more than $1bn to supply Venezuela, a major rival to the US in Latin America, with two dozen fighter jets, as well as transport and attack helicopters.

Moscow has also offered to help build a factory to produce the infamous Russian-designed AK-47 assault rifle favoured by armed groups around the world.

"His [Chavez's] decision to seek advanced military equipment from Russia is a matter of US concern," Grimmett said.

"Chavez appears embarked on an effort to make Venezuela an important military force in Latin America."

Market shrinks

But despite the fears of a new global arms race, the size of the market actually shrunk from $46.3bn in 2005 to $40.3bn last year.

Western European nations were among those hit hardest by the slump.
 
The four major regional suppliers - France, Britain, Germany and Italy - saw the collective value of their arms agreements with developing nations drop by half.

"The demand for US weapons in the global arms marketplace, from a large established client base, has created a more difficult environment for individual West European suppliers to secure large new contracts with developing nations on a sustained basis," Grimmett said.

However, the report does not take into account for the huge number of illegal weapons transfers, worth an estimated $10bn.

The report was released just days after 139 countries at the UN voted to develop a global Arms Trade Treaty.

The US was the only country to vote against the treaty that would seek to prevent international arms transfers that fuel conflict, poverty and serious human-rights violations.