However, the institute's director, John Chipman, warned against those who portrayed Islam as a new and coherent threat to fill a vacuum left by the collapse of Communism. "Not all these challenges can be met by the astute deployment of military force. I don't think it's right to talk about Islam as an organised threat against the West," Dr Chipman said.
He also identified China and North Korea as the only countries in east Asia spending more on defence than was justified by their legitimate needs. The IISS describes China's behaviour as "secretive" and accuses it of "falsification" in accounting.
At present, no missiles owned by states other than the official nuclear club - the United States, Russia, China, Britain and France - can reach Europe or North America, but the IISS confirmed predictions that the situation could change in the next few years. North Korea is developing a missile that can reach US territory, and missiles launched from North Africa and the Middle East are expected to be able to hit Britain in less than a decade.
The latest issue of The Military Balance covers missile proliferation, Chinese military spending and peace-keeping.
"It is somewhat bizarre that the end of the Cold War has heightened perceptions of the missile threat," the survey says. Fifteen countries apart from east European and former Soviet states have surface-to-surface missiles, casting doubt on the effectiveness of the Missile Technology Control Regime (MTCR), signed by 25 countries. Key missile suppliers - including China - appear not to have complied fully with the MTCR guidelines.
"The only alternative is, of course, active defence measures," The Military Balance says. These would range from anti-missiles such as the Patriots used in the 1991 Gulf war to more sophisticated measures as envisaged in the Eighties Star Wars initiative. The US is developing ballistic missile defences - first, to protect its own forces and regional allies and, second, to counter future attacks on the US itself.
According to the journal Aviation Week and Space Technology, so many missile defence studies are under way that Pentagon officials are fear it will not be possible to evaluate them all.
For the moment, conventional aircraft are more likely to cause serious damage than missiles, the IISS says, because they can carry more explosive or chemical or biological agents, and can hit more accurately. But the ballistic missile, "mainly on account of its range, speed and cost relative to that of a manned aircraft, is a favoured delivery means for proliferating states".
Missile proliferation threatens three areas: the Middle East, where even relatively short range missiles can strike other states' capitals, the Indian subcontinent, and North Korea's neighbours.
The longest-range and most formidable missile in the Middle East is the Chinese-made CSS-2, deployed by Saudi Arabia. With a range of nearly 1,700 miles and a two-and-a-half ton warhead, it outranges Israel's Jericho- 2 , which can fly 940 miles, and carries five times as much high explosive, chemical or biological agent.
North Korea's Scud-C missile, with a range of more than 300 miles, can hit anywhere in South Korea, and the Taepo Dong missile, range 1,500 miles, now under development, could hit the US territory of Guam.