The west has spent its peace dividend. Yet some experts think the chances of nuclear conflict are as big as ever. Is it time to start saving again? By John Lloyd

We have lowered our defences significantly and rapidly in the past decade: the peace dividend has been a rich one. The militaries of all the old combatants - Nato and the Warsaw Pact - have been greatly reduced in size and power.

The turn of the century, however, has ushered in a new set of threats and problems which are becoming increasingly dangerous and urgent, and to which only interim solutions have been found.

The acquisition of nuclear weapons by India and Pakistan has fundamentally changed the nuclear calculus. Although India, which with 400 nuclear warheads is the more heavily armed of the two, enjoys a relatively stable government, Pakistan's military dictatorship is unstable. Worse, its generals are smarting from defeat by India in the engagements in Kashmir last year. The two states may reach a predictable stand-off, as did the superpowers in the cold war; but many analysts believe that there is more than a fifty-fifty chance of a nuclear exchange.

Even if an India-Pakistan cold war does develop, the example set by the two antagonists is that defiance of the established nuclear powers who work to contain the proliferation of nuclear weapons is, if not without cost, bearable. In any case, the United States itself sets a bad example for non-proliferation by threatening, in essence, any state that might use chemical or biological weapons against the US or US forces that it will - or could - use nuclear weapons in retaliation.

The US has set another bad example. After the Ronald Reagan-inspired "star wars" missile defence system was put on the shelf during the Bush and early Clinton presidencies, it has now been revived for a second phase of baleful existence. Although there is no guarantee that it can be successfully developed to the point where it would offer a credibly complete shield against all incoming missiles, there are already two strategic visions built on it.

One vision - that of the Clinton presidency - is for the system to be limited in scope, offering a defence only against "rogue states", such as North Korea or Iraq. Both of these have attempted to develop efficient weapons of mass destruction, and the latter has used chemical weapons against Iraqi Kurds. The US - or so its administration claims - could still be pierced by the missiles of large nuclear states, such as Russia or even China (or France, if it decided it had had enough of Disney and McDonald's).

This strategic line led to the bizarre invitation to Igor Ivanov, the Russian foreign minister, to visit the Pentagon's high-security room in April to learn the most intimate details of the developing system. "You could still destroy us, Igor, we promise," the Pentagon brass were said to have told him.

The vision endorsed by the Republican leadership, on the other hand, calls for a complete defence against anything - and for all present and further arms-control agreements to be frozen until the system is up and running. The first strategic vision has already caused the Russians to refuse to amend the anti-ballistic missile treaty, and the Chinese to say that they have no alternative but to build more missiles. The second vision would destroy the arms-control agreements of every US president back to Richard Nixon. At present, the Republican presidential contender, George W Bush, who leads in the polls, seems committed to this version.

The "rogues" are a neuralgic issue for the US - and, although less discussed here, for Europeans, too. "There are new threats to the world," said Sandy Berger, the US National Security Advisor, last month. "One of these is the growing capability of North Korea and Iran, which may not be as susceptible to deterrence as the Soviet Union was." Berger did not mention the other prominent rogue, Saddam Hussein's Iraq, against which a US-UK bombing campaign is still being carried out. According to Richard Butler, the former head of the Unscom agency charged with verifying the destruction of Saddam's mass-destructive capabilities, the west has lacked the guts to confront the Iraqi dictator and will see him grow in power again.

In his newly published book, Saddam Defiant (Weidenfeld and Nicholson), Butler says flatly that "despite the massive amount of time and resources that were devoted to the job, it is not known accurately what capability for making and using weapons of mass destruction Saddam retains. This lamentable fact is mirrored in the politics that have enabled Saddam to succeed in his defiance of international law. Three permanent members (China, France and Russia) of the Security Council of the UN - the lawmaker and enforcer in this field - have decided to end all efforts to disarm Saddam and to oblige him to conform with the law."

Closely connected to the rogues is the issue of terrorism. "It is perfectly simple," says Butler. "Weapons are now portable and hugely destructive, and there are groups prepared to use them and individuals prepared to die with them. It is the major security preoccupation of Washington and London." Terrorism is often sponsored by the rogues; and the decaying nuclear arsenal of the former Soviet Union provides a uniquely available stockpile of mass-destruction capability for both.

The defence analyst Matthew Bunn says: "As recently as 1998, a group of conspirators at a major Russian nuclear weapons facility attempted to steal enough material for a nuclear bomb at a single stroke. While there is no evidence that enough material for a bomb has fallen into the hands of states such as Iran, Iraq or North Korea, such a proliferation disaster could happen at any moment. At the same time, virtually none of the measures that would be required to verifiably reduce stockpiles of nuclear weapons and materials to low, agreed levels are in place."

These threats come at a time of unprecedented change in the west's security structures, particularly in Europe, as a direct, if delayed, result of the end of the cold war. Nato's expansion to take in states to the east - it has already brought the Czech Republic, Hungary and Poland into the alliance - has alienated Russia and marginalised the states between Nato and the former Soviet Union; and the often-repeated desire of the three Baltic states of Estonia, Latvia and Lithuania to become members further irritates Russia.

Meanwhile, the present British government's welcome reversal of UK scepticism towards a European defence capability has Americans - especially the American right - crying foul and threatening disengagement.

In a talk to Chatham House last month, John Bolton, who was an assistant secretary of state in the Bush administration, warned that "a true European [defence] identity would mean the end of Nato as a military organisation and a fragmentation of transatlantic political co-operation. It could quite possibly spill over into harmful economic conflict as well."

Western intervention in Kosovo showed that the Europeans needed US intelligence, logistics and aircraft, and - had it come to a land war - would have needed US troops as well. European forces, although about two-thirds of the US military in paper strength, are configured separately for national defence and are often too little trained for effective use overseas. They nearly all source their weapons nationally. The effort and expense taken to reconfigure them to be effective would run into scores of billions of dollars and, at the same time, fuel isolationist moves in the US.

The Kosovo intervention, an assertion by Nato of a humanitarian ethic which it is vital to preserve, has not yet received the necessary funds to rebuild - or build anew - a decent society in the country. Nor has it got what Tony Blair said, in Chicago last year, was the most indispensable element of international politics: a doctrine that would legitimise such interventionism in the future (the Kosovo affair was illegal under international law).

The tentative move towards taking on dictators in their "own" lairs now seems threatened by indifference, niggardly expenditure and hostility to the entire project from both right and left in Europe and the US. Until governments can resolve the defence conundrums, the necessary support cannot be garnered. The peace dividend has been spent, for sure: but there is no will to save again.

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