The number of nuclear warheads around the world is continuing to drop, but that doesn't mean countries are moving towards a nuclear-free future. Far from it.

Instead, all nuclear-armed states are taking steps to consolidate or modernize their arsenals, the Stockholm International Peace Research Institute (SIPRI) said in its annual report released Monday.

"In practical terms we're seeing a world of fewer but newer nuclear weapons," SIPRI senior researcher Shannon Kile said.

At the start of 2015, the SIPRI report says, there were an estimated 15,850 nuclear weapons held by nine states - the US, Russia, the UK, France, China, India, Pakistan, Israel and North Korea. That's roughly 500 fewer warheads than the Swedish institute recorded in 2014.

The decline is mostly due to the world's top two nuclear powers, Russia and the United States. Both have been getting rid of outdated weapons, and cutting down their stockpiles under disarmament treaties, since the end of the Cold War. But despite the downward trend, the two countries have also embarked on billion-dollar programs to upgrade their nuclear delivery systems and warheads.

Beginnings of an arms race?

China is also modernizing its nuclear stockpile. According to the SIPRI report, the number of weapons there has increased from 250 to 260 over the past year.

A more worrying trend, says Kile, is the expansion of nuclear stores in India and Pakistan. The South Asian rivals are both increasing their ability to produce fissile material, used to make nuclear weapons, and could "double or even triple the existing arsenal size over the next 10-15 years," Kile says.

These developments have raised concerns of a potential arms race in the region, as well as the danger of nuclear warheads being deployed in military conflicts.

"It's not just an arms race between India and Pakistan," says Oliver Meier, deputy head of the International Security Division at the Berlin-based German Institute for International and Security Affairs (SWP). "China is also part of the equation, so it's a triangular arms race and that is something that we haven't dealt with before."

India and Pakistan aren't signatories to the Nuclear Non-Proliferation Treaty, which has disarmament as one of its main goals. According to Meier, the international community should take steps to engage these countries in "a dialogue about nuclear confidence building, about transparency on nuclear arsenals and to help find ways to make sure that there's as much transparency and stability as possible."

Russia and the West

Besides the regional implications of an arms competition in South Asia, the consequences of instability in Ukraine over the past year have also caused alarm in some circles.

Russia's annexation of Crimea in March 2014, and the subsequent separatist insurgency in eastern Ukraine, has plunged Moscow's relationship with the West to its tensest state since the Cold War.

"The crisis in Ukraine certainly is affecting the nuclear policies of Russia," says Meier. "Russia is increasing emphasis on nuclear weapons, also on nuclear weapons deployed in Europe - short range, technical nuclear weapons."

Earlier this year, Russian President Vladimir Putin revealed that he considered activating nuclear forces to ensure the annexation of the Crimean peninsula, prompting an outcry from NATO. Both Russia and the US have also accused each other of violating arms control treaties in recent years.

According to SIPRI's report, Russia has cut its stockpile from 8,000 to 7,500 since the beginning of 2014, while the US weapons count has decreased from 7,300 to 7,260. The report also noted that the pace of this reduction is slowing down.

"Frankly it's not a very bright prospect for future reductions,” says SIPRI's Shannon Kile. "If anything…we may see the redeployment of medium-range and intermediate size weapons systems back in Europe."

Lessons from Ukraine

There could be other, broader implications of the Ukraine crisis for nuclear non-proliferation, according to Giorgio Franceschini, an expert in nuclear security at the Peace Research Institute in Frankfurt.

Ukraine was left with almost 4,000 nuclear weapons after the breakup of the Soviet Union in 1991. Three years later it gave up its nuclear arsenal to Moscow in return for security assurances from Russia, the US and the UK.

"What happened is a terrible message to all those states out there who are considering whether they should acquire nuclear weapons or not," Franceschini said.

He cites Iran as one example. The country is currently in talks with the so-called P5+1 - France, Germany, the UK, China, Russia and the US - with the aim of reaching a long term agreement to curb its nuclear program in exchange for the lifting of sanctions.

"So, what does the Iranian leadership, for example, think?" asks Franceschini. "Ukraine was the third largest nuclear power in 1994. They had nuclear weapons, they gave them up, and look where they are now."