According to the index, released Tuesday, Iceland is the world's most peaceful nation on earth, followed by Denmark and Norway.

"It is clear that small, stable and democratic countries are the most peaceful," the report said.

According to the report, Iceland's ranking reflects its political stability and its good relations with its neighbors. Iceland has no standing army and proportionally, has among the lowest percentage of its citizens incarcerated and has actively participated in UN Peacekeeping Missions.

"We are very pleased that the index confirms the core values of a small, democratic society...which has never had a military and has effectively practiced peace for hundreds of years," said Ingibjorg Solrun Gisladottir, Foreign Minister, Iceland.

"We can feel that other states also find this of importance and it is in fact a driving force in our first-time candidacy for a non-permanent seat on the UN Security Council," she said.

Among all the 140 countries surveyed, languishing at the bottom of the index is, unsurprisingly, Iraq, followed closely by Somalia, Sudan, Afghanistan, Israel and Chad.

The US and the UK have fared poorly too - while the US was ranked 97th (slipping from 96th last year) out of 140 countries, Britain was placed at 49th in the Global Peace Index. Possibly because of their military role in Afghanistan and Iraq, combined with their potential for terrorist attacks.

The reputation of the US, in particular, has been dented in recent times by the prisoner abuse scandal at Abu Ghraib prison in Iraq and the inhuman treatment of terrorism suspects at Guantanamo Bay detention camp in Cuba.

"Often times, you have to do difficult things and a lot of times, people don't agree with them. They don't like them," said US State Department spokesman, Sean McCormack.

"A lot of times you fall down in these lists but at the end of the day it is in defense of democracy and the way of life we have enjoyed over the past several decades," he said.

The US, though below Belarus, Cuba, South Korea, Chile and even Libya in the index, has something to cheer about - it is slightly more peaceful than its foe, Iran, which ranked 105th.

Out of the top 20 most peaceful nations, sixteen are European nations. Interestingly, among the G8 or Group of Eight nations, Japan has been ranked 5th (sole representative of the G8 in the top ten), Canada 11th, Germany 14th, Italy 28th, France 36th, Britain 49th, the US 97th and Russia 131st.

Among the BRIC nations, China and Russia fared badly, securing the 76th and 131st rank respectively. However, India improved its rank, climbing 2 places from 109th to 107th this year. Brazil is ranked at 90th.

In case of India, on a scale of five for 'potential for terrorist acts,' the world's largest democracy was given a poor score of four.

Also, on the parameter of 'ease of access to weapons of minor destruction', India's score was four out of five.

While the survey gave an encouraging 9.6 out of 10 to India for its electoral process, which provide many options and freedom to voters to exercise their franchise, it ranked the country at a disappointing 3.5 out of 10 in terms of the level of corruption prevalent.

Among African countries, Mozambique (50th) was found to be the fourth most peaceful country in Africa, only bettered by Ghana (40th), Madagascar (43rd) and Botswana (46th). South Africa came 116th and Zimbabwe trailed at 124th.

In the Middle East, out of 18 countries, Qatar (33rd) came in second place, bettered by Oman (25th).

United Arab Emirates (UAE) came third ranked at 42, Kuwait 45th, Bahrain 74th and Saudi Arabia 108th. Iraq was at the bottom at 140th, just below Israel's 136th.

In South America, countries such as Colombia (130th), Venezuela (123rd), Ecuador (100th) and Brazil (90th) were ranked lower than Peru (80th).

On the other hand, Bolivia (78th), Paraguay (70th) and Argentina (56th) received better scores.

The two most peaceful countries in South America were Uruguay, which was ranked 21st and Chile, which earned a spot in 19th place.

All the countries were ranked on the basis of 24 parameters which determine how peaceful they are internally and how they interact with the external world, namely, military might, conflicts, UN deployment overseas, levels of violent crime, prison population, respect for human rights, the numbers of soldiers killed overseas, arms sales, access to primary education, etc.

"The concept of peace is notoriously difficult to define. [But] What we do is we take the absence of violence as the definition for peace and then we measure it internally and externally, and we look at things like the number of people in jail, the level of violent crime, the number of homicides, state sponsored terror," said Steve Killelea, an Australian philanthropist and entrepreneur and founder of the Global Peace Index.

"Externally we'd look at the number of conflicts, nations involved in battlefield, deaths, size of its military compared to its percentage of GDP (gross domestic product)," he said.

For instance, what "drags US down is its internal situation," Killelea said. "It has got more people in jail than any other nation in the world, and it is followed by Russia then North Korea."

"It has got a high level of homicides, a high level of violent crime, let's say, compared to other OECD (Organization for Economic Cooperation and Development) nations, a strong likelihood of terrorist attacks and high availability of guns," he said. "Its overall score is a reflection of that. The index is not making any moral statements by the ranking."

Giving another example, Killelea said that though New Zealand was ranked fourth on the index, its neighbor Australia was way below at 27th.

The reason is because of Australia's "involvement in Afghanistan, the potential for terrorist attacks, which is higher than New Zealand, and also that (it) spend(s) more money on the military," he said.

Russia, though a major economic power, scored low because of its high military spending, booming arms sales and poor relations with its neighbors, the study said.

Also hitting Russia's ranking were "high scores for homicides, jailed population, distrust among citizens, violent crime" and a lack of respect for human rights, it said.

While the study noted "increased stability in Chechnya," it pointed to Russia's "moderately tense" relations with its neighbors and extremely high arms exports.

The index, which has the backing of Nobel Laureates like Archbishop Desmond Tutu, Professor Joseph Stiglitz and Professor Muhammad Yunus as well as business tycoons like Sir Richard Branson and Sir Mark Moody Stuart, suggests that the world is a more peaceful place this year than it was a year earlier, with Angola (up 2 places to 110th), India (up 2 places to 107th) and Indonesia (up 10 places to 68th) making great improvements in their ranks.

Based on a comparison of 121 countries in the same index last year, scores were slightly improved for levels of crime, political instability and the potential for "terrorist acts," a statement, accompanying the release of the index, said.

"On average, scores for level of organized conflict [internal] and violent crime, political instability and potential for terrorist acts have all got marginally better," the survey noted.

However, the world's militaries have grown on average, as has the sophistication of weaponry, it warned.

"Most countries in the world are performing better against key measures of peacefulness compared with last year, according to the figures," the report said.

"The world appears to be a marginally more peaceful place this year," Killelea said. "This is encouraging, but it takes small steps by individual countries for the world to make greater strides on the road to peace."

According to Killelea, the index was created to focus the world on being able to study peace.

"If you look at climate change, ever decreasing biodiversity, full use of the fresh water - and underpinning all them overpopulation - they're global issues," he said.

"Those global issues will never get solved unless we've got a world which is basically peaceful," Killelea said. "Therefore in my view, peace is a prerequisite for society as we know it to keep existing."

The index, Killelea said, could help governments to self-evaluate and improve commerce as business could play a "crucial role" in forging stability.

According to Killelea, the report showed per capita income increased by more than $3000 for every 10 places on the index.

"Business can drive peace, no doubt about that. Business, as we all know, affects government and the way governments think," he said.

"One of the beautiful things about business is it really is driven by the bottom line. If you can create the associations with a particular agenda and their bottom line, they will respond and I think peace is one of those things," he added.

The work of collating and calculating the GPI, now in its second year, is done by the Economist Intelligence Unit.

HIGHLIGHTS OF THE WORLD PEACE INDEX:

· In South Asia, Bhutan is the most peaceful nation, ranked 26th, ahead of Bangladesh (80th), India (107th), Sri Lanka (123rd) and Pakistan (127th).

· South Korea was ranked 32nd, while its neighbor North Korea was ranked way below at 133rd.

· Military junta ruled Myanmar, where several cases of human rights violations have been reported, was ranked 126th.

· South Africa, recent victim of Xenophobia, was ranked 116th while Zimbabwe, which is facing a political deadlock, was ranked 124th.

· United States of America (ranked 97th) is below Albania (79th), Rwanda (76th), Syria (75th) and Libya (61st).

· Among BRIC nations, China ranked the highest at 67th, followed by Brazil (90th), India (107th) and Russia (131st).

· Among G5 (Group of 5) nations, France secured the highest rank (36th), followed by Britain (49th), China (67th), the US (97th) and Russia (131st).

· Among G8 (Group of 8) nations, Japan has secured the highest rank (5th), followed by Canada (11th), Germany (14th), Italy (28th), France (36th), Britain (49th), the US (97th) and Russia (131st).

SOME MAJOR COUNTRIES AND THEIR RANKS IN THE WORLD PEACE INDEX

1. Iceland

2. Denmark

3. Norway

4. New Zealand

5. Japan

6. Ireland

7. Portugal

8. Fiji

9. Luxembourg

10. Austria

11. Canada

12. Switzerland

13. Sweden

14. Germany

15. Belgium

16. Slovenia

17. Czech Republic

18. Hungary

19. Chile

20. Slovakia

21. Uruguay

22. Netherlands

23. Hong Kong

24. Romania

25. Oman

26. Bhutan

27. Australia

28. Italy

29. Singapore

30. Spain

31. Poland

32. South Korea

33. Qatar

36. France

37. Vietnam

38. Malaysia

42. United Arab Emirates (UAE)

44. Taiwan

45. Kuwait

49. United Kingdom

54. Greece

56. Argentina

61. Libya

62. Cuba

67. China

68. Indonesia

75. Syria

76. Rwanda

84. Ukraine

86. Bangladesh

90. Brazil

91. Cambodia

93. Mexico

97. United States

105. Iran

107. India

110. Angola

111. Uzbekistan

113. Philippines

114. Uganda

115. Turkey

116. South Africa

118. Thailand

119. Kenya

121. Ethiopia

123. Venezuela

124. Zimbabwe

125. Sri Lanka

126. Myanmar

127. Pakistan

129. Nigeria

130. Colombia

131. Russia

132. Lebanon

133. North Korea

134. Central African Republic

135. Chad

136. Israel

137. Afghanistan

138. Sudan

139. Somalia

140. Iraq