Pakistan backs talks to ease tension

Fears of fresh conflict are steadily spreading

The Pakistani government is reviewing its relations with India while urging the international community to press Delhi to begin talks to defuse rising tensions between the two countries.

We are ready for deployment of independent international observers on both sides

Pakistani spokesman Aziz Ahmed Khan

President Pervez Musharraf has summoned a joint session of his cabinet and the National Security Council on Wednesday to study and respond to the apparently worsening security situation.

Clashes between militants and security forces in Indian-administered Kashmir, and artillery duels between the two armies continued on Monday, with at least 12 people killed and around 70 wounded on the two sides.

Indian officials said more than 12,000 Kashmiris had been displaced by Pakistani firing and shelling over the past few days.

Economic costs

Tensions have mounted since a militant attack at an Indian garrison near Jammu last Tuesday in which more than 30 people including soldiers, their wives and children, and other civilians, were killed.

The economic cost has already been heavy

India accused Pakistan of sponsoring the attack, threatened to take "appropriate measures", and expelled the Pakistani envoy from Delhi.

Pakistan denied the allegation but reiterated its support for the "freedom struggle of the Kashmiri people", and tightened security measures with deployments of weapons and troops in major cities.

As demands from Indian activists for stern action against Pakistan mount, and fears of fresh conflict between the nuclear-armed neighbours deepen, negative impacts on the region's fragile economy are already visible.

The Karachi stock exchange index fell by more than seven per cent as anxious investors sold off their shares. In India, stock markets were less volatile but the rupee fell towards a record low against the dollar.

Diverse demands

The BBC's Susannah Price in Islamabad says Pakistan insists that the two sides should talk and resolve their disputes by negotiation.

A war could escalate out of control

However, India wants President Musharraf to curb the activities of the Muslim militants active in Indian-administered Kashmir first, a demand Islamabad has not met to Delhi's satisfaction.

Indian Prime Minister Atal Behari Vajpayee was briefed by the armed forces chiefs on Sunday and placed the paramilitary Border Security Force and Coast Guard under direct command of the army and the navy.

Mr Vajpayee is to begin a three-day tour of Kashmir on Tuesday, including the site of the militant attack in Jammu.

Pakistan's Foreign Office spokesman Aziz Ahmed Khan said his government was keeping foreign governments, the United Nations and other organisations fully informed and was ready to accept foreign intervention to defuse tension.

Diplomacy

"We are ready for deployment of independent international observers on both sides of the Line of Control to see for themselves there is no cross-border activity taking place," he said.

General Musharraf faces difficult demands

The international community, especially the United States, worried about conflict between the nuclear-armed neighbours escalating out of control, has urged restraint and sent senior diplomats to press for negotiations.

However, the recent trip by Assistant Secretary of State Christina Rocca showed up the limited effect of pressure from foreign friends.

Concerned also that conflict between India and Pakistan will detract from its "war against terrorism", the US has decided to send Deputy Secretary of State Richard Armitage to the region next week, although no date has been announced.