India, Pakistan in focus at South Asia summit

Pakistani rangers stand near the Indian (R) and Pakistani national flags near Pakistan border in Chamliyal, 45 km (28 miles) west of Jammu, June 26, 2008. Leaders of India and Pakistan are likely to meet in Bhutan's capital next week as their nuclear-armed rivalry overshadows a summit of South Asian nations.

NEW DELHI (Reuters) - Leaders of India and Pakistan are likely to meet in Bhutan's capital next week as their nuclear-armed rivalry overshadows a summit of South Asian nations to discuss trade and environment.

India halted peace talks with Pakistan after the November 2008 Mumbai attacks in which 166 people were killed and which India has blamed on Pakistan-based groups.

A meeting between the leaders is seen as crucial because it could help keep alive the idea of engagement between two players whose battle for influence in Afghanistan has a direct bearing on Western efforts to stabilise a region with 1.8 billion people.

"It is an opportunity (to meet) and both sides will take advantage of it," said a senior Indian government official, who spoke on condition on anonymity.

Foreign Secretary Nirupama Rao said there was "as of now" no offer of a bilateral meeting between Prime Minister Manmohan Singh and his Pakistani counterpart, Yousaf Raza Gilani, but did not completely rule out the possibility of one.

The two sides have been tentative about engaging since their top diplomats met in New Delhi in February but failed to achieve a breakthrough. That meeting, nonetheless, was seen as a small step towards repairing ties.

Differences over the nature of talks have held up a further meeting -- Pakistan wants India to restart the peace process; India wants to go slow until Islamabad acts against the Mumbai attack planners.

The United States has been urging the two sides to reduce tension so that Pakistan can focus better on fighting the Taliban on its westers border with Afghanistan.

"I don't really want to forecast what is going to happen, but let me say: dialogue is always useful, it helps clear the atmosphere, especially between close neighbours such as India and Pakistan," Rao said before leaving for Bhutan on Friday.

Pakistani Foreign Office spokesman Abdul Basit hinted last week about the possibility of a meeting.

"It has not yet been penciled in. Nevertheless, given that our roadmap also provided for a summit meeting in Bhutan, we look forward to a meaningful engagement with India," Basit said.

"Let me also underline here, that engaging in meaningful and result-oriented talks is in our mutual interest and in the interest of this region, it is not a favour by Pakistan to India and vice versa."

COOPERATION UNDERMINED

The scale or content of a meeting between Singh and Gilani could be drawn up by Rao and her Pakistan counterpart, Salman Bashir. Indian officials said hopes of any progress were low.

"Our outlook on the meeting is very clear -- it has to be terrorism and what steps Pakistan has taken to bring the perpetrators of Mumbai to book," a senior Indian official said on condition of anonymity.

The two sides' unmitigated animosity has undermined greater regional cooperation, an agenda that was the founding principle of the eight-nation bloc of South Asian Association for Regional Cooperation (SAARC) that meets in Bhutan on April 28-29.

Nepal, Sri Lanka, Bhutan, the Maldives, Bangladesh and Afghanistan make up the rest of the group.

While SAARC summits are often little more than a backdrop to bilateral meetings between India and Pakistan, the bloc has tried to push forward cooperation in trade and commerce.

(Additional reporting by Augustine Anthony in ISLAMABAD; Editing by C.J. Kuncheria and Nick Macfie)