Even a small incident can spark a chain of events that is not in the interest of peace

Abdul Sattar, Pakistani Foreign Minister

Mr Powell, speaking in Islamabad after holding talks with Pakistani President Pervez Musharraf, said he was ready to do anything he could to get the two sides talking. But he stopped short of saying that the US would mediate between India and Pakistan.

"We stand ready to assist but it has to be a dialogue between the two sides," he said.

Praise

Mr Powell also praised the steps to combat terrorism in Pakistan taken by Mr Musharraf, who made an important policy speech on the subject at the weekend.

"Mr Musharraf has set a new direction for Pakistan which will enhance its role in the region and the world," Mr Powell said.

Powell seeks dialogue, but will not mediate over Kashmir

Mr Powell said the purpose of his trip is to bring the escalation of tension between India and Pakistan to a complete halt and then to move it into reverse.

Pakistan's Foreign Minister Abdul Sattar said the deployment of the Indian and Pakistani armies along their border was reason for anxiety.

"All of us have reason to be anxious because the forces are poised on the border... even a small incident can spark a chain of events that is not in the interest of peace," he said.

An attack on India's parliament in December, which Delhi blamed on Pakistani-based Islamic militants, has led to a tense stand-off between the two nuclear powers, with a huge military build-up along their border.

Mr Powell is now travelling to Afghanistan and will continue to India.

Measured response

"I thinks that President Musharraf gave a very historic speech this past weekend... I think the Indian response was quite measured and I think they are reflecting on the speech," the secretary of state said on Pakistani television.

In his speech, General Musharraf banned a number of extremist groups and said any Pakistan-based militants guilty of violence in Kashmir would be severely dealt with.

Mr Powell said India was still waiting for action by Pakistan against militant groups blamed for attacks on Indian targets in Kashmir and elsewhere.

The Indian Government on Wednesday showed no signs of yielding on its two key demands.

"Handing over of 20 terrorists and whether or not infiltration [into Indian-administered Kashmir] continues... these are the two touchstones on the basis of which we will judge," Indian Home Minister LK Advani told reporters.

Kashmir conundrum

In Indian-administered Kashmir itself, Chief Minister Farooq Abdullah spoke of "positive signs".

"There is a noticeable difference in attacks by militants... recently," he said.

"I am told that border firings have also reduced."

But Mr Abdullah warned that it was too early to draw conclusions on prospects for ending violence in the region.

Kashmir lies at the heart of differences between India and Pakistan. The two countries have twice gone to war over it.