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To: 2MAR$ who wrote (56767)	6/10/2002 5:00:27 AM
From: 2MAR$	Respond to of 208838

Indian, Pakistani troops trade fire, yet war fears ease By Myra MacDonald and Bill Tarrant NEW DELHI/ISLAMABAD, June 10 (Reuters) - Indian and Pakistani troops exchanged fire in disputed Kashmir but financial markets rallied in both countries on Monday on optimism over international efforts to avert war. One Indian civilian was killed in an exchange of fire between Indian and Pakistan troops, who have been pounding each other for nearly a month after an attack on an Indian army camp brought the nuclear rivals to the brink of war. But a Pakistani official said firing across the border between Pakistan's Punjab province and India's Jammu and Kashmir state had been restricted to light-arms fire, with artillery there silent since Sunday. Sporadic fighting has continued despite hopes of a breakthrough during a peace mission this week by U.S. Defense Secretary Donald Rumsfeld to India and Pakistan, who have massed a million men along the border. Indian newspapers said Rumsfeld was expected to visit New Delhi first on Tuesday, seeking a commitment from India to take some initial steps towards reducing tensions. He would then go to Islamabad to convince Pakistan President Pervez Musharraf that he in turn must take further steps to crack down on Islamic militants. "It is still a tense situation with respect to India and Pakistan. There are hundreds and hundreds of thousands of armed troops on each side that are opposing each other," Rumsfeld told a news conference on Monday in Kuwait before flying to Bahrain. "...I would not say it is continuing to escalate in terms of the risks. I look forward to having discussions with the leadership in both India and Pakistan," he added. The secretary also gave a quick "good" when asked about an Indian statement that two al Qaeda operatives died in a gun fight in Kashmir. "There are scraps of information that suggest that al Qaeda are active in that area, we are concerned about it...You can imagine that al Qaeda might have an interest in increasing tensions in the area," he said, referring to Osama bin Laden's militant network blamed for carrying out the September 11 attacks on the United States. MARKETS RALLY Stock markets rallied in both countries on optimism about Rumsfeld's visit and after a visit last week by U.S. Deputy Secretary of State Richard Armitage which brought some initial easing in tensions. The benchmark Karachi Stock Exchange 100-share index was up 5.91 percent at 0817 GMT, while the 30-issue Bombay Stock Exchange index was up 1.77 percent. An Indian government statement on Saturday welcomed a pledge by Musharraf to Armitage to stop Muslim militants based in Pakistan infiltrating into Indian Kashmir. "This is a step forward," the statement said. India has, however, insisted Musharraf must also dismantle training camps for militants which it says are in Pakistan and Pakistan-administered Kashmir. India accuses Pakistan of sponsoring "cross-border terrorism" by training and arming militants fighting Indian rule in Kashmir and helping them cross over the border to attack Indian targets. Musharraf denies this but has nonetheless pledged to crack down on Islamic militants and stop them from crossing over the line of control, a military ceasefire line dividing Kashmir. SMALL STEPS Indian officials have declined to stay what steps India would take itself, though Indian analysts expect these to be fairly small to start with, including for example an increase in the number of diplomats in either country. Embassies in India and Pakistan were scaled back, and India's ambassador to Islamabad withdrawn, after a December 13 attack on India's parliament which New Delhi blamed on Pakistan-based militants, and which triggered the military build-up. India later expelled Pakistan's ambassador as tensions rose further following a May 14 attack on an Indian army camp in Kashmir which New Delhi again blamed on Pakistani-based militants. Pakistan denied involvement and condemned both the attack on parliament and the raid on the army camp. Along with some diplomatic moves, India could also take some small military steps, for example by reducing the level of alert for its troops on the border, analysts say. "I understand they are talking about some diplomatic actions which could include the return of some people to diplomatic postings in Islamabad, and some ratcheting down of some sort of military tension," Armitage said after his visit to the region. Indian defence specialist C. Raja Mohan wrote in The Hindu that unlike Armitage, who went first to Islamabad, Rumsfeld would visit New Delhi first. "If India makes some gestures towards military and diplomatic de-escalation by then, Mr. Rumsfeld is expected to press General Pervez Musharraf for additional steps on cross-border terrorism, such as dismantling the camps," he wrote. Analysts do not expect India to pull its army back from the border before state elections due in Kashmir in September or October, which New Delhi sees as a key step in ending a 12-year revolt against its rule there. Many separatists oppose the idea of holding elections, which have been rigged in the past, and which they see as India's way of trying to legitimise its rule in the Himalayan region. Pakistan and India have fought three wars since independence from Britain in 1947 -- two of them over Kashmir. Both conducted nuclear tests in 1998 and have ballistic missiles, prompting fears a fourth conflict could unleash nuclear war. ((New Delhi newsroom +91-11-301-2024; fax +91-11-301-4043; myra.macdonald@reuters.com)) REUTERS * end of story *