Powell faces a diplomatic minefield in India

Fresh from shoring up the support of a nervous Pakistan for America's anti-terror campaign, Colin Powell crossed into India yesterday to continue his efforts to nudge the two arch foes towards making peace over the disputed territory of Kashmir, "the most dangerous place on earth".

Even before the US Secretary of State arrived in south Asia, however, the omens were grim as India launched an artillery barrage across the line of control which divides Kashmir, killing two people and injuring 25. With both Islamabad and Delhi refusing to give ground, General Powell will need all his skills of mediation merely to prevent matters getting worse.

An indication of the diplomatic minefield which awaited him came with a frosty Indian reaction to a seemingly innocuous statement that a solution should "accommodate the aspirations of the Kashmiri people". Delhi's reaction was swift: cross-border terrorism and not Kashmir was the central issue.

"The present situation in Jammu and Kashmir is a consequence of state-sponsored terrorism, and not the cause," an Indian foreign ministry spokesman declared, pointing to the 1 October suicide bombing at the Kashmir state assembly in which 38 people died – an incident Delhi blames on an Islamic militant group operating out of Pakistan with the tacit approval of Islamabad.

Last night, Pakistan struck a moderate note, promising to exercise "maximum restraint". But it vowed to retaliate if attacked. George Fernandes, India's Defence Minister, however, served notice that his forces would be "ruthless" in dealing with incursions.

In the more than half century since independence from Britain, India and Pakistan have fought two wars over Kashmir, and 35,000 people have died – the bulk of them in the past 12 years of separatist revolt, which India says is sponsored by Pakistan – and all attempts at outside mediation have failed. Now that the feuding neighbours both possess atomic weapons, Kashmir is widely considered the most likely flashpoint of any future nuclear war.

Indeed, as Robin Cook discovered in 1997, mere mention of the N-word can occasion a diplomatic disaster. An offer of good offices by the former Foreign Secretary led to India describing Britain as "a third-rate power" and largely wrecked a state visit by the Queen marking the 50th anniversary of independence.

General Powell did not commit that blunder, but his implication that both sides have a point in the dispute has clearly set nerves jangling in Delhi.

A senior US official said that after hearing Pakistan's side of the dispute, the Secretary of State wanted to hear India's. "We don't have all the facts yet," he said.

While India is not directly involved in the crisis over Afghanistan, the stakes for General Powell during his trip could hardly be higher. Not only is Washington trying to build a better relationship with India after decades of neglect and suspicion through the Cold War – when Delhi often came out in sympathy with Moscow – but it must also satisfy India's misgivings over the make-up of a post-Taliban government in Kabul.

At the very least, India will be seeking clarification of General Powell's apparent readiness to accept a new Afghan government which would contain moderate elements of the Taliban – a suggestion which is clearly aimed as a conciliatory measure for Pakistan.

But the very notion will raise hackles in Delhi, which believes the Islamic fundamentalist regime in Kabul has helped foment the unrest in Kashmir.

As LK Advani, the Indian Home Minister, said in a magazine interview, his compatriots would have a hard job understanding, "how a terrorist state, which has given us trouble for over a decade, has become the front-rank ally of the US in this war against terrorism".

Washington's improved relations with Pakistan, in other words, risks jeopardising its hopes of more productive ties with the most populous country of the subcontinent. That is the tightrope the Secretary of State must walk.