NEW YORK, June 24: The United States would continue to work behind the scenes “to inspire “ a settlement to the Kashmir dispute between India and Pakistan US Deputy Secretary of State Richard Armitage said in an interview with the Financial Times here.

Mr Armitage reiterated that “the United States is going to stay involved and I trust our good friends from Britain are as well.”

However, he said that at this point in time the US government has no plans to become a formal mediator in the long-running dispute between India and Pakistan.”

But the Bush administration, whose diplomacy is widely credited with having averted a war between the two nuclear-armed neighbours in the last few weeks, will work behind the scenes to “inspire” a settlement to the dispute, Mr Armitage said.

“I don’t want to rule anything in or out but we have no plans to mediate right now.”

Mr Armitage said he was planning to visit India and Pakistan again in August, following a trip earlier this month in which he extracted a pledge from General Pervez Musharraf, Pakistan’s military ruler, to put a “permanent” end to cross-border terrorism.

Mr Armitage said there were strong signs that alleged terrorist infiltration from Pakistan into the Indian-held Kashmir has fallen sharply in the last few weeks.

However, the recent easing of tensions between India and Pakistan remained vulnerable to another terrorist attack within India. The US had “snippets” of information that suggested Al Qaeda could be operating in Kashmir, he said.

“It’s quite clear that Al Qaeda likes to fish in troubled waters such as Kashmir and that it would like nothing better than a splendid war between India and Pakistan,” he said.

“In that regard I think it’s in everyone’s interests to try to keep Al Qaeda out of Kashmir.”

The US, which points out that both sides remain on a state of military high alert, is clearly alarmed by the potential for tensions to flare up again and for any conflict to escalate into a nuclear exchange.

“My main concern is the spectacle of almost a million men glaring, shouting and shooting across the disputed area,” said Mr Armitage. “The alacrity with which politicians on both sides talk about the possession of and use of nuclear weapons against the other is a very disturbing sign and one we find very worrisome.”

Although the US has no plans to become a formal mediator, senior officials concede that the US is already a de facto mediator in the dispute. India, which controls about 60 per cent of Kashmir, says it is a purely bilateral dispute. Pakistan has long sought international mediation.

But there is a clear consensus in the Bush administration of the need to go beyond encouraging immediate de-escalation to help tackle the underlying causes of tension. The US would play the role of “facilitator” the FT said.

“In the first instance it’s important to stop infiltration and in the second instance to follow through and continue to lower the tensions so that both sides can have a dialogue,” said Mr Armitage.

He said the US was also focused on Pakistan’s national elections in October and on India’s plans for assembly elections in the state of Jammu & Kashmir in September. Both events could have an impact on military tensions between the two countries.

“It’s very important to have a free and fair election in Kashmir that is free of violence, and one that is judged to be free and fair by the international community,” he said.

Mr Armitage’s next trip to the region will precede the polls in Kashmir.