"At any point in this dialogue where we can be helpful, we will be helpful," Powell told a press conference in the Pakistani capital Islamabad, ahead of talks with President Pervez Musharraf.

"But it is essentially a matter that has to be resolved between the two sides or it will not be resolved in a satisfactory way.

"I am sure both sides will take into account the needs, desires, aspirations and concerns of the people of the region."

Powell played a pivotal role in coaxing the hostile neighbours back from the brink of war two years ago, when they had a million troops massed against each other along their shared frontier.

The troop mobilisation followed a deadly raid on India's parliament in December 2001. New Delhi blamed the attack on Pakistani-backed militants and Pakistan rejected the charges, but tensions spiked nevertheless.

Amid fears the subcontinent was about to be plunged into a nuclear holocaust, Powell led a campaign of telephone and shuttle diplomacy in tandem with British and European leaders. The two sides began withdrawing troops in October 2002 and since April last year have been inching towards detente.

They reached a major breakthrough in January with a joint pledge to resume long-stalled dialogue, and last month held their first formal talks in almost three years.

The thaw hit a snag last week when India reacted scathingly to remarks by President Pervez Musharraf that the 56-year-old dispute over Kashmir was central to dialogue. Islamabad called India's angry reaction "regrettable."

Powell refused to be drawn into the spat.

"I endorse the view that the two sides on the sixth of January agreed to enter into a dialogue on a variety of issues of importance to both sides ... Kashmir is part of that dialogue," he said.

"Everyone understands the importance of Kashmir to this dialogue and the importance of many other issues to the dialogue."

The territorial dispute over the scenic Himalayan region, straddling the neighbours' northern reaches, has caused two of their three wars. Both sides claim the Muslim-majority region but it has been divided between them along ceasefire lines since the subcontinent was partitioned in 1947.

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