Diplomatic pressure on India, Pakistan

NEW DELHI, India (CNN) -- With Pakistan's Army on high alert -- its medium range missiles deployed and army mobilized -- and with India placing reinforcements along its border, U.S. diplomats are working urgently to avoid an escalation of the situation.

U.S. Secretary of State Colin Powell interrupted his Christmas holiday, calling leaders in New Delhi and Islamabad, urging both to give diplomacy a chance.

"It is critically important there be a lessening of tensions and we will continue to encourage that, deputy State Department spokesman Philip Reeker said.

"Any conflict between the two countries can have no good result for either country. They need to resolve their differences through dialogue."

That was the message Powell expressed to Pakistani President Pervez Musharraf and Indian External Affairs Minister Jaswant Singh on Wednesday.

The two South Asian nations have sparred for decades over the disputed region of Kashmir.

Fourteen people including five attackers died in a suicide raid on India's Parliament December 13, sparking the latest round of accusations and military activity.

India says the suicide attack was planned and carried out by two terrorist groups based in Pakistan with the tacit support of the government, an allegation Islamabad disputes.

Troops mobilized

VIDEO U.S. officials are concerned India and Pakistan might be tempted to use nuclear weapons. CNN's David Ensor reports (December 26) Play video (QuickTime, Real or Windows Media) Tensions between India and Pakistan have escalated since 14 people were killed in an attack on India's Parliament. CNN's Michael Holmes reports (December 26) Play video (QuickTime, Real or Windows Media)   MORE STORIES • Concern over escalating tensions    RESOURCES Message Board: India and Pakistan    COUNTRY PROFILE At a glance: India Provided by CountryWatch.com   COUNTRY PROFILE At a glance: Pakistan Provided by CountryWatch.com    CNN.com Asia More news from our Asia edition

On Wednesday, Pakistan mobilized its army along its eastern border after a similar buildup by its longtime rival and fellow nuclear power.

The Pakistani mobilization is the largest in more than 30 years, one military source said.

In an address earlier in the week Musharraf said his military was capable of repelling any threat and would not cower to Indian aggression.

In the disputed Indian province of Kashmir, India and Pakistan have each lost about a half dozen soldiers in the last week in skirmishes.

U.S. officials are urging India not to provoke the Pakistanis and their leader.

"They will certainly fight the Indians if provoked. There's no question about that," Robert Oakley, the former U.S Ambassador to Pakistan, told CNN.

"They're already diverting attention and perhaps some resources from the fight against al Qaeda and the Taliban on Pakistan's western border. So the U.S. has a very big interest in this."

Meanwhile, U.N. Secretary-General Kofi Annan is urging the leaders of India and Pakistan to avoid actions and statements that could aggravate the situation.

According to a U.N. news release Wednesday, Annan sent letters to Vajpayee and Musharraf Tuesday night saying that "every effort had to be made to foster a calmer atmosphere so that differences -- no matter how great -- could be resolved through dialogue and diplomacy."

Annan also told the leaders that the world community has "great interest in improved and stable relations between their two countries," the news release said.

Parliament attack

Pakistan has called for an international inquiry into the December 13 attack on India's parliament. It has said it would take action against the militant groups blamed for the attack if Islamabad was presented with evidence of their involvement.

New Delhi has declined to do so, but the U.S. adding to its diplomatic efforts, has started sharing evidence with Pakistan about those involved in parliament raid.

The cooperation likely factored into Musharraf's decision to crack down on two Pakistani-based groups accused by India and the United States of committing terrorist acts, a U.S. State Department official noted.

In recent days, Pakistani authorities have arrested Maulana Azhar Masood, the head of Jaish e-Mohammed, or JEM, the organization accused of carrying out this month's attack, and frozen the assets of JEM and another group, Lashkar e-Tayyiba, or LET.

Powell designated JEM and LET as foreign terrorist organizations Wednesday, saying both "seek to assault democracy, undermine peace and stability in South Asia and destroy relations between India and Pakistan."

Both groups have denied responsibility for the attack on Parliament.

'Positive steps'

A Pakistani anit-aircraft battery near Karachi's port

A senior U.S. official credited Musharraf with taking "positive steps," especially given the tenuous political situation in his own country.

And while India has called Pakistan's efforts to crack down on these groups inadequate, the official said the United States believes the moves are "being privately received better" than India's public comments indicate.

The Indian Cabinet committee on security Wednesday postponed for one day a crucial meeting in which it was expected to decide and coordinate its next move.

Aziz Ahmed Khan, a spokesman for Pakistan's Foreign Ministry, said Wednesday Pakistan would prefer to resolve the latest conflict with India through diplomacy.

"Pakistan certainly does not want to escalate the tension. Pakistan would like a reduction of tension," he said.

"And that is why, despite India's action of recalling their ambassador, Pakistan has not taken a similar action."

-- CNN Producer Barbara Starr, State Department Producer Elise Labott, Islamabad Bureau Chief Ash-Har Quraishi and Producer Suhasini Haidar contributed to this report.