"With growing economies, the energy needs of South Asian countries would rise and the sooner the arrangements are made, the better," Musharraf said during a meeting with Indian Oil minister Mani Shankar Aiyar, who has been traveling through Pakistan drumming up support for the proposed 1,724-mile pipeline that will go from Iran through Pakistan and into India. Iran has the second-largest gas reserves after Russia, with an estimated 26.6 trillion cubic meters of gas.

But much speculation has surrounded the proposed pipeline project. The United States, which has had no diplomatic relations with Iran since the 1979 Islamic revolution, has outwardly criticized any economic dealings with Iran.

In March, U.S. Secretary of State Condoleezza Rice told Pakistani officials the United States would frown upon "any move to strengthen Iran, by trade or otherwise."

Kasuri will be visiting in Washington later this week to discuss Pakistani-U.S. relations. The pipeline is likely to be discussed.

In Pakistan, Aiyar rejected the notion Pakistan and India were being pressured by Washington over the deal, but a State Department official, speaking on condition of anonymity, said the U.S. concerns were legal.

"There are legal concerns regarding Iran," the official said. "There are U.S. laws regarding Iran that include the pipeline, and those are the main part of our concern."

James Phillips, a research fellow at the Heritage Foundation, a conservative think tank in Washington, said U.S. opposition to the deal was likely to be a problem.

"The U.S. has historically opposed a pipeline that would benefit the Iran regime for fear that increased revenues would increase the flow of money that is used to finance Iranian sponsored terrorism," he said.

"The U.S. policy to not help Iran export oil trumps all aspects of the Indian-Pakistan relations, and the pipeline will not necessarily lead to an outburst of peace between Pakistan and India."

But Aiyar has said India and Pakistan would continue along their path regardless of pressure, and pursue what was in their best.

Stephen Cohen, senior fellow at the Brookings Institution, a centrist think tank in Washington, said the Bush administration would have a balancing act on their hands.

"The administration is taking a tough line on Iran, and anything economic is going to be of concern for them. At the same time the U.S. favors India and Pakistan, and they realize this will benefit both countries economically and politically," he said.

"So it will be a good test of the administration to see whether their dislike of Iran will outweigh their favor for Pakistan and India."

Musharraf said Tuesday he wanted the pipeline to be under way by next year, and guaranteed the security of the 755-mile portion in his country, a key Indian concern.

Musharraf expressed satisfaction over the two-sided agreement, which is viewed as a confidence-building measure between the two nuclear powers that have fought three wars, and are embroiled in a dispute over Kashmir, which both nations claim.

Despite what some perceive as the security threats of a pipeline through Pakistan to India, the international community, including the World Bank, has expressed interest in financing the pipeline.

But there are other options for India and Pakistan. The pipeline from Turkmenistan would exclude the controversial Iran, as would a pipeline from Qatar to Pakistan. India has expressed interest in both deals.

Teams from both Pakistan and Qatar are expected to meet by the end of this month to discuss the proposed pipeline, Abdullah bin Hamad al-Attiyah, second deputy premier and minister of energy and industry, told reporters at a news conference in Qatar.

Musharraf said he welcomed India's involvement in other pipeline projects in Turkmenistan and Qatar, a hope Aiyar expressed earlier in the week.

India has articulated its interest in attending the steering committee meeting this July in the Turkmen capital, Ashgabat, over the pipeline that runs through Turkmenistan, Afghanistan and Pakistan, and would carry a projected $3 trillion to $5 trillion worth of oil and natural gas.

Aiyar and his 12-person delegation met with Musharraf Tuesday, following meetings with Pakistani Prime Minister Shaukat Aziz and Oil Minister Amanullah Khan Jadoon. Jadoon is schedule to visit India by the end of August, according to Aiyar, who returns to Pakistan in October.

The meetings between Aiyar and Shaukat Monday resulted in the formation a joint working group that will work on getting the project off the ground.

The group will commence meetings between officials and legal, financial and technical experts from both countries to take the project to the implementation phase by next year.

Negotiations for the pipeline began in 1994, but stalled amid deteriorating relations between the two countries. They resumed in January 2004 when they initiated a new peace process.

Aiyar said the India-Iran joint group has conducted both technical and ministerial meetings over the past six months, and that he plans to meet with the Iranian oil minister June 11 to discuss the project further.

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