Pakistan’s relationship with the United States can’t get more transactional than the prolonged negotiations over restoration of the Pakistani supply route for NATO troops in Afghanistan.

Pakistan, according to leaked accounts of so-called private negotiations, is demanding $5000 as transit fee for allowing trucks to use the two most obvious routes into landlocked Afghanistan, blocked since November when two dozen Pakistani soldiers were killed in an U.S. air strike from Afghanistan. The United States which apparently paid about $250 for each vehicle carrying everything from fuel to bottled water all these years is ready to double that, but nowhere near the price Pakistan is demanding for its support of the war. It also wants an apology for the deaths of the soldiers but America has stopped short of that, offering regret instead.

The two countries will likely reach a compromise, probably sooner than later. But the whole image of so-called allied nations involved in grubby negotiations about trucking fees while there is a disastrous war going on – and leaking details of those talks – tells you how destructive the relationship has become. You would think Pakistan and the United States would try and figure how to prevent incidents such as the air strike near the Afghan-Pakistan that led to the closure of the supply route in the first place. Imagine another strike of that kind and the impact it would have on an already inflamed nation, weak as it may be. Instead negotiations went down to the wire ahead of the NATO summit in Chicago over how many more dollars Pakistan can make as a conduit for a war that has turned it into a battlefield itself.

And America, playing just as hardball, is refusing to give any quarter even though it is paying quite a high price to transport the supplies by a combination of air and land through a northern route into Afghanistan, bypassing Pakistan. In any case, higher trucking fees in the closing stages of the war, can only be a drop in the vast amount America spends on its military – more than the next four countries put together.

Like a marriage gone sour, it seems to draw the worst in each country. Pakistan got a last minute invite to the NATO summit in Chicago, even though it has been a key player in its war in Afghanistan but its presence seemed to only highlight its isolation. President Barack Obama wouldn’t hold talks with President Asif Ali Zardari, who arguably is just as important to his path out of Afghanistan as Afghan President Hamid Karzai whom he met. Worse, Obama thanked all the countries that had helped NATO in its war in Afghanistan including the Central Asian nations through which supplies are being routed at the moment, but not Pakistan through which the bulk of supplies were transported all these years, save for the current six-month halt.

For a proud nation of 180 million people, the image of its president bounding across the hall to shake hands with U.S. Secretary of State Hillary Clinton while Karzai, the head of a nation long considered a poor cousin, confers with Obama, must rankle further. Some people back home may argue, in retrospect, that Pakistan might have been better off staying away from the meeting. The worry is Zardari, still the consummate survivor, may have given the hardliners another weapon as he heads back from Chicago with little to show for.

It’s clear for some time now that India and Pakistan are on the cusp of the kind of open  trade relationship they had until the 1965 war when all business links were snapped, border trading posts shut and overland Indian access to Afghanistan blocked. It was never to be the same again, despite fitful progress over the years.

On Saturday, the Indian Prime Minister Manmohan Singh, who has invested a great deal of personal credibility in a rapprochement with Pakistan, inaugurates a  $4 billion refinery in the northern state of Punjab , not far from the border with Pakistan. While   the bulk of the refinery, which is a joint venture between billionaire Lakshmi Mittal and an Indian state oil company will feed the hungry energy markets of India’s booming northern triangle, it stands to reason that some of the fuel sales will flow westwards, to Pakistan. The distance from Bhatinda where the 9 million tonne refinery is located to Pakistan’s heartland city of Lahore is about 100 miles.  If you don’t sell it to the market next door where else would you begin from ?  Pakistan’s refining capacity is half the domestic demand and last year it opened up diesel imports from India, although petrol and other petroleum products are still on a rapidly dwindling negative list.

If they begin piping fuel from the plant in Bhatinda to the Pakistani part of Punjab, and down the coast in Gujarat, if Reliance Industries’ huge refining complex in Jamnagar ships products to Karachi, you can imagine the game-changing effects of such interlocking economic stakes. Next up will be the Turkmenistan-Afghanistan-Pakistan-India gas pipeline which has been hobbled not just by security fears in Afghanistan, but the deep distrust between India and Pakistan, the two big markets at the far end of the pipe.   If Pakistan can buy refined fuel products from India, then perhaps New Delhi will have less fears about being held to ransom by Pakistani shutting off its natural gas supplies traversing through Pakistan soil.

Are the two over the hump then, ready to bury 65 years of hostility ? Not quite, going by an opposing series of actions.  India fired off its longest range missile this month which scientists said gives it the capability to launch inter-continental ballistic missiles (ICBMs) and within days Pakistan tested its own long range nuclear capable missile. While India can argue that the 5,000 km range Agni V was  aimed at closing the deterrence gap with China, Pakistan’s Shaheen missile which defence experts say  is capable of hitting targets 2,500 km away brings virtually all of India in its range.  You could ask why does Pakistan need long range missiles when it can target Delhi which is barely 700 kms from Islamabad. Presumably the idea is to negate India’s strategic depth that Pakistan does not have. Then there is a steady Indian conventional arms buildup in line with its growing economy, and again, to find some level of parity with China. But some of that armour  including  state-of-the-art Rafale fighter planes, an aircraft carrier and nuclear-powered submarines could just as well be deployed on the west.

There is similarly little forward movement on the hot-button territorial disputes that have kept the two countries apart .  Last month’s tragic accident in Siachen in northern Kashmir where 138 Pakistani soldiers and civilians were buried   in rock and ice brought the focus back on a remote high altitude battlefield that many believe is best left untouched, given its questionable strategic value.  Pakistani army chief General Ashfaq Kayani, responding to calls from anguished countrymen, said the civilian and military leaders of the two countries should hold talks to resolve the brutal standoff in the icy mountains.  But the general’s call has met with a measured response from New Delhi which wants the positions of the two armies to be authenticated before considering a withdrawal from the remote area. This along with the row over Sir Creek off the Arabian Sea was considered a low-hanging fruit which the two sides could pluck before tackling the dispute over Kashmir, really at the core of the decades of hostility.

But distrust has only deepened over the years, and as Vikram Sood former head of India’s external intelligence agency wrote recently, Pakistan’s refusal to accept the actual positions of the troops – in which India holds the advantage – only sows suspicion in the Indian mind that should there be a withdrawal from the Saltoro heights, Pakistan would “want to alter the position at first dawn.” It would be another folly on the lines of returning 90,000 prisoners and territory sezied from Pakistan after the 1971 war without permanently resolving disputes with the country, he says.

Arrive in Kabul and you know you are in a war zone, despite the heaving traffic on its crumbling roads. Whole streets are blocked off by concertina wire and sandbags, while a  zig-zag series of  blast walls are designed to stop or at least slow down the suicide bomber.  Indeed, the walls seem to get higher and more neighbourhoods disappear behind this concrete curtain each time you go back. And yet insurgents have repeatedly breached the layer-upon-layer of security, as  happened in September when the vast U.S. embassy compound came under attack, and now on Sunday when the upscale Wazir Akbar Khan diplomatic district was again targeted along with parliament.

The one feature common to the multiple attacks on Sunday and the daring September operation was that the attackers sneaked into half-finished or empty buildings, took positions half-way up the building and were able to hold off an armada of helicopters and Special Operations forces for up to 20 hours.   Kabul has been in the  midst of a construction boom that has slowed only recently as the Western pullout looms in 2014. The result is that you have a number of these high rise buildings in the centre of town which offer vantage views of the city – especially the sealed-off parts where the diplomatic and political elite live in virtual bunkers,  and which an ordinary Afghan can hardly ever see, much less gain access to.  From the reports so far, the attackers didn’t have to do much to get into these lightly guarded blocks, many of them just empty shells.  Once in, it was easy to hide behind a concrete pillar on a sixth-floor landing and fire rocket propelled grenades at the western installations below while holding off  the choppers.  The question is why are these buildings left unguarded even after the U.S. embassy was attacked from another one in the vicinity last September. What about the measures that were set in place to monitor such high-rises?

While the jury is still out on the implications of Sunday’s attacks (for some excellent analysis read this blogpost or this piece by the Afghanistan Analysts Network) there is a sloppiness to security which gives pause for thought.

You get the same gnawing worry at Kabul airport, supposed to be one of the most secure places in Afghanistan. You go through multiple checks, get out of your car several times to be patted down, take an airport bus to the terminal building, or walk carrying your bags through eerily empty grounds ringed by Afghan army and police. At one airport checkpoint during a visit last month, a soldier checking my pockets asked for “baksheesh”. I was surprised but pretended not to understand. He said it again and I continued to feign lack of understanding, sliding away as his face fell.  But if the man could be bought off with baksheesh, what would have stopped me from smuggling through a knife or even a pistol?

You know money is changing hands if you watch carefully when a car stops at one of the checkpoints at the airport and the guard refuses to let it go through. An argument ensues and the driver steps out; they keep talking until the man embraces the guard in the Afghan form of greeting and neatly hands over a $10 bill so quickly that you scarcely notice.  They keep talking loudly, the driver returns to the car and the gates are opened.

In short, the Afghan administration which is responsible for security in the capital has set up what was proudly called a Ring of Steel but which has obvious chinks in its armour which an adversary can easily exploit. For each corrupt security guard, there are at least five others who cannot be bought and that is perhaps why complex attacks like Sunday’s do not happen more often.  And as was immediately clear on Sunday, Afghan forces fought back bravely and by all accounts , in a professional manner. Some amount of backup came from NATO,  including strafing runs by helicopters on the  buildings, despite an initial attempt to spin the whole operation as entirely Afghan. But  overall the Afghan forces acquitted themselves well.

The dusty streets of Kabul are choked with traffic, restaurants selling American fast food are bustling and there is a crowd of students and parents outside a girls’ school in the centre of town trying to slip through the shuttered gates at the start of the school year.

Returning to Kabul for the first time since December, there was no sense that the mood on the ground had changed significantly. But I couldn’t help wondering how all this might change once foreign troops who have propped up the Afghan state for more than a decade leave in 2014. There is talk of a return to chaos and civil war, although admittedly you hear more of those grim warnings abroad and in the foreign circles of  Kabul than from the people themselves who will be in the middle of it.

The handover is just two years away, the Taliban have extended their operations in most of Afghanistan’s 34 provinces with many parts no-go areas, and yet it is hard to detect signs of panic. Instead, you see a crowd of women clad in black burqas checking out washing machines in a shop called “Life is Good.”

In large part, perhaps, it is because most do not have a choice. What can an ordinary Afghan struggling to make ends meet really do even if everyone’s telling him or her about a possible civil war ? Where do you go? Pakistan?

The affluent are making their arrangements,though, we are told. Money has been moving in suitcases from Kabul airport to Dubai and elsewhere. Businesses are working on Plan B, setting up operations in neighbouring countries such as India that will take over if Kabul goes under. And in the green zones of Kabul where Afghans cannot enter without a pass or work in the foreign institutions there, the blast walls keep getting higher. The number of checkpoints have been increased, as also the speed bumps- all designed to stop or slow down the suicide bomber.

They are, it seems, bracing themselves for 2014.

As in any conflict, the prisoners that the players in Afghanistan hold are a key part of their political and military strategy as they head into 2014. For the United States, the more Taliban fighters or even potential Taliban are kept off the battlefield, the better it is. For years it has been running a regime of administrative detentions under which it can hold not only suspected combatants but even people it thinks could be a potential threat for an indefinite period.

For the Taliban, getting its commanders out has been a top priority and indeed its officials say securing the release of  some of them held in Guantanamo is the starting point of the talks that it has had with the United States for more than a year now.  A former frontline commander and cousin of the Taliban’s main negotiator in the talks with the United States told me in an interview that the Taliban would resume the negotiations only when the United States carried out its promise to release five senior Taliban figures held in the U.S. military prison in Cuba.  A prison committee is ready with the names of more comrades that it wants freed.

For the Afghan administration, which wants the Americans to hand over Afghan detainees, it  has long been an issue that impinges on the sovereignty of the nation when it cannot tell its own people where the prisoners are or when will they be freed because they are not in their control. But even more than that, as the administration faces up to to the formidable challenge of looking after its own security, control of the prisoners is a bargaining chip with the Taliban. It is also a conduit to the so-called Quetta shura or Mullah Mohammad Omar since it could potentially use at least some of the top commanders to  deliver messages back and forth.

This week it named a general to take charge of the main U.S. prison in Bagram as part of a gradual  transfer of security responsibilities to Afghan forcea ahead of 2014 when NATO combat forces leave.  The two sides signed an agreement in March following months of wrangling and there is still plenty that can go wrong. The Americans worry about a premature release of some of the detainees, citing the example of a Taliban commander transferred from Guantanamo Bay in 2007 to Afghan custody who was subsequently freed only to resume fighting coalition forces. Under a compromise worked out, the transfer agreement says Afghan authorities running the detention centre will consult with the Americans before releasing any detainee and if the U.S. military feels the prisoner must remain behind , then that assessemnt must be “favourably” considered.

The Afghan administation says while  the United States can have a consultative role, it does not wield veto power over the release of any detainee.  You can see already the possibility of a rift here as Afghan -US ties already frayed by a decade  of war come under renewed strain following a series of incidents including the killing of 16 villagers in southern Kandahar for which a U.S. soldier has been charged and the burning of copies of the Koran at the base in Bagram that sparked riots. For NATO, a string of green-on-blue killings or attacks by Afghan army and police on their Western allies has underlined the growing  risk of operating in a charged atmosphere.

The United States also retains the right to access the prisoners that it has transferred to Afghan custody to ensure they are treated safely, according to the agreement the two sides signed. They may also be able to interrogate them,  which has long been a key U.S. demand.

What about the prisoners themselves ? Where do they stand in this tug-of-war ? On the one hand is detention under a prison system that they have trouble understanding and which is alien to their culture, customs and language. On the other is the Afghan system which is familiar ground and where you are more likely to be thrown together rather than kept apart. But Afghan prisons also have a chilling history of violence and abuse, built on a judicial system which leans on confessions.