The South Asian nation has already shown its anger over the weekend strike by pulling out of an international conference in Germany next week on Afghanistan, depriving the talks of a central player in efforts to bring peace to its neighbor.

“Enough is enough. The government will not tolerate any incident of spilling even a single drop of any civilian or soldier’s blood,” The News newspaper on Thursday quoted Foreign Minister Hina Rabbani Khar as telling a Senate committee on foreign affairs.

“Pakistan’s role in the war on terror must not be overlooked,” Khar said, suggesting Pakistan could end its support for the U.S. war on militancy. Despite opposition at home, Islamabad backed Washington after the September 11, 2001, attacks on the United States.

The U.S. Embassy released a video statement on YouTube by Ambassador Cameron Munter in which he expressed regret for the attack. (http:/link.reuters.com/cyz35s)

“I would like to extend my most sincere condolences to the people and government of Pakistan, and especially to Pakistan’s men and women in uniform, for the tragic incident that took place on November 26 in Mohmand Agency,” he said, standing in front of U.S. and Pakistani flags.

“We regret it very much,” he added in Urdu.

He said the United States took the attack “very seriously” and pledged a “a full, in-depth investigation.”

“Pakistan and the U.S. have stood together for over 60 years,” he said. “We have weathered previous crises together. I’m certain we will weather this one too, and emerge, together, as stronger partners.”

White House spokesman Jay Carney said the investigation was still in its early stages and he made clear the administration thought it would be premature to consider whether or not to apologize to Pakistan until the probe is complete.

“We need to find the results of this investigation,” he told reporters in Washington. “We have offered our condolences. … I’m not going to prejudge actions we might take, what we might say, in the future.”

He confirmed there had been a suggestion from the U.S. Embassy in Pakistan for a taped message of condolences, presumably by President Barack Obama, but a decision was made to offer condolences instead on the president’s behalf.

But events seemed to be working against lowering tensions. Two Pakistani men were killed in Afghanistan early on Thursday and Pakistani border guards said NATO may have been responsible.

The officials said the two men, who were from the town of Chagai in the Pakistani province of Baluchistan, were gathering wood 30 km (19 miles) inside Afghanistan. They said NATO helicopters fired on their vehicle.

“I can confirm that the bodies of two residents of Chagai have arrived from Afghanistan,” said Chagai Assistant Commissioner Tufail Baloch. “But I do not have any information on how they were killed. It happened on Afghan soil so we don’t have many details yet.”

NATO officials had no immediate comment.

NATO helicopters and fighter jets attacked two military border posts in northwest Pakistan on Saturday in the worst incident of its kind since 2001.

The top U.S. military officer denied allegations by a senior Pakistani army official that the NATO attack was a deliberate act of aggression.

General Martin Dempsey, chairman of the U.S. military’s Joint Chiefs of Staff, told Reuters in an interview,” The one thing I will say publicly and categorically is that this was not a deliberate attack.

The incident has given the army, which has ruled Pakistan for more than half of its history and sets security and foreign policy, some breathing room after facing strong criticism from both the Pakistani public and the United States after Osama bin Laden was killed in a secret raid by U.S. special forces in May.

The al Qaeda leader had apparently been living in a Pakistani garrison town for years.

Pakistanis criticized the military for failing to protect their sovereignty and U.S. officials wondered whether some members of military intelligence had sheltered him. Pakistan’s government and military said they had no idea bin Laden was in the country.

Protests have taken place in several cities every day since the NATO strike along the poorly defined border, where militants often plan and stage attacks.

Pakistan military sources said Islamabad had cancelled a visit by a 15-member delegation, led by the director general of the Joint Staff, Lieutenant-General Mohammad Asif, to the United States that was to have taken place this week.

In an apparently unrelated attack, a bomb blew out a wall of a government official’s office in Peshawar, the last big city on the route to Afghanistan, early on Thursday, police said. There were no reports of casualties.

Also in the eastern Afghan province of Logar, unknown gunmen abducted seven Pakistani engineers in Pul-e Alam, said provincial police chief Gulam Sakhi Rogh Lewanai.

The United States has long wanted Pakistan, whose military and economy depend heavily on billions of dollars in American aid, to crack down on militant groups that cross its unruly border to attack Western forces in Afghanistan.

More recently, U.S. Secretary of State Hillary Clinton asked Pakistan to bring all militant groups to the negotiating table in order to stabilise Afghanistan.

The NATO attack makes Pakistani cooperation less likely.

NATO hopes an investigation it promised will defuse the crisis and that confidence-building measures can repair ties.

Critics say Pakistan has created a deadly regional mess by supporting militants like the al Qaeda-linked Haqqani network to act as proxies in Afghanistan and other groups to fight Indian forces in the disputed Kashmir region.

Pakistan says it has paid the highest price in the war on militancy. Thousands of soldiers and police have been killed.

“The sacrifices rendered by Pakistan in the war on terror are more than any other country,” Khar was quoted as saying. “But that does not mean we will compromise on our sovereignty.”

(Additional reporting by Jibran Ahmad in PESHAWAR, Obaid Omar in PUL-E ALAM, Emma Graham-Harrison in KABUL and Matt Spetalnick in WASHINGTON; Writing by Michael Georgy and Chris Allbritton; Editing by Nick Macfie and Peter Cooney)

The South Asian nation has already shown its anger over the weekend strike by pulling out of an international conference in Germany next week on Afghanistan, depriving the talks of a central player in efforts to bring peace to its neighbor.

“Enough is enough. The government will not tolerate any incident of spilling even a single drop of any civilian or soldier’s blood,” The News newspaper on Thursday quoted Foreign Minister Hina Rabbani Khar as telling a Senate committee on foreign affairs.

“Pakistan’s role in the war on terror must not be overlooked,” Khar said, suggesting Pakistan could end its support for the U.S. war on militancy. Despite opposition at home, Islamabad backed Washington after the September 11, 2001, attacks on the United States.

In a development likely to exacerbate the crisis, two Pakistani men were killed in Afghanistan early on Thursday and Pakistani border guards said NATO may have been responsible.

The officials said the two men, who were from the town of Chagai in the Pakistani province of Baluchistan, were gathering wood 30 km (18.6 miles) inside Afghanistan. They said NATO helicopters fired on their vehicle.

“I can confirm that the bodies of two residents of Chagai have arrived from Afghanistan,” said Chagai Assistant Commissioner Tufail Baloch. “But I do not have any information on how they were killed. It happened on Afghan soil so we don’t have many details yet.”

NATO officials had no immediate comment.

NATO helicopters and fighter jets attacked two military border posts in northwest Pakistan on Saturday in the worst incident of its kind since 2001.

The top U.S. military officer denied allegations by a senior Pakistani army official that the NATO attack was a deliberate act of aggression.

General Martin Dempsey, chairman of the U.S. military’s Joint Chiefs of Staff, told Reuters in an interview: “The one thing I will say publicly and categorically is that this was not a deliberate attack.

The incident has given the army, which has ruled Pakistan for more than half of its history and sets security and foreign policy, some breathing room after facing strong criticism from both the Pakistani public and the United States after Osama bin Laden was killed in a secret raid by U.S. special forces in May.

The al Qaeda leader had apparently been living in a Pakistani garrison town for years.

Pakistanis criticized the military for failing to protect their sovereignty and U.S. officials wondered whether some members of military intelligence had sheltered him. Pakistan’s government and military said they had no idea bin Laden was in the country.

Protests have taken place in several cities every day since the NATO strike along the poorly-defined border, where militants often plan and stage attacks.

Pakistan military sources said Islamabad had cancelled a visit by a 15-member delegation, led by the Director General of the Joint Staff, Lieutenant-General Mohammad Asif, to the United States that was to have taken place this week.

In an apparently unrelated attack, a bomb blew out a wall of a government official’s office in Peshawar, the last big city on the route to Afghanistan, early on Thursday, police said. There were no reports of casualties.

Also in the eastern Afghan province of Logar, unknown gunmen abducted seven Pakistani engineers in Pul-e Alam, said provincial police chief Gulam Sakhi Rogh Lewanai.

Arif Naiel Khil, head of public health in Logar, said the engineers were building a hospital for Logar paid for by Pakistani development funds.

Nobody has claimed responsibility for abducting them.

The United States has long wanted Pakistan, whose military and economy depend heavily on billions of dollars in American aid, to crack down on militant groups that cross its unruly border to attack Western forces in Afghanistan.

More recently, U.S. Secretary of State Hillary Clinton asked Pakistan to bring all militant groups to the negotiating table in order to stabilise Afghanistan.

The NATO attack makes Pakistani cooperation less likely.

NATO hopes an investigation it promised will defuse the crisis and that confidence-building measures can repair ties.

Pakistan says it has paid the highest price in the war on militancy. Thousands of soldiers and police have been killed.

“The sacrifices rendered by Pakistan in the war on terror are more than any other country,” Khar was quoted as saying. “But that does not mean we will compromise on our sovereignty.”

Critics allege Pakistan has created a deadly regional mess by supporting militants like the al Qaeda-linked Haqqani network to act as proxies in Afghanistan and other groups to fight Indian forces in the disputed Kashmir region.

(Additional reporting by Jibran Ahmad in PESHAWAR, Obaid Omar in PUL-E ALAM and Emma Graham-Harrison in KABUL; Writing by Michael Georgy and Chris Allbritton; Editing by Nick Macfie)

The South Asian nation has already shown its anger over the weekend strike by pulling out of an international conference in Germany next week on Afghanistan, depriving the talks of a central player in efforts to bring peace to its neighbour.

“Enough is enough. The government will not tolerate any incident of spilling even a single drop of any civilian or soldier’s blood,” The News newspaper on Thursday quoted Foreign Minister Hina Rabbani Khar as telling a Senate committee on foreign affairs.

“Pakistan’s role in the war on terror must not be overlooked,” Khar said, suggesting Pakistan could end its support for the U.S. war on militancy. Despite opposition at home, Islamabad backed Washington after the September 11, 2001, attacks on the United States.

In a development likely to exacerbate the crisis, two Pakistani men were killed in Afghanistan early on Thursday and Pakistani border guards said NATO may have been responsible.

The officials said the two men, who were from the town of Chagai in the Pakistani province of Baluchistan, were gathering wood 30 km (18.6 miles) inside Afghanistan. They said NATO helicopters fired on their vehicle.

“I can confirm that the bodies of two residents of Chagai have arrived from Afghanistan,” said Chagai Assistant Commissioner Tufail Baloch. “But I do not have any information on how they were killed. It happened on Afghan soil so we don’t have many details yet.”

NATO officials had no immediate comment.

NATO helicopters and fighter jets attacked two military border posts in northwest Pakistan on Saturday in the worst incident of its kind since 2001.

The top U.S. military officer denied allegations by a senior Pakistani army official that the NATO attack was a deliberate act of aggression.

General Martin Dempsey, chairman of the U.S. military’s Joint Chiefs of Staff, told Reuters in an interview: “The one thing I will say publicly and categorically is that this was not a deliberate attack.”

The incident has given the army, which has ruled Pakistan for more than half of its history and sets security and foreign policy, some breathing room after facing strong criticism from both the Pakistani public and the United States after Osama bin Laden was killed in a secret raid by U.S. special forces in May.

The al Qaeda leader had apparently been living in a Pakistani garrison town for years.

Pakistanis criticised the military for failing to protect their sovereignty and U.S. officials wondered whether some members of military intelligence had sheltered him. Pakistan’s government and military said they had no idea bin Laden was in the country.

Protests have taken place in several cities every day since the NATO strike along the poorly-defined border, where militants often plan and stage attacks.

Pakistan military sources said Islamabad had cancelled a visit by a 15-member delegation, led by the Director General of the Joint Staff, Lieutenant-General Mohammad Asif, to the United States that was to have taken place this week.

In an apparently unrelated attack, a bomb blew out a wall of a government official’s office in Peshawar, the last big city on the route to Afghanistan, early on Thursday, police said. There were no reports of casualties.

Also in the eastern Afghan province of Logar, unknown gunmen abducted seven Pakistani engineers in Pul-e Alam, said provincial police chief Gulam Sakhi Rogh Lewanai.

Arif Naiel Khil, head of public health in Logar, said the engineers were building a hospital for Logar paid for by Pakistani development funds.

Nobody has claimed responsibility for abducting them.

The United States has long wanted Pakistan, whose military and economy depend heavily on billions of dollars in American aid, to crack down on militant groups that cross its unruly border to attack Western forces in Afghanistan.

More recently, U.S. Secretary of State Hillary Clinton asked Pakistan to bring all militant groups to the negotiating table in order to stabilise Afghanistan.

The NATO attack makes Pakistani cooperation less likely.

NATO hopes an investigation it promised will defuse the crisis and that confidence-building measures can repair ties.

Pakistan says it has paid the highest price in the war on militancy. Thousands of soldiers and police have been killed.

“The sacrifices rendered by Pakistan in the war on terror are more than any other country,” Khar was quoted as saying. “But that does not mean we will compromise on our sovereignty.”

Critics allege Pakistan has created a deadly regional mess by supporting militants like the al Qaeda-linked Haqqani network to act as proxies in Afghanistan and other groups to fight Indian forces in the disputed Kashmir region.

(Additional reporting by Jibran Ahmad in PESHAWAR, Obaid Omar in PUL-E ALAM and Emma Graham-Harrison in KABUL; Writing by Michael Georgy and Chris Allbritton; Editing by Nick Macfie)

“This is not true. They are making up excuses. What are their losses, casualties?” army spokesman Major-General Athar Abbas said in a mobile phone text message on Monday.

Tensions are running high at a time when deep cooperation is needed between the NATO mission and Pakistan to stabilise Afghanistan as the United States tries to wind up the war there.

NATO described the killings as a “tragic, unintended incident” and said an investigation was underway. A Western official and an Afghan security official who requested anonymity said NATO troops were responding to fire from across the border.

Pakistan’s military said the strike was unprovoked and has reserved the right to retaliate.

It’s possible both explanations are correct: that a retaliatory attack by NATO troops took a tragic, mistaken turn in harsh terrain where differentiating friend from foe can be difficult.

After a string of deadly incidents in the lawless and confusing border region, NATO and Pakistan set up a hotline that should allow them to communicate in case of confusion over potential targets, or if they believe they are coming under fire from friendly forces.

It is not clear if the hotline was used, either before or after the strike that killed the Pakistani soldiers.

The attack was the latest perceived provocation by the United States, which infuriated Pakistan’s powerful military in May with a unilateral special forces raid that killed al Qaeda leader Osama bin Laden.

Washington had been trying to repair ties badly damaged by the bin Laden affair and several other issues — including accusations that Pakistan’s military spy agency was backing militants who bomb American targets in Kabul.

Last month, U.S. Secretary of State Hillary Clinton visited Islamabad and held a town hall meeting to try and win over Pakistanis, held talks with her counterpart and called on all sides to work for peace in Afghanistan.

Any goodwill secured from the trip probably evaporated after the NATO strike, which fuelled a wave of anti-American sentiment in Pakistan.

Aside from growing anger on the street, newspaper editorials are filled with sharp criticism of the United States and NATO.

“This is time for U.S./NATO/ISAF (International Security Assistance Force in Afghanistan) forces to understand the dark side of wanting to go it alone and think about accepting Pakistani offers for enhanced coordination,” said The News.

BEFITTING RESPONSE

The mass-circulation Urdu language press went further.

“We have to send a clear and unequivocal message to NATO and America that our patience has run out. If even a single bullet of foreign forces crosses into our border, then two fires will be shot in retaliation,” said Jang newspaper.

“God forbid in future if something like this happened then our armed forces have to give a befitting response.”

The NATO strike has shifted attention away from what critics say is Pakistan’s failure to go after militants who cross the border to attack U.S.-led NATO and Afghan forces in Afghanistan.

Pakistan vowed to back the U.S. global war on militancy launched after al Qaeda’s September 11, 2001 attacks on the United States, and won billions of dollars in aid in return.

But the unstable, nuclear-armed country has often been described as an unreliable ally, and the United States has had to resort to controversial drone aircraft strikes against militants on Pakistani territory to pursue its aims.

U.S. frustrations grew so much that President Barack Obama ordered that the raid that killed bin Laden deep inside Pakistan be kept secret, knowing it could make the United States even more unpopular in Pakistan.

Pakistan shut down NATO supply routes into Afghanistan in retaliation for the weekend shooting incident, the worst of its kind since Islamabad uneasily allied itself with Washington in 2001.

Pakistan is the route for nearly half of NATO supplies shipped overland to its troops in Afghanistan. Land shipments account for about two thirds of the alliance’s cargo.

A similar incident on Sept 30, 2010, which killed two Pakistani service personnel, led to the closure of one of NATO’s supply routes through Pakistan for 10 days.

Few believe the strategic alliance between Pakistan and the United States will break, even though the aggrieved military — the South Asian nation’s most powerful institution — may now feel it needs to assert itself.

Both sides are likely to opt for damage control and then confidence-building measures — the usual pattern in a frequently troubled relationship.

(Writing by Michael Georgy; Editing by Raju Gopalakrishnan)

“This is not true. They are making up excuses. What are their losses, casualties?” army spokesman Major-General Athar Abbas said in a mobile phone text message on Monday.

Tensions are running high at a time when deep cooperation is needed between the NATO mission and Pakistan to stabilize Afghanistan as the United States tries to wind up the war there.

NATO described the killings as a “tragic, unintended incident” and said an investigation was underway. A Western official and an Afghan security official who requested anonymity said NATO troops were responding to fire from across the border.

Pakistan’s military said the strike was unprovoked and has reserved the right to retaliate.

It’s possible both explanations are correct: that a retaliatory attack by NATO troops took a tragic, mistaken turn in harsh terrain where differentiating friend from foe can be difficult.

After a string of deadly incidents in the lawless and confusing border region, NATO and Pakistan set up a hotline that should allow them to communicate in case of confusion over potential targets, or if they believe they are coming under fire from friendly forces.

It is not clear if the hotline was used, either before or after the strike that killed the Pakistani soldiers.

The attack was the latest perceived provocation by the United States, which infuriated Pakistan’s powerful military in May with a unilateral special forces raid that killed al Qaeda leader Osama bin Laden.

Washington had been trying to repair ties badly damaged by the bin Laden affair and several other issues — including accusations that Pakistan’s military spy agency was backing militants who bomb American targets in Kabul.

Last month, U.S. Secretary of State Hillary Clinton visited Islamabad and held a town hall meeting to try and win over Pakistanis, held talks with her counterpart and called on all sides to work for peace in Afghanistan.

Any goodwill secured from the trip probably evaporated after the NATO strike, which fueled a wave of anti-American sentiment in Pakistan.

Aside from growing anger on the street, newspaper editorials are filled with sharp criticism of the United States and NATO.

“This is time for U.S./NATO/ISAF (International Security Assistance Force in Afghanistan) forces to understand the dark side of wanting to go it alone and think about accepting Pakistani offers for enhanced coordination,” said The News.

BEFITTING RESPONSE

The mass-circulation Urdu language press went further.

“We have to send a clear and unequivocal message to NATO and America that our patience has run out. If even a single bullet of foreign forces crosses into our border, then two fires will be shot in retaliation,” said Jang newspaper.

“God forbid in future if something like this happened then our armed forces have to give a befitting response.”

The NATO strike has shifted attention away from what critics say is Pakistan’s failure to go after militants who cross the border to attack U.S.-led NATO and Afghan forces in Afghanistan.

Pakistan vowed to back the U.S. global war on militancy launched after al Qaeda’s September 11, 2001 attacks on the United States, and won billions of dollars in aid in return.

But the unstable, nuclear-armed country has often been described as an unreliable ally, and the United States has had to resort to controversial drone aircraft strikes against militants on Pakistani territory to pursue its aims.

U.S. frustrations grew so much that President Barack Obama ordered that the raid that killed bin Laden deep inside Pakistan be kept secret, knowing it could make the United States even more unpopular in Pakistan.

Pakistan shut down NATO supply routes into Afghanistan in retaliation for the weekend shooting incident, the worst of its kind since Islamabad uneasily allied itself with Washington in 2001.

Pakistan is the route for nearly half of NATO supplies shipped overland to its troops in Afghanistan. Land shipments account for about two thirds of the alliance’s cargo.

A similar incident on Sept 30, 2010, which killed two Pakistani service personnel, led to the closure of one of NATO’s supply routes through Pakistan for 10 days.

Few believe the strategic alliance between Pakistan and the United States will break, even though the aggrieved military — the South Asian nation’s most powerful institution — may now feel it needs to assert itself.

Both sides are likely to opt for damage control and then confidence-building measures — the usual pattern in a frequently troubled relationship.

(Writing by Michael Georgy; Editing by Raju Gopalakrishnan)

Pakistan has long been reluctant to open up trade with its neighbor because of long-running political disputes, particularly over the Kashmir region. But both countries have been trying to boost their trade following a recent thaw in ties.

Lasting peace between the rivals is seen as essential to South Asian stability and to helping a troubled transition in Afghanistan as NATO-led combat forces plan their military withdrawal from that country in 2014.

Pakistan last week said it would grant India most-favored nation (MFN) trade status that would help normalize trade by ending huge restriction. India gave MFN status to Pakistan in 1996.

Pakistan’s Commerce Ministry recently requested the Economic Coordination Committee (ECC), the top decision-making body on economic affairs, to increase the number of items that can be imported from India.

“The ECC met on Friday and approved the addition of 12 goods in the positive list of items that can be imported from India,” a ministry official said.

Another official said the goods included machinery and raw materials for the leather and textile industries.

The decision came as senior commerce officials of the two countries prepare to meet early next week in New Delhi to explore ways to boost bilateral trade.

Despite having a combined population of more than a billion, Pakistan and India’s official bilateral trade stood at $1.4 billion in 2009/10 while an estimated $3 billion unofficial trade is routed through third countries in the Gulf.

Indian Foreign Secretary Ranjan Mathai said on Thursday the two countries would take the process of normalization of trade to its “logical conclusion” and India would also work toward a preferential trade agreement with Pakistan and easing of visa restrictions for businessmen.

Pakistan and India have fought three wars, two of them over the Himalayan region of Kashmir, since their independence in 1947 but their relations have improved since they resumed a dialogue in February that was derailed by an attack by Pakistan-based militants in the Indian city of Mumbai in 2008.

Pakistani Prime Minister Yusuf Raza Gilani and his Indian counterpart Manmohan Singh hailed progress in diplomatic ties and promised a “new chapter” in ties when they met on the sidelines of a regional summit in the Maldives on Thursday.

(Reporting by Zeeshan Haider; Editing by Robert Birsel)

Bhutto, the first female prime minister in the Muslim world, was killed in a gun and suicide attack in 2007 in one of the most shocking events in Pakistan’s turbulent history.

An anti-terrorism court indicted the seven men in a hearing held behind closed door in the city of Rawalpindi for security reasons.

“They have been charged with conspiracy as well as abetment in the murder,” Chaudhry Zulfiqar Ali, a government prosecutor, told Reuters.

The charismatic Bhutto was killed on December 27, 2007 as she waved to a crowd through the sunroof of a sports utility vehicle following an election rally in Rawalpindi weeks after she returned to Pakistan from a self-imposed exile after striking a deal with then military ruler Pervez Musharraf.

Musharraf’s government had blamed Pakistani Taliban leader Baitullah Mehsud for the killing. Mehsud was killed in a U.S. drone strike near the Afghan border in 2009.

The five Taliban militants were charged with “criminal conspiracy” for bringing the suicide bomber from the tribal belt in the northwest to Rawalpindi where he carried out the attack, another prosecutor Mohammad Azhar said.

The police officers, including Saud Aziz, who was then Rawalpindi police chief, were charged with breach of security by “changing the security plan for BB (Benazir Bhutto),” he added.

Musharraf, who lives in exile in Dubai and London, also faces accusations of failing to provide adequate security to Bhutto.

The anti-terrorism court in February issued an arrest warrant for him and later declared him fugitive of law after he failed to respond to these accusations.

In August, the court ordered the confiscation of all property and the freezing of Musharraf’s bank accounts in Pakistan after he again failed to respond.

The prosecutor Ali said the court would deal with Musharraf’s issue later.

A report by a U.N. commission of inquiry released last year said any credible investigation should not rule out the possibility that members of Pakistan’s military and security establishment were involved in the killing, though it did not say who it believed was guilty.

It heavily criticized Pakistani authorities, saying they had “severely hampered” the investigation.

Musharraf has denied suggestions that he or his security agencies had any role in Bhutto’s murder.

After her death, Bhutto’s party won general elections in 2008 by riding a wave of public sympathy and ultimately forced Musharraf to step down.

Bhutto widower, Asif Ali Zardari, has been the president of the country since then.

(Reporting by Zeeshan Haider; Editing by Ed Lane)

Trade has long been tied to political issues between the hostile neighbors, who have fought three wars since independence from Britain in 1947.

There are hopes that progress in trade ties will help bolster a fragile peace process, which the two resumed in February, with political implications likely to outweigh any practical benefits.

“This was a decision taken in the national interest and all stakeholders, including our military and defense institutions, were on board,” Information Minister Firdos Ashiq Awan told reporters.

Pakistan’s military, which has ruled Pakistan for more than half of its history, sets security and foreign policy.

Critics say Pakistan’s generals have been so obsessed with a perceived security threat from India for decades that their judgment on vital issues such as the economy has become clouded.

“It’s a very powerful step, and a welcome step in the right direction,” Indian Trade Secretary Rahul Khullar told Reuters in New Delhi.

“It’s good for business. It’s good for commerce, and most importantly it increases confidence on the economic front that both Pakistan and India are committed to moving the social and trade agenda forward.”

But underscoring the sensitivities, an angry Pakistani journalist covering Awan’s press conference described the decision as a “crime.”

Islamabad has been looking increasingly isolated after India signed a wide-ranging agreement with Afghanistan last month, and the unilateral U.S. raid that killed Osama bin Laden in Pakistan in May which heavily strained ties with ally Washington.

“It’s (MFN status) a very major milestone in terms of change in the mindset of Pakistan,” said retired Pakistani general and prominent commentator Talat Masood.

“I think they have realized they can’t have bad relations with the United States and at the same time continue to have very poor relations with India because this synergy will be very dangerous for Pakistan.”

Islamabad wants a major say in shaping any peace settlement in Afghanistan, where India is taking an active but low-profile approach to building influence through aid and investment.

But Islamabad has alienated both the Washington and Kabul governments — who will play a central role in any reconciliation — because of its suspected links with militant groups fighting Western and Afghan forces in Afghanistan.

The United States is likely to applaud Pakistan’s decision to give India MFN status.

Peace across the heavily militarized frontier between India and Pakistan is crucial for the United States to draw down troops and stabilize Afghanistan without sparking off a proxy war between New Delhi and Islamabad in that country.

Awan said commerce officials from the two countries would meet in India in mid-November to discuss ways to boost trade.

India broke off talks after the November 2008 attack on Mumbai by Pakistan-based militants that killed 166 people.

While India granted Pakistan MFN status in 1996, Pakistan hesitated.

Pakistani officials want New Delhi to remove non-trade barriers against Pakistan goods. Pakistan has long complained that Indian quality standards and customs procedures have hindered the flow of Pakistani goods into India.

Of the $1.4 billion in trade recorded in 2009/10, Indian exports to Pakistan stood at $1.2 billion while Pakistan exports to India totaled $268 million, according to official data.

The wider economic disparity is just as stark. Pakistan reported 2.4 percent growth in gross domestic product in the 20100-11 fiscal year while India reported 8.5 percent growth.

Since the 1960s, when Pakistan was an Asian tiger economy and India a basket case, India’s economy has swelled to $1.06 trillion, more than eight times the size of Pakistan’s $207 billion.

Trade ties were severed after the second war between the two countries in 1965 and have yet to recover fully.

But despite the challenges, the two now appear more keen to remove barriers to trade and the two countries’ commerce ministries say trade could easily triple in three years.

(Additional reporting by Qasim Nauman and Rebecca Conway in Islamabad and Matthias Williams in New Delhi; Editing by Nick Macfie; Writing by Michael Georgy)

The Pakistani military had forced the Indian helicopter to land and detained four Indian army officials after it intruded into its territory in Olding sector in northern Skardu region near the border in the disputed Himalayan region of Kashmir.

But it was released after senior military officials from both sides spoke on a hotline.

“The helicopter and four officers on board returned around 5.30 p.m. (1230 GMT) after a contact between the director-general military operations of the two countries,” Pakistani military spokesman Major-General Athar Abbas said.

The Indian defense ministry said the helicopter had returned to Kargil in Indian-ruled Kashmir. “The issue has been resolved,” the ministry spokesman, Sitanshu Kar, said.

Indian officials said the helicopter strayed into Pakistani territory because of bad weather.

The Himalayan region of Kashmir lies at the heart of tensions between the nuclear-armed South Asian rivals and has been trigger of two of the three wars between them since their independence from British rule in 1947.

The latest incident took place near Kargil in Indian Kashmir where the two nations came dangerously close to their fourth war in 1999.

However, relations between the two uneasy neighbors have improved after they resumed a peace process this year which was suspended following attacks by Pakistan-based Islamist militants on the Indian city of Mumbai in 2008, that killed 166 people.

“The swift release of the helicopter shows both countries do not want to derail the peace process. Otherwise it could have turned into a major crisis,” security analyst Hasan Askari Rizvi said.

The Himalayan region of Kashmir is divided but claimed in entirety by both Pakistan and India.

(Additional reporting by Frank Jack Daniel in NEW DELHI and Ashok Pahalwan in JAMMU; Editing by Sugita Katyal)

The helicopter intruded into Pakistani territory in Olding sector in northern Skardu region near the border with Indian Kashmir at around 1:00 p.m (4 a.m. EDT).

The incident comes as the two South Asian rivals are trying to improve ties strained after an attack by Pakistan-based Islamist militants in the Indian city of Mumbai in 2008, that killed 166 people.

“The helicopter had come deep into our airspace. It was forced to land. Four Indian army officers have been taken into safe custody. They are safe,” military spokesman Major-General Athar Abbas told Reuters.

Abbas said India had been informed of the incident and investigations were underway.

“Our air defense aircraft immediately scrambled into the air and reached the area and forced the helicopter to land,” a Pakistan air force official said.

A military official said a lieutenant-colonel, two majors and a junior commission officer of the Indian army were on board the helicopter and all of them had been detained.

Indian television reports cited army sources saying the airspace violation by the Cheetah model helicopter operated by the 666 Siachen Falcons was not intentional.

The reports said the helicopter entered Pakistan territory during “whiteout” conditions due to snow in the mountainous region.

“It was due to bad weather that the Cheetah chopper strayed across the LoC. There was no deliberate attempt to intrude,” the Indian army said in a statement to Times Now television station, referring to the de facto border in the divided Kashmir region known as the Line of Control.

The nuclear-armed neighbors have fought three wars, mainly over the disputed Kashmir region, since their independence from British rule in 1947.

However, their relations have improved after they resumed a peace process this year which was suspended after the Mumbai attacks.

Analysts said the two countries might try to resolve the incident amicably.

“Overall, the relations are improving and both governments would like to avoid any crisis if the intrusion was unintentional,” security analyst Hasan Askari Rizvi said.

The latest incident took place near Kargil in Indian Kashmir where the two nations came dangerously close to their fourth war in 1999.

(Additional reporting by Jack Daniel; Editing by Sugita Katyal)