Read the report: The Political Economy of the Kashmir Conflict Opportunities for Economic Peacebuilding and for US Policy

US officials told rediff.com that Deputy Secretary of State Richard Armitage Armitage knew about Habibullah's paper before his recent trip to South Asia, during which he maintained that cross-border infiltration from Pakistan across the Line of Control in Kashmir still continued.

The officials, who deal with South Asia in the US State Department, the National Security Council and senior Congressional aides who advise members of the powerful Senate Foreign Relations Committee on the subcontinent, told rediff.com that the "report is being studied seriously," particularly because they are aware of Habibullah's credibility with all parties to the conflict, including the All-Parties Hurriyat Conference and the Kashmiri militants.

In the officials' assessment, Habibullah is "considered a straight-shooter with no particular agenda."

One source in the South Asia bureau in the State Department, who has known the Indian civil servant since his days in Washington when he served in the Indian embassy as minister (community affairs), told rediff.com, "We know of Wajahat's involvement in the Kashmir issue over the years, particularly during the Hazratbal mosque crisis (of 2000), and that he is respected and trusted by all the parties to this problem. So naturally we take his recommendations seriously, and although our policy on Kashmir has not changed and has been consistent with previous administrations, it helps in giving us an expert perspective of the situation in the current context, while being provided with an objective background."

Habibullah, who has just completed his stint at the USIP, said The Political Economy of the Kashmir Conflict: Opportunities for Economic Peacebuilding and US Policy, will constitute a part of the book he is writing on conflict resolution in Kashmir.

In several interviews with India Abroad -- the newspaper for the Indian-American community owned by rediff.com -- and in public remarks in Washington, DC, then Indian Ambassador Lalit Mansingh had also said that India would welcome US 'facilitation' to resolve the Kashmir issue, and that one way to facilitate it would be to impress upon Pakistan that a serious dialogue can begin only when cross-border terrorism across the LoC is permanently halted.

In his report Habibullah says 'the United States could play a crucial role as a facilitator -- not as a mediator -- paving the way toward resolution while leaving the principal stakeholders to determine the form of that resolution.'

'Most Kashmiris regard the United States as an honest broker, an opinion rarely held in Muslim countries in the aftermath of 9/11,' he wrote.

Habibullah notes that 'this view has also been expressed repeatedly in private by several members of the separatist leadership,' and makes the case that 'in fact, Kashmiris credit all positive developments in the region over the past five years to efforts made by the United States.'

He argues that 'given the deep mistrust Kashmiris have of India and their growing mistrust of Pakistan, the United States might find it advantageous to cultivate its positive image,' more so at a time when 'that image is beginning to fray because of Iraq.'

According to Habibullah, the US has a stake in resolving this crisis, not least being Washington's overriding concern that 'Kashmir might spark a nuclear confrontation.'

He recommends that 'Washington's priority in the region should switch from avoiding nuclear confrontation -- an unlikely event -- to helping restore a highly functioning, robust democracy in Kashmir,' because this would be 'an effective means of countering terrorism in India' and would 'also help to undercut the rationale for unrest in Kashmir and thereby help to rid Pakistan -- now a major non-NATO US ally -- of the incubus of religion-based terrorism that has resisted its evolution into a modern nation-State.'

He argues that 'if Kashmiris are to feel less alienated, governments in the Indian and Pakistani parts of the state of Jammu and Kashmir must grant their people freedom, not merely by granting elections but also by rolling back restrictions on business, terminating governmental monopolies in trade and commerce, and encouraging international investment by bodies such as the World Bank and the Asian Development Bank.'

Habibullah states that there has not been a concerted American effort to help resolve the Kashmir issue since 1962-63, when then Secretary of State Dean Rusk 'made it clear that the outcome of talks between India and Pakistan could have a 'genuine' impact on each country's relations with the United States.'

'That initiative foundered because attempts to force the issue failed, with India garnering the support of the then powerful Soviet Union, and Pakistan veering toward China.'

'When President Kennedy was assassinated in November 1963, the United States abruptly dropped this approach, but the quest for resolution continued,' he notes.

Habibullah said 'a popular perception among Kashmiris is that the sporadic periods of near normalcy achieved in Jammu and Kashmir have been the result of US efforts. Whether or not this is true, one can hardly deny that the United States could contribute greatly today, given its long-standing relations with Pakistan and growing friendship with India.'

He suggests that 'helping Pakistan modernise its armed forces -- for instance, by filling gaps in the country's defense arsenal with modern equipment provided on easy terms -- could be a legitimate quid pro quo for action by Pakistan not only to withdraw support for cross-border terrorism but also to actively discourage it.'

'This would require dismantling the terrorist infrastructure that continues to flourish in Pakistan -- and that elicits merely fitful gestures of disapproval from Pakistan's government.'

He acknowledges that 'if Pakistan makes such positive moves, so too must India by reducing its military and paramilitary presence in Jammu and Kashmir,' and predicts that this would 'ease threat perceptions in Pakistan, encouraging it to reduce its economically debilitating levels of defense expenditure.'