Pakistan tells India it wants to defuse tension

By Zeeshan Haider

ISLAMABAD (Reuters) - Pakistan offered on Tuesday to help India investigate the militant assault on Mumbai saying it wanted to defuse tension as it considered an Indian demand that it hand over 20 of India's most wanted men.

India has blamed Islamist militants based in Pakistan for last week's attacks in India's financial capital that killed 183 people.

Tension between the nuclear-armed rivals has led to fears of renewed confrontation after Pakistan's civilian government had been trying to push forward a peace process.

But fear of a crisis that could undermine U.S.-led efforts to bring stability to Afghanistan eased when India's foreign minister said military action was not being considered.

Pakistan has denied the involvement of its state agencies in the Mumbai attacks and vowed to work with India in its investigation. It has rejected what it called unsubstantiated allegations of complicity.

Foreign Minister Shah Mehmood Qureshi said Pakistan would bring India in on its investigation.

"We don't want to do anything in haste. We don't want to do anything that fuels confrontation," Qureshi told reporters after an all-party conference on relations with India.

"We want to defuse the situation."

Earlier, Indian Foreign Minister Pranab Mukherjee told reporters India was demanding the handover of about 20 fugitives it believes are in Pakistan.

Pakistani Information Minister Sherry Rehman told reporters the government was formulating a response.

"UNDERWORLD DON"

The tension with India comes as Pakistan is struggling with an economic crisis and its own bloody campaign against militants.

Despite the tension, the Pakistani rupee firmed slightly, buoyed by the arrival last week of the first tranche of a $7.6 billion loan, dealers said.

Indian media reported the men on the Indian fugitive list included Dawood Ibrahim, a Mumbai underworld don, and Maulana Masood Azhar, a Pakistani Muslim cleric freed from jail in India in exchange for passengers on a hijacked plane.

Ibrahim, India's most wanted man, has eluded authorities for 15 years. He is believed to be hiding in Pakistan. Security experts say he has militant ties, and India wants him for bomb attacks in Mumbai in 1993 that killed at least 250 people.