If the United States is to succeed in Afghanistan, it is going to have to engage in dialogue with Taliban-led insurgents, according to many analysts with close knowledge of the region.

But in doing so, it will have to juggle the competing interests of India and Pakistan, both of which have a stake in any eventual political settlement in Afghanistan.

This is not going to work out smoothly. Each step there are going to be complications, said C. Raja Mohan, Professor of South Asia Studies at Singapore's Nanyang Technology University.

The United States, which is due to announce a new strategy for Afghanistan and Pakistan shortly, has suggested it could reach out to insurgents to see if some can be peeled away from a hardline Islamist core linked to al Qaeda.

Vice President Joe Biden said this month that he believed only five percent of the Taliban were incorrigible.

I do think it is worth engaging and determining whether or not there are those who are willing to participate in a secure and stable Afghanistan, he told a news conference in Brussels.

But India has been wary of any political accommodation with the Taliban, which were close allies of Pakistan before they were toppled by the U.S.-led invasion of Afghanistan in 2001.

It long accused Pakistan of using links to Afghan Islamists to fuel an insurgency in Indian Kashmir, and of seeking to dominate Afghanistan to provide strategic depth -- effectively giving its army space to operate in the event of war with India.

Pakistan in turn has resented growing Indian influence in Afghanistan which it sees as an attempt by its much larger neighbor to put pressure on it from both east and west.

ADDRESSING PASHTUN GRIEVANCES

Indian analysts say India has no reason to oppose outright any political settlement with Afghan insurgents, who are dominated by the Pashtun ethnic group whose influence was undercut by the fall of the Pashtun Taliban in 2001.

Engaging the Taliban is necessary, said retired Indian diplomat M. K. Bhadrakumar.

He noted Indians had good relations with the Pashtuns dating back to pre-independence days but blamed Pakistan for having encouraged Islamist fervor in Afghanistan to build a common bond of religion across both countries.

Addressing Pashtun grievances is indeed the key to any settlement, said Raja Mohan. The real problem is different: all Taliban are Pashtun; not all Pashtun are Taliban. Finding the space here is the real challenge.

It is by no means clear if the U.S. and Pakistani interests can ever coincide, he added. Pakistan needs to maintain an Islamic hold on the Pashtuns and the U.S. needs to separate the Pashtun conservatism from the extremist Islamic ideology, which is the same objective as that of India.

Pakistani analysts, however, say Indian suspicions that Pakistan -- and particularly the powerful Pakistan Army -- continues to support Islamist militancy to maintain its influence on Afghanistan are outdated.

Indeed they say Pakistan Army chief General Ashfaq Kayani has redefined strategic depth as coming not from Afghanistan, but from a stronger economy and stable Pakistan.

They are probably going to stay away from the religion thing, said Shuja Nawaz, Director of the South Asia Center at The Atlantic Council of the United States. Kayani knows how unreliable these religious types are.

He really wants Pakistan to succeed in international terms, economically, first, then socially, said defense analyst Brian Cloughley.

KASHMIR PEACE

Whatever differences between India and Pakistan, both would gain enormously if Washington could reach a political settlement in Afghanistan that isolates hardline Islamists.

Engaging in talks with the Afghan Taliban would have a sobering impact on the Pakistani Taliban since both appeal to each other on the basis of their common Pashtun identity, said Asif Durrani, Pakistan's Deputy High Commissioner in London.

What we are seeing on the Pakistani side is a reaction to what is happening in Afghanistan, he said.

The moment the (Afghan) war ends, Pakistan is on the road to stability, said Bhadrakumar, adding this in turn would galvanize peace efforts over Kashmir.

According to Raja Mohan, a framework peace deal was nearly agreed in 2007 and then put on the back burner because of political instability in Pakistan.

But achieving a political settlement that would spread from Afghanistan into Pakistan, Kashmir and India would require Washington to pull off a spectacular diplomatic high-wire act.

It already has to contend with al Qaeda, which has every interest in sabotaging its plans. It has to decide how to adjust its military strategy, which is driving many Afghans into the arms of the Taliban because of high civilian casualties.

And with India facing a national election, the government is unlikely to make any concessions to Pakistan now, especially after last November's attack on Mumbai.

Washington would also have to work out the mechanics of how to hold talks and with whom.

U.N. special envoy to Afghanistan Kai Eide told France's Le Monde newspaper it was important to avoid a fragmented approach to the insurgency but to talk to all the Taliban movement.

The U.S. review of strategy in Afghanistan and Pakistan will have to contend with all that and more. They are trying to come up with big ideas, said Nawaz. There is no wishful thinking.

(Editing by Janet Lawrence)

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