BRUSSELS, Jan 26: Prime Minister Shaukat Aziz on Wednesday warned that there would be no peace in South Asia without a resolution of the Kashmir conflict and said that India's huge nuclear and conventional arms arsenal and search for new weapons had created a 'serious imbalance' in the region.

Speaking to the Brussels-based Royal Institute for International Relations, Mr Aziz also reiterated Pakistan's calls to be included in the European Union's duty-free import system known as the GSP Plus.

The prime minister, winding up three days of intensive meetings with EU, Belgian and NATO officials, said that Pakistan was striving for peace with India. While the atmospherics between the two countries were improving through confidence-building measures, Islamabad and Delhi had yet to engage in substantive negotiations, he said.

"A resolution of the Kashmir conflict would be the best confidence-building measure of all," Mr Aziz insisted. Pakistan did not wish to enter into an arms race with India, the prime minister said. But India's huge conventional and nuclear capacity and its bid to modernize its armed forces was a source of concern, he said.

"We hope India will agree to the concept of strategic restraint in the nuclear sector," Mr Aziz said. Both countries should be investing in the "tools of development, not the tools of destruction," he underlined.

The Pakistani leader vowed a continuing commitment to the war against terror but warned that the country was paying a heavy economic and political price for the combat.

"We will not falter in our resolve," he underlined but added that the struggle against terrorism could not be won through the use of force alone. The root causes of poverty and deprivation as well as the 'festering wounds' of Palestine and Kashmir must be addressed, he said.