ISLAMABAD, President Gen Pervez Musharraf praised Israeli Prime Minister Ariel Sharon on Friday as, “courageous” for withdrawing settlers from Gaza. According to a Guardian, report, quoting AP, President Musharraf in a wide-ranging interview said he was encouraged by Sharon’s actions, calling the creation of a Palestinian state critical to resolving a number of political disputes around the world and undercutting one of the root causes of terrorism.

He hinted that he would consider establishing relations if Israel took concrete steps towards the establishment of an independent Palestinian state.

“I can’t really give a cut line,” he said about when formal ties could be established. “But I’m always a believer in reacting before events, of foreseeing events and reacting accordingly ... I don’t believe in reaction, I believe in action.”

He said the Gaza withdrawal demonstrated Sharon’s potential to carry out tough decisions. “I think such actions need courage and boldness,” Gen Musharraf said of the pullout. “What we have seen on the TV, Israelis not wanting to leave, being forced out, is a courageous thing to do.

“We hope that he shows (an) equal amount of courage finally in the creation of the Palestinian state.”

He also said Pakistan and India are optimistic about resolving their bitter dispute over Kashmir, and he hopes for a settlement while he and India’s prime minister are still in power.

He declined, however, to say whether this meant he hopes for a resolution of the dispute by 2007, when his term is up. There is a simmering controversy over whether Musharraf plans to give up his post of army chief then and seek re-election as a civilian president. Indian Prime Minister Manmohan Singh’s term ends in 2009.

Gen Musharraf said he had established a good personal rapport with Mr Singh. They are to meet on the sidelines of the UN General Assembly session in New York later this month. But he quashed speculation that he also would meet Sharon there.

“Why should there be a rush?” he asked. “We are clear in our stance. We want to progress toward resolution of the Palestinian dispute, and as progress is made, Pakistan would like to keep reviewing its diplomatic stance.”

The president said he had no fresh information on the whereabouts of Osama bin Laden but speculated the Al Qaeda leader likely is still hiding out on either side of Pakistan’s rugged border with Afghanistan and not in an urban area where he could be recognized and arrested.

He said Al Qaeda capabilities have been crippled and that it does not provide a central command for other militant groups, but that the terror network and its leaders remain symbolic motivators, with insurgents revering them and carrying around their photographs.

“I personally think, yes, there is an underworld of these organizations linked to each other,” Gen Musharraf said. “Most dangerous is the financial underground.

“These linkages should be cut.”

He also confirmed that Shahzad Tanweer, one of the suspects in the July terror bombings in London, briefly visited a school linked with militants in Lahore. But he said it “would be very naive to believe” that the short stint had any real influence on his beliefs or motivations.

“We are investigating,” the president said. “We would like to move against any organization that helped him in any way.”

Al Qaeda once provided a variety of capabilities to terrorists - finances, logistics, training and the technology to build sophisticated bombs and booby traps, he said.

“All those capabilities have been crippled. They are very restricted, very limited now,” he said, pointing out that its leaders have little or no easy access to banks. “I think they’re looking for financial support themselves.”

On Pakistani politics, the president said his harshest critics have little support. He praised former prime minister Benazir Bhutto’s main opposition Pakistan People’s Party but said she could not become premier again because she already has served her constitutional limit of two terms.