Aziz will urge his Indian counterpart Manmohan Singh to back the Iranian pipeline project when he meets him on the sidelines of a South Asian Association of Regional Conference (SAARC) summit next weekend in Dhaka, the Financial Times said on Monday.

The mooted gas pipeline project is first among the series of CBPs that need not be held hostage to the resolution of the long-standing dispute between the two countries over Kashmir.

"Such initiatives would improve the atmospherics" between India and Pakistan and create a mood more conducive to resolving more intractable problems, Aziz told the Financial Times in an interview held at the World Economic Forum in Davos, Switzerland.

He said that he would tell Singh that Pakistan will proceed with its part of the pipeline from Iran, holding open the possibility of India joining it later if agreement cannot be reached at this stage.

The Pakistani prime minister said he had a good relationship with Singh, but he added he was puzzled by India's demands for economic concessions including transit rights, in return for joining the Iranian gas pipeline project.

At their talks, he said he would also push his plan to open banking links between the two countries, a move he believes would be a catalyst for bilateral trade and development.

"There are many other possibilities which we want to explore," he said.

Aziz also made it clear that he did expect progress on Kashmir as well, but that Pakistan would like to see India cut troop numbers in its part of disputed Kashmir and take steps to prevent human rights abuses.

Progress might also include opening a bus route linking Muzaffarabad to Srinagar, the divided halves of Kashmir, but he added that a wider normalization of relations would not be possible while the dispute was unresolved.

India and Pakistan have fought two of the three wars on the issue since gaining their independence in August 1947. Two rounds of composite dialogue have taken place recently in Islamabad and New Delhi but no significant progress has been made on issues such as Kashmir and Baglihar dam.