Picking One's Friends : Just as the world seems to be waking up to the threat of Muslim extremism in South Asia, the region's awkward giant is feeling left out in the cold.

For the last couple of years, India has liked to describe itself as the "natural ally" of the United States. The term is meant in part to distinguish the country from Asia's other massive, nuclear-capable state--undemocratic China. And it pictures as well a post-cold-war world, in which Washington should no longer have reason to favor Pakistan over a neighboring and Soviet-leaning India.

Or so one would think. In fact, America's new cold war against terrorism has upended the chessboard in South Asia, and the pieces seem to be falling into familiar positions. Pakistan has again assumed a critical strategic importance because of its proximity to and influence over Afghanistan. The United States has lifted sanctions placed on the country for conducting nuclear tests, promised at least $50 million in aid and rescheduled an additional $379 million in debt. The Americans continue to insist that no deal has been struck on Islamabad's obsession--its struggle with India over Kashmir. But neither is Washington interested in entertaining India's complaints against its neighbor at the moment. New Delhi could be forgiven for thinking the new cold war is freezing India out.

What's ironic is that the issue of terrorism has forced that role reversal. Ever since Pakistani troops were caught infiltrating Indian-held Kashmir in 1999, India has imagined itself to hold the moral high ground against guerrillas it says are condoned and at times coordinated by Islamabad. Last week's suicide attack by Muslim militants on the legislature in Srinagar, the summer capital of Jammu and Kashmir, which killed nearly 40 people, was only the latest incident in an insurgency that has claimed more than 30,000 lives since 1989. Indians have long insisted that most of the rebels are trained in Pakistani-controlled Kashmir and financed in part by Pakistan's Inter-Services Intelligence agency. They are appalled by Islamabad's rehabilitation as an ally in the fight against terror.

To bolster their case, the Indians are emphasizing any and all links between the Kashmiri militants, Pakistan's ISI and terror financier Osama bin Laden. The group that initially took responsibility for the Srinagar bombing, Jaish-e- Mohammad (Mohammad's Army), has a relevant history. The hijackers of an Indian Airlines jet in Katmandu on Christmas Eve, 1999, diverted the plane to the Afghan city of Kandahar, spiritual home of the Taliban movement, and demanded the release of three Muslim militants held by India. The trio were eventually brought to Kandahar and, along with all five hijackers, allowed to cross freely into Pakistan. "We kept asking the Taliban to hand over the hijackers to us," says a top Indian official who was part of the negotiations. "But... it seemed they were protecting them and the freed terrorists." One of the three extremists, an urbane 28-year-old named Ahmed Omar Sheikh, is now believed to have funneled more than $100,000 to the Sept. 11 hijackers on behalf of bin Laden's network, Al Qaeda. Another, Masood Azhar, went on to found Jaish-e- Mohammad.

The Srinagar attack came just a day after Pakistan's leader, Gen. Pervez Musharraf, announced that there were no terrorist groups operating from Pakistan. But Azhar still lives in the country--traveling between Karachi, Lahore and Islamabad. (Jaish-e-Mohammad later denied responsibility for ...