As Obama, Karzai meet, Afghan peace efforts show flickers of life By Warren Strobel and Mehreen Zahra-Malik WASHINGTON/ISLAMABAD (Reuters) - President Barack Obama and Afghan President Hamid Karzai will discuss matters of war, including future U.S. troop levels and Afghanistan's army, when they meet on Friday, but matters of peace may be the most delicate item on their long agenda. After nearly 10 months in limbo, tentative reconciliation efforts involving Taliban insurgents, the Karzai government and other major Afghan factions have shown new signs of life, resurrecting tantalizing hopes for a negotiated end to decades of war. Pakistan, which U.S. and Afghan officials have long accused of backing the insurgents and meddling in Afghanistan, has recently signaled an apparent policy shift toward promoting its neighbor's stability as most U.S. combat troops prepare to depart, top Pakistani and Afghan officials said. In another potentially significant development, Taliban representatives met outside Paris last month with members of the Afghan High Peace Council - although not directly with members of the Karzai government, which they have long shunned. U.S. officials, speaking on condition of anonymity, said the developments are promising - but that major challenges remain to opening negotiations, let alone reaching an agreement on the war-ravaged country's political future. Hopes for Afghan peace talks have been raised before, only to be dashed. Last March, the Taliban suspended months of quiet discussions with Washington aimed at getting the insurgents and the Karzai government to the peace table. Obama is expected to press the Afghan president to bless the formal opening of a Taliban political office in the Gulf state of Qatar as a way to jump-start inter-Afghan talks. Karzai has been lukewarm to the idea, apparently fearing his government would be sidelined in any negotiations. Karzai's meeting with Obama, at the end of a three-day visit to Washington, is shaping up to be one of the most critical encounters between the two leaders, as the White House weighs how rapidly to remove most of the roughly 66,000 U.S. troops in Afghanistan and how large a residual force to leave after 2014. Obama, about to begin his second term in office, appears determined to wrap up U.S. military engagement in Afghanistan. On Monday, he announced as his nominee for Pentagon chief former Nebraska Senator Chuck Hagel, who appears likely to favor a sizeable U.S. troop drawdown. Other issues on the agenda have plenty of potential for causing friction: the future size and focus of the Afghan military; a festering dispute over control of the country's largest detention center; and the future of international aid after 2014. Karzai's trip "is one of the most important ones because the discussions we are going to have with our counterparts will define the relations between (the) United States and Afghanistan," Afghan Foreign Minister Zalmay Rassoul told the lower house of parliament this month. No final announcement on post-2014 U.S. troop levels is expected during Karzai's visit, and the issue is further complicated by Washington's insistence on legal immunity for American troops that remain. General John Allen, the top U.S. and NATO commander in Afghanistan, recommended keeping between roughly 6,000 and 15,000 U.S. troops in Afghanistan after 2014, but the White House is considering possibly leaving as few as 3,000 troops. A U.S. official, speaking on condition of anonymity, said the White House had asked for options to be developed for keeping between 3,000 and 9,000 troops in the country. Last year, the Obama administration hoped to kick-start peace talks with a deal that would have seen Washington transfer five Taliban prisoners from Guantanamo Bay prison. In return, the Taliban would renounce international terrorism and state a willingness to enter talks with Karzai's representatives. That deal never came off, and the question now is whether it, or an alternative peace process, can get under way as the U.S. military presence rapidly winds down. Looking at developments in the last few months, "you could see that there are things happening," said one U.S. official, who was not authorized to speak for the record. At the end of 2012, Pakistan released four Afghan Taliban prisoners who were close to the movement's reclusive leader, Mullah Mohammed Omar. It appeared to be a step toward meeting Afghanistan's long-standing insistence that Islamabad free those who could help promote reconciliation. A senior Afghan official welcomed the release. A member of Pakistan's parliament closely involved in Afghan policy-making said there are signs of a shift in the thinking of Pakistan's powerful military. Some in the military, which has long regarded Afghanistan as a battleground in its existential conflict with rival India, are now saying that the graver threat comes from Pakistan's own militants. Yes, there is skepticism. The hawks are there. But the fact is that previously there were absolutely no voices in the army with this kind of positive thinking," the parliamentarian said. "Pakistan has also realized that there won't be a complete withdrawal of the U.S. from Afghanistan," the lawmaker said. The security establishment realizes it has to compromise somewhere. Hence the Taliban releases. ... Hence the statements from even the most skeptical Afghan officials that there is a change in Pakistani thinking. Ghairat Baheer, who represented the Hezb-e-Islami faction at last month's peace talks in the Paris suburb of Chantilly, rejected a continued U.S. military presence in Afghanistan, but praised the Pakistan prisoner release as a sign of its good intentions. After more than a year of frustration, Obama administration officials are skeptical about luring the Taliban to peace talks, citing what appears to be a deep fissure within the movement between moderates who favor entering the political process and hard-liners committed to ousting both NATO troops and Karzai. The Taliban's lead negotiator, Tayeb Agha, whom the Obama administration regards as a reliable interlocutor, offered to resign last month in apparent frustration, the Daily Beast website reported. Taliban envoys have yet to meet officially with Karzai's government, and the insurgents demand a rewriting of the Afghan constitution. I don't think anyone knows where (reconciliation) stands. And I mean that because there are a lot of reconciliation talks and a lot of games that are being played in a lot of places," said Fred Kagan, a military analyst at the conservative American Enterprise Institute. "The likelihood of getting an acceptable deal that actually secures our interests is vanishingly small," he said. But the probability that you could get the deal and have it implemented in time to make this drawdown timeline make sense is nonsense. (Additional reporting by Phil Stewart and David Alexander in Washington, and Hamid Shalizi in Kabul. Editing by Christopher Wilson)