The United States and Pakistan on Wednesday raced to conclude a deal to reopen key supply routes for the Afghanistan war before next week’s Nato summit, with Washington hopeful of an imminent deal but Islamabad insisting that the US pay more to repair relations and end the blockade.

Both sides said negotiations continued in Islamabad, a day after Nato invited Pakistan’s president to the Chicago summit in the strongest sign yet that the wary US ally was ready to reopen its western border to American and allied military supplies heading to neighboring Afghanistan.

Pakistan closed the routes after American airstrikes in November that killed 24 Pakistani troops on the Afghan border. Since then, supplies have taken a far more expensive route through eastern Europe and Asia.

”We have had some progress,” State Department spokeswoman Victoria Nuland said.

”While the Pakistani political leadership hasn’t yet authorised the reopening of the ground transportation routes, we understand that they did endorse the conclusion of the negotiations.”

Nuland declined to describe what details remained to be worked out, but American officials had previously spoken of lingering differences over security arrangements, customs fees and other taxes that would be paid to Islamabad for hosting the routes and guaranteeing safe passage.

But those issues appeared to have been largely ironed out by Wednesday, according to an American official, who said a final deal hinged only on the two sides formalizing a written memorandum of understanding.

The agreement should be concluded by Friday, said the official, speaking on condition of anonymity because of the sensitivity of negotiations.

Nuland told reporters, ”If we can get it done by Chicago, that will send a powerful signal of support from Pakistan to Afghanistan” and the international mission there. The Nato summit begins Sunday in Chicago.

But a Pakistani official offered a different assessment, saying the two sides remained at loggerheads over money. The gap in their estimations of how much money Islamabad should be paid remained ”huge” Wednesday, according to the official, who also asked for anonymity because the talks were continuing late Wednesday.

The official couldn’t cite any figures. ”It is a problem,” the official conceded, ”but we are trying to resolve it.” The official added that questions linked to security or customs procedures were secondary and were easily solvable after a financial agreement but said it was unclear when the memorandum could be finalised.

Haggling by Pakistan could reflect a last-ditch effort to get a higher price, or the widespread distrust of the United States back home and the difficult internal politics involved in securing a national consensus to reopen the routes.

Washington and Islamabad have suffered a debilitating year for their already strained relations. November’s airstrikes were preceded by a CIA contractor’s killing of two Pakistanis and the unilateral US raid on Osama bin Laden’s Pakistani compound. And tensions are compounded by the US suspicion that Pakistan supports the Taliban, making the Afghanistan war unwinnable.

Still, a picture of rapprochement seemed clearer Tuesday, when Nato invited President Asif Ali Zardari to its upcoming gathering and Pakistani diplomats said he was likely to attend. The summit will focus on the war in Afghanistan and Pakistan is seen as a key player in any political reconciliation between the Afghan government and the Taliban.

The US has expressed regret for the airstrikes and quietly pressed Pakistan to reopen the routes over the last two weeks. Washington and Nato stepped up the efforts in recent days, and a series of Pakistani statements suggested the supply line blockade would soon be lifted.

By keeping the routes closed, Pakistan’s teetering economy risks missing out on millions of dollars in international development and loans, as well military aid. It could also be excluded from discussions on Afghanistan’s future.

The blockade forced Nato to reorient its logistics chain to more expensive routes across Russia and Central Asia.

The Pakistani routes will be more important in coming months as Nato begins to pull out of Afghanistan, with a 2014 deadline for the withdrawal of all foreign combat troops. AFP