TONY BLAIR will tonight lead urgent talks with Western leaders in Birmingham aimed at defusing the increasingly tense nuclear crisis sparked by India's fundamentalist Hindu government.

The G8 Summit has just 48 hours to come up with a solution that will persuade Pakistan to drop its plans for a retaliatory test of what its government warned will be the first ''Muslim nuclear bomb''.

In an ominous warning that the crisis could escalate further, Pakistan said India's decision to test five nuclear weapons earlier this week was ''just short of a declaration of war''.

Britain marked its ''dismay'' by summoning the Indian acting High Commissioner to the Foreign Office for a diplomatic dressing-down, and by recalling its representative in Delhi.

Senior American diplomats, rushed to the region by President Bill Clinton, will spend the day in Islamabad taking advantage of a ''small window of opportunity'' to urge calm in the face of what has been condemned around the world as an unnecessarily provocative act by India's overtly nationalist government.

With intelligence experts and spy satellites reporting that Pakistan could be ready as early as Sunday to detonate its own device at a site near the Iranian border, the leaders of the world's most powerful economies have effectively been given a deadline to come up with an international response to the crisis.

In Washington, the director of the CIA branded the conflict between India and Pakistan as ''the most dangerous nuclear flashpoint in the world''.

Pakistan's government brushed aside appeals for restraint and seemed prepared to escalate the long-running dispute between the two nations over the status of Kashmir. Pakistan's foreign Minister, Gohar Ayub, said: ''What India has done is short of a declaration of war, the provocation has been that extreme.''

Britain yesterday marked its profound ''dismay'' at India's decision by summoning its High Commissioner in Delhi, Sir David Gore-Booth, back to London for urgent consultations, but continued to rule out imposing sanctions on the single largest recipient of British overseas aid.

Mr Blair's task, with Britain holding presidency of the G8 and the European Union, looked difficult last night, with signs of an emerging split between the five nuclear powers on how to handle the crisis.

The US and China, which fought several wars with India in the 1970s, have imposed draconian sanctions on India, but Russia and France oppose such tough action.

India flew in the face of world opinion by carrying out a series of five nuclear tests in the desert 330 miles south-west of Delhi near the border with Pakistan, three on Monday and two on Wednesday.

It has now made a conditional offer to adhere to the nuclear test ban treaty. Previously, India had refused to sign the Comprehensive Test Ban Treaty, approved by the United Nations in 1996, saying that it gave an advantage to the five nations which had already tested their nuclear weapons.

The Cabinet discussed the crisis yesterday and agreed the Government would seek to use its mediating influence as EU and G8 president.

A Cabinet source warned: ''This is a serious threat to world peace. We are gravely concerned. This should keep us all awake at night.''

Foreign Secretary Robin Cook told MPs it was a matter of finding ''the point of maximum unity'' between nations, but he conceded measures were necessary to impress on India the strength of world opinion. ''The urgent task now is to do all we can to prevent these tests from provoking other tests in the region,'' he told the Commons in an emergency statement.

''An increase in tension in the region cannot be in the interests of India, and the escalation of an arms race in the subcontinent cannot help to tackle the poverty in which millions of its people live''.

Meanwhile, UN Secretary General Kofi Annan said he was ''deeply disturbed'' by India's nuclear tests, and looked forward to India giving an ''unequivocal assurance'' that it would sign the test ban treaty.

The Security Council issued a statement urging all sides to ''exercise maximum restraint''.

It said it ''strongly deplores'' the nuclear tests India has conducted since Monday and ''strongly urges'' New Delhi to refrain from carrying out any more.

In an implicit appeal to Pakistan not to follow suit, it stated: ''With a view to preventing an escalation in the arms race, in particular with regard to nuclear weapons and their delivery systems, and to preserving peace in the region, the Security Council urges all states to exercise maximum restraint.''It added: ''The council underlines that the sources of tension in South Asia should only be resolved through dialogue and not by military build-up.''

Last night the Indian government brushed aside the prospect of losing $20bn in American aid, loans and trade as a result of sanctions which will take effect next month. Japan has ordered a block on $1000m in aid loans.

Members of the coalition government led by the Hindu revivalist Bhartiya Janata Party have begun a damage limitation exercise to dispel fears that sanctions could damage the country.

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