Benazir Bhutto thought she had a deal with General Musharraf -- until Nawaz Sharif came along, writes Graham Usher in Islamabad "No understanding has been arrived at and we are making our plans to return," former Pakistani prime minister Benazir Bhutto told a packed London press conference on 1 September. It was a baffling finale or "intermission" to what in Pakistan has been billed as the mother of all deals: a grand and American mediated pact in which Pakistan's exiled ex- premier supports current leader Pervez Musharraf to another presidential term so long as he stands down as army chief and permits her to return to Pakistan for the first time in eight years. As recently as last week Bhutto had said she and Musharraf were a "cat's whisker" away from a deal. What turned the cat into a tiger? There were differences. Musharraf balked at Bhutto's demand that he give up the president's power to dissolve parliament. Understandably so -- the army has used this clause in the past to rid it self of unwanted but elected governments. He also refused the dissolution of local government bodies ahead of general elections this fall. Understandably so -- these bodies were created to rig the elections in his favor. More time was also needed to finesse a legal trade so Musharraf and Bhutto can run again for office -- the constitution currently bars this. But agreement was reached on an indemnity for legal cases facing Pakistani politicians prior to 1999, when Musharraf seized power in a coup. Understandably so -- many in Musharraf's ruling Muslim League party (PML-Q) will benefit from such an amnesty. But these are snags, to be ironed out, especially if applied under American pressure. The real force behind Bhutto and Musharraf's hesitation was a man -- Pakistan's other exiled premier and their mutual nemesis, Nawaz Sharif. In 1990s Sharif was Bhutto's bitterest rival, with each colluding with the army to bring down the other's government. Sharif was prime minister at the time of Musharraf's 1999 military takeover. The General then banished him to a 10-year exile in Saudi Arabia. Or so he thought. Last month, Pakistan's re-born Supreme Court ruled there was no ban on Sharif returning to his homeland. On 30 August -- at another packed London presser -- Sharif said he would arrive in Islamabad on 10 September to "start a decisive battle against dictatorship". As for the government's warnings of imprisonment or further exile, these were the "cries of a terrified regime that is on its way out," he said. There is a bit of posturing in such answers -- but only a bit. Government lawyers concede that any attempt to banish Sharif from Pakistan would be contempt of court. They also know his arrest would not only make him a political martyr and trigger unrest: it would massively hike Sharif's popularity and erode still more Musharraf and Bhutto's. There is another problem. Many members of Musharraf's PML-Q were once members of Sharif's PML-N party. In a long and ignoble Pakistani tradition they "turned coats" when Musharraf took power. Now -- with Musharraf in freefall and Sharif ascendant -- there is again the shuffling sound of jackets being shed. PML-N sources say as many as 30 PML-Q "turncoats" want to rejoin their old boss. Sharif says he will grant amnesty on "a case-by-case basis". This could turn a trickle into a flood say PML-Q leaders. At a crisis meeting with Musharraf on 31 August they warned a pre- election deal with Bhutto could signal the PML-Q's demise and a 'stampede" to Sharif. A few hours later the president called a temporary halt on the "dialogue" with Bhutto. Does this mean the "deal" won't happen? It is more likely, say analysts, and not only because Bhutto and Musharraf have now so closely intertwined their political futures. As Musharraf, Bhutto and Sharif played poker in London, an event occurred which demonstrates why for the United States the stakes are so high. Pro-Taliban tribesmen abducted a convoy of over 150 soldiers in Pakistan's South Waziristan tribal agency bordering Afghanistan. They would be freed only if the army withdrew from South Waziristan and 15 captured Taliban fighters were released from jail. "The militants want complete command and control over the area," says a source in South Waziristan. Pakistan's tribal areas are base for the Taliban-led insurgency in Afghanistan. They are also the "haven" where US intelligence insists al Qaeda has "regrouped" to orchestrate its global jihad from Anbar to America. Washington remains convinced that only Musharraf and the Pakistan army can fight the war against the Taliban and al Qaeda in tribal areas on its behalf. But they know he lacks domestic legitimacy. Enter Bhutto. She not only talks the American talk of "moderation versus extremism"; she heads the largest political party in Pakistan. The Americans are not only backing the Bhutto-Musharraf rapprochement, says a government source. "They are its micromanagers". But this latest American intervention in the politics of Pakistan will make a bad situation worse, says analyst and Afghan expert, Rasul Baksh Rais: "The West's exclusive interest is the defeat of the extremist religious parties in Pakistan. Now, many of us would like to reduce the power of militant Islam in Pakistan and Afghanistan. But you can only do that through the establishment of clean, democratic government based on the rule of law. You cannot do it through entrenching the role of the army in political governance. The fundamental divide here is not between moderation and extremism. It's between democracy and dictatorship."