Pakistan says it will ask the World Bank to resolve a dispute over construction of a controversial dam in the Indian-controlled portion of Kashmir. The decision comes after the two rival nations failed to settle their differences in face-to-face talks.

Announcing the decision at news conference in Islamabad Tuesday, Foreign Ministry spokesman Masood Khan blamed India for the failure of talks meant to resolve the dispute over the Baglihar dam.

He says Pakistan is seeking arbitration under the terms of a bilateral agreement that the World Bank brokered in 1960 on the sharing of river water.

Mr. Khan says Indian officials were never willing to resolve the differences, and prolonged the discussions only to gain time to complete their project.

"It's unfortunate that we have to go to the World Bank," he said. "We could have resolved this issue here given the technical expertise. What we lacked here was a positive response from India."

India is building the one-billion-dollar hydroelectric dam on the Chenab river, which flows from the Indian-controlled portion of Kashmir into Pakistan. An Indian foreign ministry spokesman said Pakistan's decision to refer the issue to the World Bank is not justified.

Islamabad says the project violates the bilateral Indus Water Treaty, and will deprive Pakistan's main agricultural province, the Punjab, of water for irrigation. India dismisses these concerns, saying the dam will not disrupt the flow of water.

Pakistani spokesman Khan also warns the disagreement could hurt efforts to establish a permanent peace between India and Pakistan though an on-going dialogue.

"It's not a good omen, I must say. And it is casting a shadow over the composite dialogue process," he said. "It was perhaps the most durable confidence-building measure between the two countries."

The wide-ranging peace dialogue between India and Pakistan is aimed to settling all outstanding issues, including their bitter dispute over Kashmir. The divided region is at the center of tensions, and has caused two of the three wars between the two countries.