The Centre today said the situation in Iraq was a matter of concern and hoped that the turmoil in the Gulf country will not affect the oil supplies to India.

"The new issue of concern is Iraq. Our oil pipeline comes from Southern Iraq. So far the terrorist have not targeted this pipeline but the government is keeping a close watch on the issue," Minister of State for Defence Rao Inderjit Singh told reporters here.

"We are hopeful that the situation in Iraq improves and our oil supplies are not affected," Singh, who laid a wreath the War Memorial at Badamibagh Cantonment here, said.

Replying to a question, the Minister said talks with Pakistan for resolving bilateral issues can progress if Islamabad fulfills its commitment of not allowing its territory to be used against India by the terrorists.

"The basic issue with Pakistan is that they should not allow their territory to be used for terrorist activities against India. If they can make sure of this, then the atmosphere becomes conducive for talks," he said.

Sing said talks cannot be held when guns roaring. "We are hopeful that the peaceful environment continues and the issues are resolved".

He said situation in Kashmir was not only under control but had improved over the years.

"I think it is only because of the efforts of the Armed forces that they have not allowed the situation to go out of hand," he added.

Asked if India still perceived China as a threat, the Minister said New Delhi will have to remain cautious about all the countries with which it had had issues in the past.

"We cannot choose our neighbours and kind of security environment we desire is not probably there. Any country with which we have had disputes in the past, we have to be careful. We are being cautious about China also," he said.