Kasuri, who was spearheading the peace talks with India under the President Pervez Musharraf, also said there was a substantial understanding on a joint mechanism that would have representatives from the two countries besides both sides of divided Kashmir.
The agreements could not fructify because of "sheer bad luck" and because the visit of Prime Minister Manmohan Singh to Islamabad did not materialise, Kasuri said in an interview to the CNN-IBN television channel.
Kasuri said Pakistan had hoped Singh would visit the country but in 2007 there were assembly elections in Uttar Pradesh and other states. After before Singh could be invited, Pakistan was embroiled in a controversy over the removal of Chief Justice Iftekhar Mohammad Chaudhari.
Kasuri replied in the affirmative on being asked whether the two countries had come close to working out the outline of a solution to Kashmir.
"Yes. We wanted Kashmiris to be involved and India was not that keen, so we arrived at this modus vivendi that Indian Kashmiris would travel to Pakistan, Pakistani Kashmiris would travel to India and meet Indian leaders, and Indian Kashmiris would meet Pakistani leaders in an indirect form. We would have preferred a direct Kashmiri participation," Kasuri said.
Kasuri admitted that there was intense back channel diplomacy during which representatives of the two sides met in "different parts of the world".
Musharraf's close aide and the Pakistan national security adviser, Tariq Aziz first met his then Indian counterpart Brajesh Mishra and later continued the efforts with J N Dixit and S K Lambah.
Kasuri said both prime ministers, Atal Bihari Vajpayee and later Manmohan Singh "helped" the process.
"Both India and Pakistan were working on similar sort of things on both the sides through the back channels and almost agreed on four issues -- demilitarisation, regionalisation, self-governance and joint mechanism," Kasuri said.
On demilitarisation, Kasuri said the principle was understood that it would provide comfort to Kashmiris on both the sides but the schedules had not been agreed upon. The two sides discussed withdrawing troops from their respective areas of Kashmir.
Asked whether it meant complete demilitarisation, Kasuri said, "Propriety stops me from going into such details."