Pakistani President Pervez Musharraf's surprise resignation announcement Monday has quelled any faint remaining hopes of improving relations between his country and Israel in the near future, according to Israeli sources. It was only three years ago that Musharraf made headlines when he stopped to shake the hand of former prime minister Ariel Sharon at a reception for world leaders at the United Nations in September 2005. Isaac Kfir, an expert on Pakistan at the Interdisciplinary Center Herzliya, blamed Prime Minister Ehud Olmert for not doing more since then to improve relations with Musharraf. He faulted Olmert for rejecting Musharraf's offer to join the peacekeeping forces along the Lebanese border. "This was a major loss," he said. Kfir said he had viewed it as a subtle first step toward relations with Israel, since Musharraf could not have done it openly. Now given the race for power in Pakistan, which has the second-largest Muslim population in the world, such ties will not be possible for a while, he said. But a government source said that Musharraf never actualized the desire to move closer to Israel because he had been busy over the past few years struggling to survive. Making contacts with Israel would not have played well for him at home, the source said. The same would be true in the near future, with the battle for democracy and power raging in Pakistan, there is little hope of creating any ties at this time between the two countries. The best observers in Israel can hope for is that a stable democratic government is established that would improve the state of the country, which at a later stage could have positive benefits for Israel, said the source. Musharraf's announcement Monday ended his nearly nine-year tenure, which opponents said was hampering the country's shaky return to democracy. An emotional Musharraf said he wanted to spare Pakistan from a dangerous power struggle with opponents vowing to impeach him. He said he was satisfied that all he had done "was for the people and for the country." "I hope the nation and the people will forgive my mistakes," Musharraf said in a televised address, much of which was devoted to defending his record. But three years ago when Musharraf had a firmer grip on power, he had followed his handshake with Sharon with the delivery of a keynote address at a dinner in New York organized by the Council for World Jewry. At that time Musharraf said that a resolution to the Israeli-Palestinian conflict would enable Pakistan to formalize full diplomatic relations. Speaking briefly to The Jerusalem Post shortly before making his address, Musharraf said he had no timetable for such ties. "We need to sit down and talk more [with the Israelis]," he told the Post, "and see how to move forward... We ought to be taking more steps." Only a month earlier he had organized an historic meeting in Turkey between then-foreign minister Silvan Shalom and his Pakistani counterpart, Khursheed Kasuri. Later that fall, Pakistan agreed to informally accept through a third party humanitarian aid from Israel in the aftermath of an earthquake that rocked that country. The hopes for expanded relations were never materialized. In 2007 Israel rejected an offer by Musharraf to help resolve the Israeli-Palestinian conflict. In an interview with the pan-Arab Al-Arabya television station, based in Dubai, Musharraf said he was "enthusiastic" about solving the Israeli-Palestinian conflict and would go to Israel if his offer to mediate were accepted. Even as recently as January 2008, Musharraf reportedly held a rare and secret meeting with Defense Minister Ehud Barak in a Paris hotel where they were both staying. Musharraf's political exit robs the West of a stalwart ally who echoed its concern about how Islamic militancy is destabilizing Afghanistan and Pakistan, where al-Qaida and the Taliban have regained strength. Pakistan's stock market and currency both rose strongly on hopes that the country was bound for political stability. In his hour-long address, Musharraf said he would turn in his resignation to the National Assembly speaker Monday. It was not immediately clear whether it would take effect the same day. Mohammedmian Soomro, chairman of the upper house of parliament, was poised to take over in the interim. It remains an open question whom the parliament will elect to succeed Musharraf, largely because the ruling coalition has vowed to strip the presidency of much of its power. There is speculation that both Nawaz Sharif and Asif Ali Zardari, the leaders of the two main parties, are interested in the role. However, neither has openly said so. It was also unclear whether Musharraf would be able to stay in Pakistan. Foreign Minister Shah Mahmood Qureshi said leaders of the ruling coalition would discuss later Monday whether to prosecute Musharraf in court on impeachment charges. Most of his political foes put those issues on the back-burner and got on with celebrating. "It is a victory of democratic forces," Information Minister Sherry Rehman said. "Today the shadow of dictatorship, that has prevailed for [so] long over this country, that chapter has been closed." Television footage showed groups of people celebrating in the streets in several towns across Pakistan, some of them firing automatic weapons into the sky. "It is very pleasing to know that Musharraf is no more," said Muhammad Saeed, a shopkeeper among a crowd of people jigging to drum beats and hugging each other at an intersection in the northwestern city of Peshawar. "He even tried to deceive the nation in his last address. He was boasting about economic progress when life for people like us has become a hell," he said, because of economic problems that include runaway inflation. Musharraf dominated Pakistan for years after seizing power in a 1999 military coup, making the country a key strategic ally of the US by supporting the war on terror. But his popularity at home sank over the years. Many Pakistanis blame the rising militant violence in their country on Musharraf's use of the army against militants based in the northwest. His reputation suffered fatal blows in 2007 when he ousted dozens of judges and imposed emergency rule. His rivals won February parliamentary elections and have since sought his ouster, announcing impeachment plans earlier this month. Musharraf, who has been largely sidelined since his rivals came to power, finally yielded after the coalition finalized impeachment charges against him and threatened to send a motion to Parliament later this week. The charges were expected to include violating the constitution and gross misconduct, likely in connection with the ouster of the judges and the declaration of emergency rule. A defiant Musharraf, seated in an office between two national flags, listed the many problems facing Pakistan, including its sinking economy and a chronic power shortage. He said his opponents were wrong to blame him for the mounting difficulties and suggested they were going after him to mask their own failings. "I pray the government stops this downward slide and takes the country out of this crisis," he said. Allies and rivals of the president said talks had been under way to get him to step down by possibly granting him legal immunity from future prosecution. The second biggest party in the government has said he should be tried for treason, which carries a maximum punishment of death. Qureshi would not say whether Musharraf might be granted a "safe exit" - speculation has focused on whether he might go into exile in Saudi Arabia or Turkey - or dragged through the courts. "That is a decision that has to be taken by the democratic leadership," Qureshi, who is from the main ruling Pakistan People's Party, told Dawn News television. The leaders would assess the speech and the political situation, he said. US Secretary of State Condoleezza Rice offered "deep gratitude" Monday for Musharraf's original decision to join the US-led fight against extremists, but she was careful to signal strong support for the civilian government that pushed Musharraf aside. Her statement marked a public separation from a leader the Bush administration once championed as "indispensable" to holding together a nuclear-armed country deemed crucial to American efforts to battle extremists in South Asia. Musharraf's popularity fell sharply in Pakistan after he ousted dozens of judges and imposed emergency rule last year, and the Bush administration had been distancing itself from the former army general since the election of a new civilian government in February. Hours after Musharraf announced his resignation Monday to avoid impeachment at the hands of his political enemies, Rice said the United States supported Pakistan's elected democratic government. "We believe that respect for the democratic and constitutional processes in that country is fundamental to Pakistan's future and its fight against terrorism," Rice said. She noted that "Musharraf made the critical choice to join the fight against al-Qaida, the Taliban and other extremist groups that threaten the peace and security of Pakistan, its neighbors and partners throughout the world. For this, he has our deep gratitude." She called Musharraf "one of the world's most committed partners in the war against terrorism and extremism." Many US lawmakers and Pakistani opposition leaders had long pushed the Bush administration to stop making support for Musharraf the core of its Pakistan policy. Late last year, Deputy Secretary of State John Negroponte called Musharraf "indispensable" to President George W. Bush's campaign against terror. State Department spokesman Robert Wood, asked Monday about Musharraf's fall, said, "The war against extremism is bigger than any one person. What's important here is that we work with Pakistan to do what we can to root out these extremists." Wood, responding to a reporter's question, said he was not aware of any recent contact between the US and Musharraf to discuss where he might go into exile.