Bhutto death dims U.S. hopes for democratic Pakistan

Pakistan's former Prime Minister and opposition leader Benazir Bhutto attends an election rally in Rawalpindi December 27, 2007, shortly before she was killed in a gun and bomb attack. Bhutto was assassinated on Thursday as she left an election rally in the city of Rawalpindi, putting Jan. 8 polls in doubt and sparking anger in her native Sindh province.

WASHINGTON (Reuters) - The killing of Benazir Bhutto sends the United States back to square one in its search for a Pakistan that is a stable, democratic partner in a fight against Islamic extremism, analysts said on Thursday.

Possible consequences of the assassination range from widespread street rioting by her followers to the nightmare scenario for Washington of Pakistan eventually becoming a nuclear-armed, unstable Islamic state.

Financial investors, who already factor in Pakistan's considerable political risk, said the killing itself was not surprising but that continuing instability would boost the risk.

Stephen Cohen of the Brookings Institution called Bhutto's death a "blow to the idea of a liberal, moderate Pakistan" that made him fear for that country.

"Its further decay will affect all of its neighbors, Europe, and the United States in unpredictable and unpleasant ways," the South Asia expert wrote in an essay.

"It is probably too late for the United States to do much either: we placed all of our bets on (President Pervez) Musharraf, ignoring Benazir's pleas for some contact or recognition until a few months ago," Cohen added.

The United States invested great energy and political capital to secure the return of the 54-year-old exiled former prime minister to Pakistan in October. It convinced Musharraf to give up his role as military leader and accept elections and a power-sharing arrangement with her.

Now, Washington faces "a disaster on every account," from dimmed hopes of a democratic transition to the risk of more attacks by emboldened radicals, said Frederic Grare, a South Asia expert at the Carnegie Endowment for International Peace.

"The leaders of the mainstream parties are being assassinated. That weakens the parties and does not augur well for any reestablishment of democracy in Pakistan," he said.

STREET VIOLENCE, NUCLEAR SAFETY

U.S. President George W. Bush urged Pakistanis to honor Bhutto "by continuing with the democratic process for which she so bravely gave her life."

Other U.S. officials said Washington hoped Islamabad would stick to plans to hold elections, slated for January 8.

Anthony Cordesman, security analyst at the Center for Strategic and International Studies, said Bhutto's death made a very unstable political situation much worse.

"There's no figure that we can work with who has the same immediate ability to try to create political stability and a climate in which you can have legitimate elections, bring back the rule of law and bridge the gap that had developed between Musharraf and the Pakistani people," he said.

Analysts warned that in a country prone to conspiracy theories and passionate politics, fingers would point in all directions over the assassination amid grief and anger that could spill into violence.

"The number one concern right now is to maintain calm in the streets of Pakistan," said Lisa Curtis of the Heritage Foundation. She said it would be unwise for Musharraf to impose emergency rule to accomplish that aim.

Other analysts questioned the wisdom of relying on Musharraf to fight terrorism.

"If he can't protect a leading politician in a fairly secure garrison city, how can he tackle the problems in the remote tribal areas, where al-Qaeda and the Taliban are reportedly thriving?" asked Win Thin, senior currency strategist at Brown Brothers Harriman & Co.

A perennial question during crises in Pakistan is the security of the country's nuclear arsenal.

U.S. officials said there was no change in an assessment offered last month, amid strife over Musharraf's imposition of emergency rule, that the weapons were secure.

Cordesman of CSIS said Islamabad had received U.S. help and studied other country's policies to ensure maximum safety for its nuclear facilities.

"But is there transparency that allows anybody on the outside to make some kind of categorical statement about the security of Pakistan's nuclear weapons? Anybody who did that may discredit themselves," he said.

(Reporting by Paul Eckert; Editing by David Storey)