Pakistan never backed Haqqani network-spy chief

Some of nearly 300 residents, most of whom support the Sundar Sharif Sufi Shrine, take part in an anti-American rally through the streets of Lahore, September 28, 2011.

ISLAMABAD (Reuters) - Pakistan's intelligence chief on Thursday denied U.S. accusations that the country supports the Haqqani network, an Afghan militant group blamed for an attack on the American embassy in Kabul.

"There are other intelligence networks supporting groups who operate inside Afghanistan. We have never paid a penny or provided even a single bullet to the Haqqani network," Lieutenant-General Ahmed Shuja Pasha told Reuters after meeting political leaders over heavily strained U.S.-Pakistani ties.

Pasha, one of the most powerful men in the South Asian nation, told the all-party gathering that U.S. military action against insurgents in Pakistan would be unacceptable and the army would be capable of responding, local media said.

But he later said the reports were "baseless".

Pakistan has long faced U.S. demands to attack militants on its side of the border with Afghanistan, but pressure has grown since the top U.S. military officer, Admiral Mike Mullen, accused Pasha's Inter-Services Intelligence (ISI) directorate of supporting a September 13 attack on the U.S. mission in Kabul.

The dozens of political parties that participated in Thursday's meeting rejected the allegations against state links to violent militants in a joint declaration. "The Pakistani nation affirms its full solidarity and support for the armed forces of Pakistan," they said.

The Obama administration appears to be trying to smoothe things over with Pakistan even as it struggles with mounting frustration with Islamabad and seeks to curb speculation about divisions in its ranks.

As some U.S. officials appear to distance themselves, Mullen, who steps down this week, said he stood by the tone and content of his comments.

"I phrased it the way I wanted it to be phrased," he said in an interview aired on Thursday.

He said the ISI was giving the Haqqani group financial and logistical support and "sort of free passage in the (border) safe haven."

"They can't turn it off overnight. I'm not asserting that the Pak mil or the ISI has complete control over the Haqqanis. But the Haqqanis run that safe haven. They're also a home to al Qaeda in that safe haven," he told National Public Radio.

The attacks threaten to become a major obstacle to U.S. hopes of withdrawing smoothly from Afghanistan.

White House spokesman Jay Carney said that the relationship with Pakistan was "complicated but very important."

"There's no question that we have disagreements, complications in our relationship and we speak openly and candidly with our Pakistani counterparts about those," he said.

PATIENCE WEARING THIN

Support is growing in the U.S. Congress for expanding U.S. military action in Pakistan beyond drone strikes against militants, said Senator Lindsey Graham, an influential Republican voice on foreign policy and military affairs.

Islamabad is reluctant to go after the Haqqanis -- even though the United States provides billions of dollars in aid -- saying its troops are stretched fighting Taliban insurgents.

Pakistan says it has sacrificed more lives than any of the countries that joined the "war on terror" after the September 11 attacks by Islamist militants on the United States in 2001.

Pakistan's military faced withering public criticism after a surprise U.S. raid that killed al Qaeda leader Osama bin Laden in a garrison town not far from Islamabad in May.

A similar U.S. operation against militants in North Waziristan on the Afghan border, where American officials say the Haqqanis are based, would be another humiliation for the powerful army.

Graham said in an interview with Reuters that U.S. lawmakers might support military options beyond drone strikes that have been going on for years inside Pakistani territory, including using U.S. bomber planes within Pakistan. He added that he did not advocate sending in U.S. ground troops.

"I would say when it comes to defending American troops, you don't want to limit yourself," Graham said.

The U.S. Treasury Department on Thursday announced new sanctions on five individuals it said were linked to "the most dangerous terrorist organizations operating in Afghanistan and Pakistan," including the Haqqani network.

But it stopped short -- despite growing political pressure at home -- of officially designating the Haqqani network a terrorist group.

Pakistan was designated a major non-NATO ally by the United States for its support of coalition military operations in Afghanistan after 9/11.

But their relationship has been dogged by mistrust. Although regarded as critical to U.S. efforts to stabilize Afghanistan, Pakistan is often seen from Washington as an unreliable partner.

Following U.S. accusations that some in the Pakistani government have aided anti-U.S. militants, Congress is reevaluating its 2009 promise to triple non-military aid to Pakistan to a total of $7.5 billion over five years.

That aid came on top of billions in security assistance provided since 2001, which Washington is also rethinking.

The al Qaeda-linked Haqqani network has sworn allegiance to the Taliban, but has long been suspected of also having ties to the ISI.

(Additional reporting by Zeeshan Haider, Augustine Anthony and Bushra Takseen in Islamabad, Mirwais Harooni in Kabul and Missy Ryan, Susan Cornwall, Matt Spetalnick and John O'Callaghan in Washington; Writing by Michael Georgy; Editing by John Chalmers, Janet Lawrence and Philip Barbara)