U.S. reviews financial aid to Pakistan

By Sue Pleming

JERUSALEM (Reuters) - U.S. Secretary of State Condoleezza Rice said on Sunday the United States would review billions of dollars in financial aid to ally Pakistan after President Pervez Musharraf declared emergency rule.

Rice, who was speaking to reporters in Jerusalem, also urged Musharraf to call elections and reiterated U.S. displeasure at emergency rule, which she advised against in two phone calls with Pakistan's president on October 31.

"Obviously we are going to have to review the situation with aid, in part because we have to see what may be triggered by certain statutes," Rice said.

Musharraf imposed emergency rule on Saturday in a bid to reassert his flagging authority against challenges from Islamist militants, a hostile judiciary and political rivals.

"I am disappointed at his decision. I think the decision sets Pakistan back in terms of the considerable progress it had made along the road to democratic change," Rice said.

Asked whether she regretted that the United States had put so much faith in Musharraf as a leader, Rice responded: "The United States has never put all of its chips on Musharraf."

Pakistan has received about $10 billion in U.S. aid since 2001, with much of that in counter-terrorism assistance.

Sen. Joe Biden of Delaware, a Democratic presidential candidate and chairman of the Senate Foreign Relations Committee, described the situation in Pakistan as "a real mess" and agreed that U.S. aid should be under review.

"I'm not sure how much good that military aid we're giving him to fight the extremists is doing us anyway," Biden said on CBS News' "Face the Nation."

"From the brief briefing I got last night (from White House officials), I don't know that they have any notion of what they're going to do right now," he said. "There's still this faint hope that this martial law will last only a day or two, but I think we're kidding ourselves."

Republican presidential candidate Fred Thompson, a former senator from Tennessee, said on NBC's "Meet the Press" that it was too soon to pull U.S. aid from Musharraf's government, but said "we've got to play hardball with him."

'COMPLICATED MATTER'

Pakistan this year is receiving about $700 million in U.S. economic and military assistance and is expected to receive more than $800 million in 2008. It also receives billions of dollars in counter-terrorism assistance.

"We have to be very cognizant of the fact that some of the assistance that has been going directly to Pakistan is directly related to counter-terrorism missions. This is a complicated matter," Rice said.

Rice, on a visit to Israel and the Palestinian Territories, said the United States had made clear to Pakistan's leaders before emergency rule was announced that such a move would not be supported by the United States.