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U.S. struggles to chart fresh course with Pakistan

By Missy Ryan and Mark Hosenball

WASHINGTON (Reuters) - The White House's attempts to set a fresh course with Pakistan are being hobbled by bad options, bureaucratic tensions and the desire to avoid severing a vexing but critical relationship.

In the wake of a blunt and public accusation by the top U.S. military officer that Pakistani intelligence supported a militant attack on the U.S. Embassy in Kabul, officials at the Pentagon, State Department and White House are urgently debating an array of unattractive choices.

Washington desperately wants to tighten the screws on the Haqqani network, a militant group U.S. officials say was supported by Pakistan's powerful ISI intelligence agency in the embassy attack and in other violence that threatens a smooth U.S. withdrawal from Afghanistan.

Despite mounting exasperation in official Washington, dramatic change in U.S. policy looks unlikely in the short term toward Pakistan, an unstable, unpredictable nation that boasts nuclear weapons and controls a key supply route needed to keep U.S. troops fed and fighting in Afghanistan.

"I don't see that we have a comprehensive new strategy on Pakistan in the works," said Bruce Riedel, a former CIA official who advised the highest levels of the Obama administration on regional policy. "I think we need one, or at least we need to reshape the one we have."

In the face of Pakistani indignation, the White House and State Department appeared quietly to distance themselves from the remarks by Admiral Mike Mullen, who stepped down this week as chairman of the Joint Chiefs of Staff.

"My understanding of the situation is that senior administration officials agree with Admiral Mullen's statements," said Lisa Curtis, a former State Department official and CIA analyst. "But they have not developed a Plan B for dealing with Pakistani malfeasance and that is why they are now walking back Mullen's tough statements."

DRONE STRIKES

A bureaucratic turf war continues in the meantime, with the Pentagon defending military-military ties with Pakistan; the State Department pushing reconciliation talks with the Taliban and Pakistan-based militants; the CIA holding onto its contacts with the Inter-Services Intelligence agency; and the U.S. Agency for International Development arguing prosperity will further long-term U.S. interests.

"What I keep seeing is that each part of the bureaucracy says we've got to get tougher on Pakistan, but not in my lane," Riedel said. "If you take all those things together, where is the pressure?"

The only thing that appears to be a virtual certainty in the Obama administration's future policy is an intensification of drone strikes on militants in Pakistan's lawless tribal regions. "Air operations are not a problem," one U.S. official familiar with U.S. counter-terrorism policy in Pakistan said.

Those drone strikes have had the tacit approval of officials in Islamabad, even though the launchpad for such strikes has shifted to Afghanistan since the U.S. raid that killed al Qaeda leader Osama bin Laden deep within Pakistan in May bruised Pakistan's military pride.

The U.S. official said the United States has what may be surprisingly good intelligence these days about what militants are doing in Pakistan. Even with increasing public hostility between Washington and Islamabad, the United States is still able to collect what it considers to be adequate information to continue drone strikes without much hesitation.

Other military options -- drone strikes on urban areas with greater potential for civilian casualties or bombing raids by manned U.S. aircraft -- do not appear to have garnered much traction so far.

The bin Laden raid's success surely has shaped the debate at the Pentagon, where discussions are led by Defense Secretary Leon Panetta and Michael Vickers, the Pentagon's senior intelligence official.

While that raid may have also fueled support in some quarters for further manned U.S. incursions into Pakistan against Haqqani militants or others Pakistan has so far not touched, future U.S. ground operations do not yet appear to be a serious possibility.

'NO BOOTS ON THE GROUND'

One senior U.S. official told Reuters on Friday Pakistan had been informed there would be "no boots on the ground."

Whether Washington will stick to the pledge if push came to shove, and if American intelligence is solid enough, is of course another matter.

Beyond military options, the administration also appears undecided what diplomatic or soft power steps it can take to tighten the screws on Pakistan without creating unacceptable backlash -- cutting aid perhaps, withholding support at the World Bank or bestowing favors on arch-enemy India.

It has not yet acted on calls from Congress to officially declare the Haqqani network a foreign terrorist group -- apparently because some U.S. officials still hope the Haqqanis will be part of a peace deal someday.

But talk is growing, Riedel said, of declaring Pakistan a "state sponsor of terrorism" -- diplomacy's nuclear option. The U.S. government would more likely threaten Pakistan with such a declaration than actually do it, especially since a declaration is hard to undo.

The White House meanwhile appears to be scrambling to lower the temperature enough to give Islamabad room to act.

"The point has been made loudly," another U.S. official said. "But we recognize there is a risk if the Pakistanis feel like they've been backed into a corner."

In the end, it may be Congress that takes the most draconian measures.

Lawmakers are already proposing to restrict U.S. aid by placing more rigorous conditions on it. Lawmakers are growing more hostile to Pakistan and -- especially as they face a budget crunch -- military aid looks certain to be affected.

(Additional reporting by Matt Spetalnick in Washington and Chris Allbritton in Islamabad; editing by Warren Strobel and Todd Eastham)

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