Taliban fighters and Pakistani government officials have agreed a controversial deal which will lead to a "permanent ceasefire" in the troubled northwestern Swat valley, threatening to create an outpost of militant rule and a terrorist haven only 100 miles from the capital, Islamabad.
The agreement, between the militant commander Maulana Fazlullah and local administrators, was announced late yesterday and builds on a previous temporary deal.
"They have made a commitment that they will observe a permanent ceasefire and we'll do the same," Syed Mohammad Javed, commissioner of Malakand and local representative of the Pakistani government, told reporters late yesterday afternoon.
Around 1,200 people have been killed and between 250,000 and 500,000 have fled Swat in 18 months of fierce fighting over the beautiful valley that was once a centre of tourism. Three thousand militants have been battling up to 12,000 troops.
Western governments and many Pakistanis have been alarmed by the provincial government's offer to reinstate sharia law in Malakand if the Taliban agreed to peace. Last week Richard Holbrooke, Barack Obama's special envoy to the region, contacted Pakistani president Asif Ali Zardari, who has yet to ratify the deal, to express American concern. The US and Britain fear that a ceasefire could result in another sanctuary in Pakistan where al-Qaida and Taliban militants can move freely, and that Taliban fighters elsewhere in the region will be encouraged by the move.
The new US administration has launched a review of its policy in Afghanistan and Pakistan and British officials are hoping the World Bank will set up a development fund to channel aid money to the violent border regions of Pakistan where Osama bin Laden is believed to be hiding. The fund would receive hundreds of millions of pounds which the government hopes will be pledged this year to fund roads, clinics and schools.
The plan, which officials stress would have to be initiated by the Pakistani government, is part of a wide-ranging strategy aimed at boosting development in the tribal areas to fight Islamic militancy and counteract the effects of missiles fired by unmanned drones operated by the CIA. The attacks have eliminated a number of high-ranking targets but have enraged local people and are deeply unpopular throughout Pakistan.
Last week, however, the US signalled that such strikes would be broadened in scope. Two attacks in the past 10 days have killed dozens and targeted the network of Pakistani militant leader Baitullah Mahsud, suspected of organising the killing of Benazir Bhutto in 2007. It is the first time the drones, recently revealed to be based in Pakistan, have hit militant groups whose focus is not Nato troops or their allies in Afghanistan but Pakistan.
A list of 20 individuals was drawn up by the CIA and cleared with the Pakistani government in consultations last summer, despite public denials by Islamabad. Intensive strikes over recent months have pleased global intelligence services because they put al-Qaida "on the back foot", provoking damaging internal witch-hunts and forcing senior leaders to take time-consuming and demoralising security precautions.
Of the massive American aid to Pakistan since 2001, little has been used for development. In recent months, the country has been forced to ask for emergency funding from the International Monetary Fund to avoid a default. The US Congress is considering a $1.6bn development aid request from the Obama adminstration. Officials at the World Bank said they had yet to hear of the plan for a fund.
One Whitehall source said the idea was to stop development money for the tribal regions arriving "in penny packets" and to make sure it reached its target.
· This article was amended on Sunday March 8 2009. We described "unarmed drones" in the article above. We meant unmanned drones. This has been corrected.
