Everybody knew the botched Time Square bombing in New York was going to have repercussions for Pakistan. It was only a matter of time the US officials came to Pakistan with more findings about the Faisal Shahzad case. Therefore, the visit last week of the US National Security Adviser Gen James Jones and CIA Chief Leon Panetta and their crucial meeting with Pakistan's president, prime minister and the chief of army staff came as no surprise.

Even though Shahzad's connection with Waziristan is not yet conclusively and publicly stated even by the US authorities, it is amply clear that they have demanded of the Pakistani side to do something concrete about North Waziristan that remains a sanctuary for militancy around the world. From the statements issued by the Pakistani side after this recent visit, it seems they may find it hard to put this off for a long time. Whether it will be a full scale military operation or a guerrilla offensive remains to be seen.

Beyond the immediate terrorist threat on its soil, control over North Waziristan is important for the US as it has a direct bearing on its exit strategy in Afghanistan. Besides, North Waziristan is why Pakistan has not been able to concretise the gains made in Swat and South Waziristan or for that matter Bajaur and Orakzai.

However, North Waziristan is not the only problem that should worry Pakistan. First, Shahzad may have been declared Pakistan's "first global jihadist", he is certainly not the first Pakistani to have been nabbed on charges of terrorism. Wherever there is a terror suspicion, the suspects somehow have some link with Pakistan. Earlier this year, five American terror suspects caught in Sargodha are facing trial here.

The Faisal Shahzad case has thrown open another issue: how the Muslim youth are being radicalised in the United States. People who have studied in American universities have written about the extremist ideas being easily propagated in the academic environment. Others have pinpointed at the discriminatory legislation and racial profiling of Muslims as the likely causes of this radicalisation. But that's where the American side of story ends. How an anti-American citizen turns a terrorist is where the issue of his connections elsewhere and trainings begins. That is what brings Pakistan into the picture, ironically a country worst hit by terrorism.

While all the experts we have spoken to for this Special Report have ruled out that Tehrik-e-Taliban Pakistan (TTP) has the capacity to launch a major terrorist attack outside Pakistan, the case of Faisal Shahzad is going to haunt us for a long time. If any more such attacks happen, it may harden the US position towards Pakistan and the Pak-US relations may be in serious disarray.

All these issues have been addressed in today's Special Report.

It was in September 2006 that the government made a peace deal in North Waziristan with the Taliban militants and prompted the US to lead a campaign to get it scrapped. No other accord had evoked so much criticism, particularly at the international level, and in due course of time it collapsed.

The parties to the agreement accused each other of violations and eventually a military offensive was launched that resulted in a stalemate and led to one more peace accord.

That peace agreement between the military and the militants in North Waziristan is still in place, but it is increasingly coming under strain both due to domestic and international factors. Local militants who have found sanctuaries in North Waziristan after fleeing military operation in South Waziristan and elsewhere constitute a threat to the Pakistani state. Foreign militants, on the other hand, pose a challenge primarily to the US and its allies fighting in neighbouring Afghanistan.

The US, never supportive of peace deals with the militants in Pakistan, would like the one in North Waziristan to be scrapped. However, it doesn't want to push Islamabad too much to do its bidding as Pakistan's military prefers doing things at its own pace and in keeping with its priorities. However, the US doesn't relent while applying pressure as its strategy in asking Pakistan to 'do more' has worked in the past and there is no reason it won't work in the future.

In terms of priorities, Pakistan would first want to go after the Mahsud militants aligned with the Hakimullah Mahsud-led Tehrik-i-Taliban Pakistan (TTP) and their allies including the Punjabi Taliban who have flocked to North Waziristan after concluding that their previous sanctuaries elsewhere have become inhospitable for them. Taking action against the TTP-linked militants would be a follow-up action to the military offensive in October 2009 in parts of South Waziristan populated by the Mahsud tribe as the mission would be incomplete unless the fleeing Taliban are tackled. Any move by Pakistan's security forces to take action against the TTP militants in North Waziristan would be opposed by the local militant commander Hafiz Gul Bahadur and termed a violation of their peace accord. However, the government could argue that outsiders, whether foreign militants or TTP fighters from outside North Waziristan, cannot be part of the accord or covered by it. Besides, Hafiz Gul Bahadur as the head of the non-TTP militants in North Waziristan would be expected to exercise control over any militant seeking refuge in his area and ensure implementation of the terms of the peace agreement with the government.

The US priorities in North Waziristan are mostly different from those of Pakistan. While the Pakistan government and military, despite occasional problems, have presently no major dispute with the Hafiz Gul Bahadur-led militants as they don't fight the security forces outside North Waziristan and refrain from attacking the country's cities, the Americans consider them as their enemies because they give refuge to al-Qaeda-linked fighters in their areas and sometimes fight the US-led coalition forces in Afghanistan.

More importantly, the top US priority and the foremost target in North Waziristan is the Haqqani Network, a group that is part of the Afghan Taliban but is so powerful that it is sometimes mistakenly mentioned as separate and distinct from the Mullah Mohammad Omar-led Taliban. There is no doubt that the US is also concerned about the presence of some Arabs linked to al-Qaeda and a sizeable number of Uzbek militants associated to the Islamic Movement of Uzbekistan (IMU) in North Waziristan. It appears to be more worried about the ability of the Haqqani Network to use this tribal region as a staging post to launch attacks in Afghanistan. Though sometimes it appears that the Americans credit the Haqqanis with a lot more than they have accomplished as a guerrilla group or overplay the existence of the Haqqani Network in Afghanistan, the fact remains that the US and its allied militaries have suffered many casualties in attacks organised by this group's fighters in Kabul and several other provinces. The Haqqanis also provide an identifiable target with a known place of residence in North Waziristan since the 1980s unlike the other Taliban guerrilla commanders who are hard to locate. The whereabouts of both the elderly Maulvi Jalaluddin Haqqani, the known Afghan mujahideen commander who fought the Soviet occupying forces and later joined the Taliban, and his son and the Haqqani Network leader Sirajuddin Haqqani, aren't known but the Americans are convinced they are in North Waziristan. In their hunt for the Haqqanis, the US drones until now have killed scores of people, some militants but mostly civilians including the Haqqani family's women and children, without being able to eliminate the father and son.

With their different set of priorities in North Waziristan, Pakistan and the US would continue to mistrust each other and squabble over the right strategy and targets while pursuing militants deemed more dangerous to one or the other. Pakistan has carried out military action in North Waziristan in the past as well without scoring a decisive victory. Any future military offensive there would have to be huge and on the lines of those carried out in South Waziristan and Swat and rest of Malakand division. Undertaking such a big military operation would require troops and resources that are presently mostly tied up in South Waziristan, Swat and Orakzai, Kurram, Bajaur, Mohmand and Khyber tribal agencies. A stage may come when military action would have to be undertaken in North Waziristan to reclaim control from the militants. But for that to happen, Pakistan and the US would need to reconcile their priorities as the former would have to first secure itself by dealing with those who threaten the country.

The News on Sunday: What is the US exit strategy from Afghanistan, if any, and how is it going to resolve the terrorist issue in the region?

Mahmood Shah: For the present, the US has decided to use force against Taliban in Afghanistan but it endorses the policy of the Hamid Karzai government which is a)to negotiate with Taliban if the latter dissociate themselves from al-Qaeda, stop fighting against the government and are prepared to work within Afghanistan's constitution. This then will be the US position on talks with Taliban also. But, presently, I can say that the US is concentrating on use of force and they hope to weaken Taliban's fighting potential and force them to come to the negotiating table. Other than this, they don't have a clear exit strategy. At best, they can provide an honorable exit, but this will not solve the problem [of terrorism] in the region.

TNS: Tehrik e Taliban Pakistan (TTP) has announced that it will now focus targets in the US. What is the level of engagement between Afghan Taliban and the TTP? Is the latter in a position to actually carry out terrorist attacks in the US cities?

MS: Afghan Taliban's control over the TTP is rather weak because the Afghan Taliban believe the TTP has unnecessarily involved itself in the fight against the Pakistani State due to their vested interests. Besides, their contribution to jihad in Afghanistan is minimal. The TTP doesn't have the access or the capacity to engage in international terrorism. Likewise for the Afghan Taliban.

TNS: After an aborted bombing attempt in New York Times Square, the US administration has threatened to launch strikes inside Pakistan if another such terror incident takes place in the US. Is the Obama administration pressing the Pakistan military for expanded operations against the militants in North Waziristan and Southern Punjab?

MS: Yes. And, the US government is using the incident for the same purpose. But the Pakistan government has wisely decided not to be subdued by such threats and continues with the 'war on terror' as per its own indigenous plan.

TNS: Hamid Karzai, during his meeting with Barack Obama recently, has agreed on a role for Pakistan to help restore peace in Afghanistan and facilitate a US exit from the country. Is there a shift in the Afghan policy?

MS: No. In fact, this has been the policy of the US and Afghanistan for quite sometime now.

TNS: Do you think the Afghan government will be able to win back Taliban through reintegration and reconciliation policy?

MS: It's highly doubtful. The present Afghan government lacks credibility in the public. However, in view of no other option, this is worth trying.

TNS: Is it true that the key Taliban and al-Qaeda leadership is based in and operating from North Waziristan?

MS: Some elements are definitely there in North Waziristan, but you can't be sure of the 'key elements' of Taliban and al-Qaeda. There are adequate ungoverned spaces on Afghanistan's soil which are being used by these elements.

TNS: Since 9/11, Pakistan has been fighting a war against militants. When, in your opinion, will this war come to an end?

MS: It is difficult to tell precisely. But one can say that if the Army operations continue with the same zeal and vigour as they did in 2009 and the US starts leaving Afghanistan in 2011, the pressure on Pakistan will reduce considerably.

The recent visit of Afghan President Hamid Karzai to the US and the warm response he received there hints at a possible, though minor, shift in the US exit policy in Afghanistan. Last year, President Obama announced a surge in the US troops in Afghanistan in order to give a final blow to the militants before gradually pulling out from the country. The focus also was on the fact that this time the US would not simply abandon the country as it did after the withdrawal of Soviet troops from Afghanistan back in late 1980s.

Karzai has also come up with the option to involve Taliban fighters in peace talks. He wants to involve only those Taliban in the peace talks who have laid down their arms and disassociated themselves from al-Qaeda. Following a telephonic conversation with the US Secretary of State, Hillary Clinton, earlier this month, Karzai raised his voice against what he called the western interference in Afghanistan's affairs. This war of words concluded with a threat coming from him to join the Taliban if foreign interference did not stop.

The Afghan government seems serious in bringing Taliban on board as its representatives held talks with those of the latter in Maldives. The same country hosted an Afghan peace meeting in January, ahead of the London conference of world powers to discuss Afghanistan.

No doubt, Karzai has some concerns over the new Afghan policy but he also praises its positive aspects and wants the US to help the country tackle the challenges it faces. For example, Karzai wants the US administration to assist his government in country's human resource development programmes. Currently, Afghanistan is receiving assistance from India which is training Afghan civil servants, building roads, schools, universities, hospitals, and other infrastructure as the country's fourth-largest bilateral donor. Pakistan is wary of the relations between India and Afghanistan and has even asked President Karzai to close the Indian consulates involved in "dubious activities."

President Obama's team is hoping for a political settlement in Afghanistan that could enable the US military forces in the country to gracefully exit. Pakistan also wants to go for a truce and avoid opening new warfronts in North Waziristan and South Punjab despite the ever-increasing pressure from the US to do so.

Coming back to Karzai's recent US trip, it was Hillary Clinton who hosted him for a day. She called the American relationship with Afghanistan a "strategic partnership", and praised Karzai's efforts to fight corruption. She vowed not to abandon Afghanistan even after the American troops leave. It was there that Karzai reportedly presented his plan for reconciliation with Taliban members. He also pushed for American support for a "peace jirga", a meeting with 1,500 tribal leaders focusing on Taliban reconciliation.

The critics of the US exit policy call for normalisation of India-Pakistan relations and the resolution of major contentious issues between them. Otherwise, they say the withdrawal of US troops from the region will lead to an uncontrollable chaos. The concerns are also there that the increase in US troops in Afghanistan will simply push Taliban fighters across the border into Pakistani territory. Pakistan, accused of being a sanctuary for Taliban militants, has been denying the presence of these militants in Balochistan and South Punjab.

During Karzai's recent US visit, Obama outlined his goals in Afghanistan including an offensive against the Taliban in its traditional stronghold around Kandahar. He said the success of this operation will lead to the withdrawal of troops from the Afghanistan starting July 2011. Taliban insurgents have been defined as enemies in the US but now they have been referred to as party to the peace talks. The sitting US ambassador to Afghanistan spoke talked about "reconciliation" and the possible ''reintegration'' of the Taliban -- something that hints at a possible review in the US Afghan policy.

The News on Sunday: In the wake of the attack in New York and the TTP's claim, do you still see the links between al Qaeda and Taliban?

Ahmed Rashid: I think the links between the Taliban – both Punjabi and Pashtun – and the al-Qaeda are very strong. Don't forget al-Qaeda has been living in Fata for the last ten years, since 9/11, and it's been the TTP that has been giving them protection. They have been paid very lavishly for that protection, which is why the TTP is able to raise militias. So, it [TTP] is an ally and also treated like a mercenary force. The TTP has expanded the area under its control and given al-Qaeda an even bigger base to operate from.

TNS: The US is exerting pressure on Pakistan to extend the military operation to North Waziristan. What is actually happening there?

AR: I wrote a piece in Washington Post about that. I see North Waziristan as a melting pot; the leadership of all these groups is taking sanctuary in North Waziristan, be it from Swat, South Waziristan, Bajaur or Orakzai. We have not caught anyone, not even Fazlullah. Besides, the Punjabi groups are all there now. The TTP leadership is there; Hakimullah was able to hide in North Waziristan. We have not taken North Waziristan very seriously. North Waziristan is the adda (centre) of all these groups. I think Pakistan's intelligence is very poor as to what is going on there. The other remarkable thing about North Waziristan right now is that I feel the Haqqani group who were controlling North Waziristan and Gulbahar have lost control of a lot of area because there are so many groups now active in North Waziristan.

TNS: And the military operation has still not begun.

AR: Yes, and everybody is hiding in North Waziristan. I'm the first one to say that we need to go into North Waziristan in some form or the other.

TNS: But are you convinced about the reasons given by the Pakistan military -- that we don't have the wherewithal and we are engaged on the eastern side and that we are not equipped to go there.

AR: Certainly, they [Pakistani army] are overstretched. They have a hundred and fifty thousand troops in Fata, which is more than ever before. They have limited resources, limited helicopters, etc. First of all, I think the army is exaggerating the threat from India which is non-existent at the moment. India with its 9 percent growth rate is not going to attack Pakistan. What is the need for these exercises on the Pakistan borders? No matter what the army says, there is a lot of public resentment in Punjab that at a time when the country has no electricity, no gas and no jobs the army was holding an exercise with fifty thousand troops on the Indian border. We can still afford to move troops from the Indian border to Fata.

Secondly, in North Waziristan, we don't need fifty thousand troops. We need a selective offensive, an unorthodox guerrilla offensive. This should be based on good intelligence where we are able to knock off the leadership of these groups.

TNS: How do you evaluate the military operation in South Waziristan?

AR: None of these offensives has been able to kill or capture the leadership. I think the offensive in South Waziristan was far better planned than any other offensive. And certainly they have managed to kill and capture several hundred militants. But even then we know that the leadership managed to escape.

TNS: Coming to Afghanistan, do you think the US administration's exit strategy will solve the terrorist problem in the region?

AR: No, in its present shape and form, the July 2011 deadline the Obama administration has given for start of US troops withdrawal will not lead to a total exit. There will be a very slow withdrawal and a slow handover to the Afghan forces. I think they will have to have a political dialogue with the Afghan Taliban. Hamid Karzai is in favour of that already and so is Pakistan. The British favour it very much and so do many other countries of Europe. The big problem is that, so far, Obama has still not signed on for a dialogue with the Taliban. He has signed for what is called "reintegration" which is trying to bring in mid-level commanders and fighters but not a dialogue with the Taliban leadership. I don't believe this conflict with the Taliban can end without a dialogue with the Afghan Taliban.

TNS: Will that solve the problem of the Pakistani Taliban?

AR: No, it will not solve the problem but it will have a hugely negative impact on the Pakistani Taliban. The Pakistani Taliban justify their attacks on the Pakistan army as a defence for Mullah Omar and the Afghan Taliban's jihad. If you eliminate the cause of jihad and you bring about a ceasefire in Afghanistan, what justification is there for the Pakistani Taliban to go and fight? We are a Muslim state, a Muslim army. This is not an occupation army. What legitimacy do they have in killing Pakistani soldiers? None whatsoever. What we have to do is to break their so-called justification. The international community can help us break that by making peace with the Afghan Taliban. I think it will totally discredit the Pakistani Taliban.

TNS: Do you believe the recent wave of terrorism in the US is homegrown, especially in the backdrop of the Faisal Shahzad case. How did he become radicalised?

AR: It is extremely difficult to understand how ten years after 9/11 there is a shift or change taking place in many young American Muslims. There is some kind of radicalisation taking place which took place in Europe after 9/11 amongst European Muslims; we had the London bombings, the Spain bombing and all that. It never happened in America but it is happening in America now. And neither the American media nor the government or the academics have been able to understand or explain it because this is not an isolated phenomenon. We had the five boys in Sargodha, we had Najibullah Zazi -- the Afghan-American who had been convicted of trying to bomb subways in New York. You have got all these half a dozen cases during the last six months most of whom are perfectly reasonable guys, American Muslims, unfortunately Muslims and Pakistanis. They cut across all class background.

Secondly, there is no question that most of these people, especially the Pakistanis, all had links here. And were able to get inspiration, mentors, and training in Pakistan through various groups. Now we cannot deny that role. You can have anti-American views and still live in America. But what makes you actually plant a bomb. That could well be the trigger that took place here: the mentoring, the inspirational speeches, and training camps, etc.

TNS: How will the US now deal with this situation at home?

AR: The US should understand the causes. Is this the second generation of Muslims after 9/11 -- a younger generation of Muslims who suffered from racial profiling? Are they the ones who suffered some of the discriminatory laws that have been passed there? Why is it happening now? I don't think the Americans have properly explored this phenomenon.

TNS: How is the Faisal Shahzad case going to affect Pak-US relations?

AR: The Faisal Shahzad case has led to the visit now by US National Security Advisor James L Jones and CIA Chief Leon Panetta. Obviously, there is going to be enormous pressure on Pakistan to eliminate at least the second part which is the issue of training in North Waziristan.

TNS: People are apprehending there may an aid cut-off to Pakistan.

AR: Certainly, I think if one of the attacks succeeds and kills Americans I think all bets are off with the relationship. Even with the Faisal Shahzad case, there are moves in the US Congress to take away American citizenship from suspected Pakistanis. There could be much greater deportations of Pakistanis from America. So the laws against Pakistanis in America are going to get even tougher.

TNS: Do you think the US administration is now convinced that the Pakistan military is serious about rooting out the Taliban?

AR: No, I don't think so. I still think the US believes there is a double game going on because we are not dealing with certain groups like the Afghan Taliban and the Punjabi Taliban. We are not going after them. We are still being very selective in our approach. And if for example it is found that Faisal Shahzad has been helped by the Punjabi Taliban like Lashkar or Jaish, there will be a huge demand that the army take action against these groups in Punjab which are supposed to be banned but we all know that their leaders are freely operating. Leaders of, for example Jaish, are comfortably sitting at home. If they played a role in this kind of radicalisation process, obviously there will be pressure to do something about them.