ISLAMABAD - Pakistan denied Tuesday making concessions to militants after signing a deal allowing them to impose Islamic law in an area where government troops have failed to put down a bloody insurgency.
The United States, which puts South Asia on the frontline of the "war on terror," has branded extremists in northwest Pakistan a direct threat to the country, its neighbour Afghanistan, US security and other powers.
Analysts have derided the deal as a defeat that will embolden Islamists in the violent, nuclear-armed Muslim nation, but the government and pro-Taliban cleric Soofi Mohammad, who signed the deal, hailed it as a chance for peace.
Information Minister Sherry Rehman denied it was a "concession."
"It is in no way a sign of the state's weakness. The public will of the population of the Swat region is at the centre of all efforts and it should be taken into account while debating the merits of this agreement," she said.
The government hopes that Islamist hardliners will now disarm in the Swat valley, where the deal will be implemented, and Rehman insisted President Asif Ali Zardari will only validate the agreement after peace has been established.
"The president will approve the Nizam-e-Adal Regulation after the restoration of peace in the region," she said.
But NATO, whose International Security Assistance Force (ISAF) operates over the border in Afghanistan fighting an insurgency, voiced concern at the deal.
"We should be concerned by a situation in which extremists would have a safe haven," and "we would not like to see that get worse," said NATO spokesman James Appathurai, asked in Brussels about the impact of the deal.
He added he did not know if it would lead to more attacks on ISAF troops.
US and NATO forces have criticised previous peace deals with Islamists in Pakistan, saying they have seen an increase in suicide attacks on international and Afghan forces across the border.
Radical leader Maulana Fazlullah has waged a nearly two-year campaign to enforce Taliban-style sharia law in the northwest Swat Valley, formerly a ski resort popular with Westerners.
Thousands of his followers have beheaded opponents, silenced detractors, bombed schools and outlawed entertainment, forcing tens of thousands to flee and trapping the Pakistan's military into an apparently unwinnable conflict.
On Monday, the government signed a deal with his father-in-law, considered more moderate, that accepts Islamic law as the only system of justice in the Malakand district, home to three million people and of which Swat is part.
"Our demand for the enforcement of sharia law has been accepted. I have come here to establish peace and I am confident peace will be restored," Mohammad told thousands of cheering well-wishers in Mingora, the capital of Swat.
A spokesman for the cleric, Amir Izzat, said Mohammad would hold talks with Fazlullah's men to disarm them, but said no schedule has been set.
Tuesday's visit to Swat was the first for Mohammad in nearly eight years. He left the valley in 2001 for Afghanistan, where he took thousands of fighters into battle against the US-led invasion.
After his return to Pakistan in 2002, he was arrested and jailed. In his absence, the mantle was taken by Fazlullah.
Speaking in Tokyo, US Secretary of State Hillary Clinton said she needed to learn more about the issue before commenting on it, but warned that "extremist elements in Pakistan pose a direct threat" to Pakistan and other countries.
"The decision that was announced by the government of Pakistan has to be thoroughly understood and we are in the process of pursuing that at this time," Clinton said.
Fazlullah's spokesman Muslim Khan said any decision on extending a "goodwill" 10-day ceasefire would be dependent on the talks with Mohammad.
"A decision on a permanent ceasefire will be made after meeting Soofi Mohammad and obtaining details about the accord on enforcing sharia," he said.
The military vowed to hold fire and respect Monday's agreement but said troops would only leave "whenever the government feels normalcy has been restored and the writ of government has been re-established."