The Pakistani military on Monday insisted it was capable of fighting Islamic militants without US assistance, hitting back after Washington said it would suspend $800 million worth of security aid.

"The army in the past as well as at present has conducted successful military operations using its own resources without any external support whatsoever," military spokesman Major General Athar Abbas told AFP.

US President Barack Obama's chief of staff, William Daley, confirmed in a television interview on Sunday that the United States has decided to withhold almost a third of its annual $2.7 billion security assistance to Islamabad.

Abbas, however, said the military had not been officially informed of the decision to suspend aid.

Relations between the key allies in the war on Al-Qaeda drastically worsened after US commandos killed Osama bin Laden in Pakistan on May 2, humiliating the Pakistani military and opening it to allegations of complicity or incompetence.

Abbas referred AFP to an extraordinary statement issued by army chief of staff General Ashfaq Kayani on June 9 as part of the bin Laden fallout which recommended that US military aid be redirected towards civilians.

The US aid freeze was welcomed by Pakistan's neighbour and rival India.

"It is not desirable that this region had to be heavily armed by the US," External Affairs Minister S.M. Krishna said, according to the PTI news agency, adding that the spending would upset the regional power balance.

The US administration on Monday, meanwhile, reiterated the reasons for its decision.

"When it comes to our military assistance, we're not prepared to continue providing that at the pace that we were providing it unless and until we see certain steps taken," State Department spokeswoman Victoria Nuland said.

Islamabad's demand that about 100 US advisers leave Pakistani soil, effectively halting military training, was a bar to the prospect of improving "our cooperation in counterterrorism, in counterinsurgency," she added.

"We obviously can't do that in an environment where Pakistan has asked our trainers to go," Nuland told reporters.

The suspended aid includes about $300 million to reimburse Pakistan for some of the costs of deploying more than 100,000 soldiers along the Afghan border, according to The New York Times.

Pakistan says it has 140,000 soldiers in the northwest, more than the 99,000 American troops in Afghanistan, fighting a local Taliban insurgency.

The United States has long called on Pakistan to do more to crack down on militants, such as the Al-Qaeda-linked Haqqani network, who use its soil to attack within Afghanistan, but the army says its troops are too over-stretched.

But the relationship is complicated as the US uses Pakistan as a sea port and land corridor to truck about 50 percent of its military supplies into Afghanistan, although Taliban and other militants routinely attack the convoys.

Ties between the US and Pakistan are now at their lowest point since Islamabad officially broke with the Taliban and sided with Washington after the 9/11 attacks, analysts said.

One Western security official in Islamabad told AFP that bin Laden's killing had hardened America's approach to Pakistan, but the underlying difference was that the so-called allies cannot agree who or what the enemy really is.

"They don't have the same enemy and so relations will only continue along this chaotic path," the official said.

Analyst Rasul Baksh Raees acknowledged the deep antipathy to America that is prevalent in Pakistan, but added: "I think Pakistan and the United States will come to some kind of understanding soon to sort out irritants."

In Washington, Islamabad's ambassador to the US Husain Haqqani said civilian aid continued to flow and that "so far all suggestions for an aid cut-off for Pakistan have been defeated" as the US Congress looks at funding for next year.

On the ground Monday, two missiles fired from a US drone hit a compound in Pakistan's northwestern tribal belt on the Afghan border, killing at least 10 militants, local security officials said.

The missile strikes are hugely unpopular among a Pakistani public deeply opposed to the government's alliance with Washington and sensitive to perceived violations of sovereignty.

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