$2m deal heals US, Pakistan spy row but scars ties

ISLAMABAD: A blood money deal to secure the release of a CIA contractor accused of murder in Pakistan has ended a damaging spy row but eroded a thin veneer of trust between the suspicious allies, analysts say.

The sudden freeing of American Raymond Davis on Wednesday, seven weeks after he shot dead two men in Lahore, has sparked small angry demonstrations in protest at authorities' decision to bow to the demands of the superpower ally.

The United States persistently argued that Davis enjoyed full diplomatic immunity as a member of its embassy staff but secured his release only after $2m compensation was paid to the families of the dead men.

Pakistani media was quick to denounce the deal with populist right-wing newspaper The Nation decrying it as a "Sell Out".

"'Rambo' Raymond Davis has been let loose through a state-managed drama aimed at hoodwinking the entire nation. Every self respecting Pakistani is ashamed today," said The Nation's front page story on Thursday.

Islamabad has stayed largely quiet in the wake of the blood money deal, and a weekly press conference at the foreign ministry was cancelled on Thursday.

US Senator John Kerry, who flew to Pakistan in the wake of the shooting in a bid to resolve the row, lauded the decision as a boon for bilateral ties.

"Neither country can afford for this tragedy to derail our vital relationship," Kerry said in a statement.

The United States holds Pakistan as a critical ally in winning the war next door in Afghanistan, and believes the Taliban's top leadership live in safe havens in the tribal regions on the remote border between the two countries.

The United States has been waging a diplomatic campaign for months to convince Pakistanis that its interests in the country lie beyond security ties, signing off huge sums of non-military aid and rushing to the rescue in the wake of devastating floods last summer.

But a sceptical Pakistani public point to a covert drone campaign that pummels the northwest border area as proof that the United States is only interested in maintaining relations to win the Afghan war, and the Davis saga has only reinforced that view, says analyst Imtiaz Gul.

"They have created a facade of a strategic partnership between the US and Pakistan but it will largely remain a transactional relationship, and this will continue," said Gul.

Analyst Talat Masood agreed. "One single incident showed the fragility of the relationship. As of now everyone thinks it's primarily based on Afghanistan," he said.

"It would require a sustained relationship for quite some time for people to think otherwise. But American and Western interests in this region will not go away."