ISLAMABAD - Pakistani forces battled Taliban fighters on Monday as the militants denounced the army and government as U.S. stooges and said a peace pact would end unless the government halted its offensive.

The February pact and spreading Taliban influence have raised alarm in the United States about the ability of nuclear-armed Pakistan -- important in efforts to stabilize Afghanistan -- to stand up to the militants.

Last month, U.S. Secretary of State Hillary Clinton accused Islamabad of abdicating to the Taliban while President Barack Obama expressed grave concern the government was very fragile and unable to deliver basic services.

Obama will present his strategy for defeating al Qaeda to Pakistan and Afghanistan leaders on Wednesday amid growing U.S. concern it is losing the Afghan war.

In the Buner valley, 100 km (60 miles) northwest of the Pakistani capital, security forces backed by helicopter gunships and artillery attacked militants in three hamlets on Monday, residents and security officials said.

There's been heavy firing going on since morning. It's very scary. Troops are using heavy artillery and gunships, resident Nasir Khan told Reuters by telephone.

A military spokesman said seven militants, including a commander, were killed. One soldier was killed and three wounded.

The militants were also using about 2,000 villagers as human shields, the military said.

Pakistani stocks ended at a more than one-month closing low on Monday on fears of escalating ethnic violence in the country's commercial capital Karachi and of insecurity in the northwest, dealers said.

Buner is to the southeast of the Swat valley, where in February authorities gave in to a Taliban demand for Islamic sharia law as part of a deal to end nearly two years of violence in the former tourist destination.

But the Taliban refused to give up their guns and pushed into Buner and another district adjacent to Swat last month, intent on spreading their rule.


Amid mounting concern at home and abroad, security forces launched an offensive to expel militants from Buner and another district just over a week ago.

About 180 militants have been killed, according to the military, although there has been no independent confirmation of that casualty estimate.

A Taliban spokesman in Swat said elements in the military and the government were trying to sabotage the peace process to please the United States.

They have no respect for any pact, the spokesman, Muslim Khan, said by telephone. They keep violating every agreement and if this goes on, definitely there will be no deal, no ceasefire.

This is not our army, this is not our government. They're worse enemies of Muslims than the Americans. They're U.S. stooges and now it's clear that either we'll be martyred (killed) or we'll march forward.

The military said the Taliban had resumed patrolling in parts of the valley at night, in violation of the February pact. In response, authorities imposed a night curfew in the region's main town of Mingora.

The military said it was exercising restraint to honor the peace agreement in Swat despite militants high-handedness and several militant attacks in which two soldiers were killed.

In Islamabad, several hundred members of a religious party held an anti-Taliban protest, the latest in a series of small demonstrations against the militants.

At this week's Washington meeting, President Asif Ali Zardari, widower of former prime minister Benazir Bhutto, will be doing his utmost to convince Obama the government is on the right track and needs help.

It is a battle for a modern, democratic, progressive and pluralistic Pakistan, Zardari's spokeswoman, Farahnaz Ispahani, said in a statement.

Pakistan looks to Washington and the West for military and financial aid.

It has been affected by the global economic crisis and domestic security troubles, with net foreign investment declining in the first nine months of this fiscal year, when the rupee also fell.

Afghanistan President Hamid Karzai will join Obama and Zardari in the Washington talks.

Nationalistic hawks in the Pakistani establishment fear Karzai's government is too close to arch-rival India and see support for the Taliban as a way of maintaining influence in Afghanistan, especially for the day the Americans leave.