ISLAMABAD: A Pakistani intelligence official said Monday that an American in custody for killing two men was an undercover CIA contractor, in remarks likely to inflame a crisis with the United States.

Washington insists that Raymond Davis, who says he acted in self-defence, is a member of its Islamabad embassy's “administrative and technical staff” who has diplomatic immunity and should be released immediately.

“It is beyond any shadow of a doubt that he was working for CIA,” an official from Pakistan's Inter-Services Intelligence (ISI) agency told AFP on condition of anonymity.

“He's on contract. He's not a regular CIA guy, but he's working for CIA. That's confirmed,” the Pakistani official said.

Meanwhile, Prime Minister Yousuf Raza Gilani told the lower house on Monday that he was confident “that both the Pakistani and the US governments will not allow the Davis case to come in the way of mutually beneficial partnership”.

He said Pakistan was mindful of its international obligations under the Vienna Convention and other agreements.

But he added: “I want to assure this house and the nation that my government will not compromise on Pakistan's sovereignty and dignity. We are a responsible government and conscious of the sentiments of our people.”

Local analysts suggested Pakistani intelligence had deliberately decided to complicate the case in order to put pressure on the government and the United States, with whom relations have been troubled over the war in Afghanistan.

“This would be seen as a kind of deliberate attempt to make the situation more difficult and complex to handle, and this provides additional material to the militant groups to adopt a hardline stance,” said analyst Hasan Askari.

“These (intelligence) groups are not happy with the way America was building pressure on Pakistan on the war on terrorism.

“If it goes to the street and massive agitation, all political parties will find it a good opportunity to knock the PPP out of power,” he said.

The Pakistani intelligence official said the Davis case had soured relations with the Central Intelligence Agency.

“Our relations with the CIA are now sort of pretty dicey. It has affected our relationship,” the official told AFP.