ISLAMABAD: Incensed over the 'shock revelation' about growing network of CIA spies in Pakistan, the Directorate of Inter-Services Intelligence (ISI) is trying to redefine its terms of engagement with the American spy agency before any settlement of the row over immunity for Raymond Davis, the jailed US operative.

In an indication that Pakistan and the US were actively considering a review of parameters of their cooperation, the chief of the Office of (US) Defence Representative in Pakistan, Vice Admiral Michael LeFever for the first time attended monthly White House Af-Pak meeting recently through video teleconferencing.

The meeting reportedly discussed various options on the table for getting out of the stalemate, which has serious implications for the bilateral strategic relationship.

LeFever's first appearance at the monthly White House meeting indicated that the Davis issue was now being handled mainly by the two militaries, even though American officials emphasise that it was strictly an issue for State Department to handle.

In Pakistan's context, they broadly use the term 'Government of Pakistan' while some others say 'political reality is there' _ an indication that the Army was their main interlocutor.

US Ambassador Cameron Munter and LeFever have both been intensely involved in dealing with the diplomatic crisis after Davis's arrest.

The Lahore High Court will resume its proceedings on March 14 for deciding the issue of immunity for Davis, where the government is expected to testify on his diplomatic status. But, sources suggest, the hearing will be preceded by a lot of 'give and take' between the two sides and negotiations to that effect were already under way.

American sources also confirmed that communication was taking place at different levels to sort out different contentious issues, which although simmering for quite some time, have gained urgency following the Davis saga.

According to an official privy to the ongoing negotiations, the Davis issue, although still primary for the US, has been overtaken by other matters pertaining to working of the CIA in Pakistan, the operational freedom it (CIA) had been enjoying and more specifically its ties with the ISI. Davis's fate, a source said, hinged to a large extent on the outcome of this CIA-ISI dialogue.

The ISI believes that it had been betrayed by the CIA. Although their complex relationship was always marred by mutual distrust, the ISI officials this time look particularly perturbed over the CIA reportedly developing its own network of undeclared spies and disregarding their institution and sacrifices of their colleagues – 300 of whom have been killed during the war on terror.

“There have been seven or eight major attacks on the ISI, whereas there has been only one on a CIA post in Khost,” an official said while comparing the brunt borne by the two spy outfits.

One of Pakistan's demands at the talks between military and intelligence officials is a categorical assurance from the American spy agency for ending its undeclared activities and being transparent in its dealings with the ISI.

There were unconfirmed claims that the CIA in its bid to pacify the situation, which is deteriorating fast, has already started withdrawing into shell by removing some of its men from Pakistan and cutting certain questionable activities.

A senior military commander, speaking on background, however, said it was premature for him to say whether or not there was some forward movement.

Even as Pakistani officials claim that they were caught unawares about the CIA developing its network of spies and mounting undeclared operations, the Americans insist that Pakistanis were fully aware of the activities now being questioned.

Davis, revelation of whose CIA affiliation apparently caused the furore in Pakistani intelligence quarters, was declared by the US embassy as affiliated with Regional Affairs Office (RAO) in the registration request with the Foreign Office filed last year. The fact that the RAO is widely known to be linked to the CIA, therefore, raises questions as to why Pakistani security agencies couldn't know who he was before the January 27 shooting incident in Lahore.

The lingering dispute, which has turned uglier with the public spat between the intelligence agencies of both countries, has started affecting their counter-terror cooperation.

A Pakistani general said the row had definitely impacted the Pak-US military-to-military relationship, because the ISI was a services intelligence agency and an extension of military. But, the brighter side, he maintained was that both sides continued to engage each other for resolving their disputes.

A senior American official seconded his view saying: “we are walking with the pebble in the shoe”.

Other sources, while trying to give an impression that military ties remained unhurt, pointed towards recent disbursement of $633 million in the Coalition Support Fund to Pakistan and delivery of long demanded night vision goggles. “We are now working on CSF disbursements for third and fourth quarter of 2010,” a source added.

While much of the media focus has been on the CIA and ISI washing their linen in public, sources say, disclosure about growing CIA network in Pakistan has further frayed civil-military ties in the country.

Military and officials are now questioning the grant of visas to some 450 Americans without any scrutiny allowing CIA spies to enter the country in great numbers.

At the same time, the ISI has also done a bit of soul-searching to find how they lost track of the CIA spies. This was followed by an internal reshuffle to express displeasure of the top brass, if not as part of fixing responsibility on the changed officials.