Suspected Al Qaeda and Taliban militants hiding out in this country's semiautonomous tribal belt have ignored an April 30 deadline for foreigners to register with the government and lay down their arms.
Pakistani authorities this weekend quietly extended the amnesty offer, expressing hope that an extra seven days would convince the militants to live in harmony with the federal government here, and to cease attacking US troops over the Afghan border. Officials also encouraged local tribal leaders to vouch for the safety of those foreigners who cooperate.
"This has been a farce from the start," says Ahmed Rashid, author of The Taliban. "I think it won't be long before we see some action from the Americans on this."
Diplomats and analysts say the recent events represent a significant setback to the war on terror and the hunt for top Al Qaeda leaders, but have come at a time when the Bush administration is largely preoccupied with Iraq. Pointing to the spurned amnesty offer, many doubt the government's peace option has a serious chance and instead view it as a way to postpone a difficult military offensive.
"These are the same hardened terrorists who won round one in March," says one foreign diplomat. "Why on earth would they give up now?"
In March, Pakistan's military got badly bruised when a mission to capture or kill an estimated 400 extremists in South Waziristan left more than 100 soldiers and civilians dead, and failed to capture any Al Qaeda.
Pakistani authorities then convinced tribal chieftans in South Waziristan to form a lashkar, or tribal army, to hunt down the militants themselves. The irregular force staged a war dance before heading to hills with red ribbons tied to their rifles so they would know not to shoot each other. However, they failed to round up foreign militants.
Finally, last week, a top commander of the Northwest Frontier Province, Lt. Gen. Safdar Hussain, traveled to South Waziristan to meet local militants who support the foreign fighters, telling a cheering crowd wearing long robes and enormous turbans that, "the impression this is the den of terrorists has been proven wrong."
It was an ironic statement, given that video footage of the meeting shows one of the militants, Naik Mohammad, arriving to greet military officers with his Uzbek bodyguard in tow. Local sources in South Waziristan say the Islamic Movement for Uzbekistan, an extremist group closely allied to Al Qaeda and to Mr. Mohammed, organized his security for the event.
"We have neither surrendered nor laid down our arms," said another militant, former Taliban commander Maulvi Abbass, hours after the deal. "I have been with the Taliban from beginning to end."
Washington so far has remained publicly silent about Pakistan's peace deal with the militants, yet privately, senior US military officers are upset. US troops hunting Al Qaeda and Taliban fugitives in Afghanistan routinely pursue enemy combatants who cross the border.
Indeed, the peace deal in South Waziristan came just two days after a Taliban ambush in nearby Khost Province killed football-player-turned Army Ranger Pat Tillman.
Some Pakistani military officials are horrified since so many of their own soldiers lost their lives in the operation in March and now have little faith that the peace initiative will bear fruit.
"It's very much like the situation in Iraq," says Talat Massood, a former secretary of defense. "They are finding it difficult to go the military way, and they are also on the defensive politically."
Pakistani officials have insisted that a peace deal with local militants, like Mohammed and Abbass, will help them separate the bad guys from the really bad - or allow them to co-opt the local militants while they focus their effort hunting Al Qaeda.
• Additional reporting by Mujib-ur Reham in South Waziristan.