General Asad Durrani, another former spy master, found the statement "highly speculative" and against the interests of Pakistan.

Musharraf, reportedly, also instructed that a list be compiled of all retired officers who had been involved in any significant intelligence operations and who were suspected of still being sympathetic towards the Taliban.

"This is just one glimpse of upcoming events as a result of Musharraf's pro-American policies, which are in contrast to the thinking pattern of Pakistan's state institutions," said retired squadron leader Khalid Khawaja, a former ISI official who went to Afghanistan after his forced retirement and fought alongside Osama bin Laden against Soviet Russia in the 1980s. (Khawaja features on Musharraf's list mentioned above.)

"Musharraf always blamed the madrassas [Islamic seminaries] for extremism, but all plots against him or his government go back to the armed forces. But he still does not realize why this happens," Khawaja maintained.

"He says retired ISI officials are involved in supporting the Taliban. I say there is no difference between retired and serving ones. All of them have the same approach, mindset and conviction. The retired ones act freely, while the serving ones have some job constraints, but both think in the same way. The present move of a coup against Musharraf is the writing on the wall that if he continues with pro-American policies, he will continue to face problems like that," Khawaja said.

Khawaja said that whatever officials did during their service in the ISI, it was on state instructions, and if the state tried to punish these same officials, the result would be the type of events that are happening now.

It is all too apparent that Pakistan's head and tail are moving in opposite directions: while Musharraf is fully behind the "war on terror", the strategic institutions are reluctant to follow Islamabad's instructions.

This is not something new, but over the years Musharraf and hardliners within the army have been able to live with one another. Had a hardline ruler been in Musharraf's place, Western countries would have tightened the noose around Pakistan and its security institutions would not have been able to manipulate their support of the Taliban. Because of Musharraf, Western countries are not prepared to be tough on Pakistan, which allows the hardliners to continue their activities.

Musharraf is acutely aware of the undercurrents in the army, which historically draws its inspiration from Islam, and more recently from the attacks on the US of September 11, 2001, when anti-US sentiment also took root. Musharraf exploited this by convincing the West of his usefulness in keeping the army - "full of extremism" - under control, something that a democratically elected government could not do, he argued.

This cozy arrangement, or uneasy truce, between Musharraf and hard-line Islamists in the ranks is breaking down as the US is demanding that Musharraf do something about the resurgent Taliban. He has responded, as outlined above, by cracking down on Taliban supporters and sympathizers. These people, both in uniform and out, have in turn given their response: they are not prepared to throw away all the gains that have been made in Afghanistan.

Given that Musharraf may be running out of political options, vis-a-vis the "extremists", he and his team is reaching out to the "moderates" - particularly Benazir Bhutto, the exiled leader of the liberal, pro-Western Pakistan People’s Party (PPP) who still has the biggest vote bank.

The US and the West have been nudging him (the General) to mend fences with Bhutto. During his recent visit to the US, he reportedly assured them that he would. And with 2007 poll drums starting to beat now, Musharraf's team has begun to put their ducks in a row.

Just a few days prior to his book launch, close confidants of Musharraf and a senior spymaster revived contacts with Benazir. The News International newspaper reported the Dubai contact as the first ever face-to-face meeting between a Musharraf lieutenant and the two-time former prime minister.

Interestingly, last week, a court released Bhutto's deputy and former parliamentary speaker, Yousaf Raza Gilani, on bail. Gilani is facing a ten-year prison term for abuse of power and corruption.

Analysts find this government move too obvious to ignore, especially when a similar bail plea for the release of deposed prime minister Nawaz Sharif’s deputy, Javed Hashmi, was rejected. Hashmi, who succeeded Sharif as head of the moderate Pakistan Muslim League, was jailed in 2003 for criticizing the military’s intervention in politics and charged with "treason".

The Musharraf-Bhutto contact and the release of Gilani has also caused anxiety among the ranks of the Pakistan Muslim League (Nawaz), PML (N), led by Sharif.

Bhutto and Sharif are the country's two top opposition politicians, and it is clear that Musharraf is courting one at the expense of the other, hoping to divide and conquer. Though Bhutto and Sharif could possibly catch up on a few things when they meet in London later this month, the hopes for a grand alliance (also involving other opposition parties) against Musharraf have all but evaporated.

Political observers once believed that the violent death of Baloch tribal leader Nawab Akbar Bugti at the hands of Pakistani security forces would unite the fractured opposition parties in pursuit of shared objectives. But that appears unlikely to happen, says ISN Security Watch in their latest article on Pakistan affairs.

According to ISN, the military government thwarted those prospects in a timely manner by introducing amendments to the Islamic laws - Hudood ordnance. The controversial amendment introduced in parliament was designed to bitterly divide the opposition as Bhutto's PPP favored the move, while the MMA threatened to resign from the assemblies if it became a law in its original form.

Meanwhile, seven retired senior army officers joined 11 eminent civilians in July to address a letter to General Musharraf, asking him, among other things, to quit one of the two offices. It was a bold move, as some of them had held important assignments in Musharraf’s military government.

Such a move would not have taken place at all if things were not "conducive", said one Pakistan observer to DesPardes.com.

"Musharraf and Benazir have worked out a deal ahead of next year’s general elections and this arrangement will help the Pakistan People’s Party Parliamentarians (PPPP) chairperson return to Pakistan without any fear of arrest or state-sponsored harassment and intimidation, reported Daily Times today.

According to insiders, says the newspaper, Gen Musharraf has agreed to provide PPPP with an even playing field in next year’s electoral contest to the extent that Benazir Bhutto may “vigorously” canvass for her candidates.

Sources said that while the general has previously ruled out the possibility of allowing Benazir Bhutto to contest the elections, he has now given his consent to “mediators” for her return to Pakistan by June next year.

Insiders said the General was now contemplating even allowing her to contest the elections. A senior minister belonging to PPP (Patriots) has been tasked by Gen Musharraf to oversee a “patch-up” between him and the PPP.

"The ensuing deal could be Musharraf as President, Benazir as Prime Minister - post 2007 elections!" said a Pakistani-American with links to Islamabad.