WASHINGTON, Sept 7 (Reuters) - The United States is preparing to designate the Pakistan-based Haqqani network as a terrorist group as early as Friday, the New York Times said on its website.

The Haqqanis, a Pashtun tribe with strongholds in southeastern Afghanistan and across the border in Pakistan, have been blamed for an attack on the U.S. embassy in Kabul and other high-profile assaults in Afghanistan.

The United States accuses Pakistan's intelligence agency of supporting the Haqqani network and using it as a proxy in Afghanistan to gain leverage against the growing influence of its arch-rival India in the country.

Pakistan denies the allegations.

A senior Pakistani security official said blacklisting the Haqqani network would be counterproductive and put unnecessary pressure on Islamabad, a strategic U.S. ally.

"If the United States wants to have a constructive relationship with Pakistan, then this is a bad move," the official told Reuters. "This will push Pakistan into a corner."

In June, Defense Secretary Leon Panetta said the United States was reaching the limits of its patience with Pakistan because of the safe havens that groups like the Haqqanis found there.

Designation by the State Department as a Foreign Terrorist Organization would bring sanctions such as criminal penalties for anyone providing material support to the group and seizure of any assets in the United States.

The Obama administration is facing a congressional deadline this weekend to determine whether the network met the criteria for such designation.

The New York Times said senior officials who argued against blacklisting the group were concerned it could further damage relations with Pakistan and possibly jeopardize the fate of U.S. Sergeant Bowe Bergdahl who is being held by the militants.

But State Department and military officials who argued for the designation believed it would help curtail the group's fund-raising activities in countries like Saudi Arabia and the United Arab Emirates and pressure Pakistan to act against the militants, the newspaper said.

"This shows that we are using everything we can to put the squeeze on these guys," one administration official involved in the process told the New York Times on condition of anonymity. The newspaper said four administration officials late Thursday said the government was going ahead with the designation.

Asked for comment on the New York Times story, a senior State Department official said: "As she (Hillary Clinton) noted earlier this week, the Secretary expects to send her report on the Haqqani network to Congress today, September 7, and announce her decision regarding designation of the Haqqani network."

Clinton was wrapping up an Asia-Pacific trip and was headed to the APEC summit in Vladivostok in Russia.


MAFIA

The Haqqanis run a sophisticated and diverse financial network comparable to a mafia group, according to a July report by the Center for Combating Terrorism.

It said the group raised money through kidnapping, extortion and drug trafficking but also had a business portfolio that included import/export, transport, real estate and construction interests in Afghanistan, Pakistan and the Persian Gulf.

But the group had never had to deal with a sustained attack on their finances, author Gretchen Peters said, and might be vulnerable to cash flow chokepoints and attacks on its small and centralized command structure.

"Network leaders appear to be as motivated by profit-making as they are driven by issues like revenge, honor and ideology," the report said.

Formal designation as a Foreign Terrorist Organization would increase pressure on the Pakistani government, but any actual effects beyond that were unclear since most of the Haqqani leaders have already been blacklisted individually.

In Kabul, a government spokesman said any move by Washington against the Haqqanis was welcome.

"This will be a major step by the United States against the Haqqani network who are still plotting for dangerous and destructive attacks against us," said Interior Ministry spokesman Sediq Sediqqi.

(Reporting by Tabassum Zakaria and Andrew Quinn, Katherine Houreld and Michael Georgy in ISLAMABAD and Hamid Shalizi in KABUL; Editing by Jackie Frank and Nick Macfie)

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Captions courtesy of the Associated Press
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  • <strong>Q: What is the Haqqani network?</strong><br> A: The Haqqani network is considered one of the most dangerous militant groups fighting U.S.-led forces in Afghanistan, partly because of its record of carrying out high-profile attacks in the capital, Kabul. The group is based across the border in Pakistan's North Waziristan tribal area but also has significant strength in eastern Afghanistan, the original home of the network's founder, Jalaluddin Haqqani. He made a name for himself in the 1980s when he fought the Soviets in Afghanistan, with extensive support from U.S. and Pakistani intelligence agencies. He fled to Pakistan following the U.S. invasion of Afghanistan in 2001. Haqqani is now believed to be in his 60s or older and has handed day-to-day operations of the group over to his son, Sirajuddin.<br> <em>Caption: A file photo of Jalaluddin Haqqani, founder of the militant group the Haqqani network, on Aug. 22, 1998. (AP Photo/Mohammed Riaz, File)</em>

  • <strong>Q: What impact will the U.S. designation of the Haqqani network as a foreign terrorist organization have on the group?</strong><br> A: The designation requires U.S. financial institutions to freeze assets owned by the network and outlaws Americans from providing the group funds or material support. It can also prevent members of the group from traveling to the U.S. Analysts doubt the designation will have much of an impact on the group given the informal nature of its financing network and the lack of ties with the U.S. Many of the Haqqani network's senior leaders have already been blacklisted individually, and that has seemingly had little effect.<br> <em>Caption: Defense Secretary Leon Panetta, left, listens to Afghan Defense Minister Abdul Rahim Wardak speak during joint a press conference in Kabul, Afghanistan, on Thursday, June 7, 2012. (AP Photo/Ahmad Jamshid)</em>

  • <strong>Q: What impact will the U.S. designation have on its relationship with Pakistan or the peace process in Afghanistan?</strong><br> A: The designation could further strain already troubled ties between the U.S. and Pakistan. It could also complicate U.S. efforts to strike a peace deal in Afghanistan because of the close ties between the Taliban and the Haqqani network. Pakistan has long criticized the U.S. for trying to fight and talk with militants at the same time, and the designation could feed into that narrative.<br> <em>Caption: A Pakistani protester holds a burning US flag as they shout slogans during a protest in Multan on October 31, 2011 (S.S. MIRZA/AFP/Getty Images)</em>

  • <strong>Q: How many fighters make up the Haqqani network and how much violence are they responsible for in Afghanistan?</strong><br> A: The network is believed to be composed of several hundred core members and thousands of fighters with varying degrees of affiliation and loyalty, according to the Combating Terrorism Center in West Point, N.Y. A U.S. defense official estimated the group's size at 2,000 to 4,000 militants. U.S. officials have told The Associated Press that the Haqqani network is responsible for less than 20 percent of all U.S. and NATO casualties in Afghanistan. <br> <em>Caption: Pakistanis surround the body of an Afghan national who was allegedly killed by the al-Qaida-linked Haqqani network for spying in Pakistan's tribal area of Waziristan in Miran Shah, Pakistan, on Dec. 13, 2008. (AP Photo/Hasnbanulla Khan)</em>

  • <strong>Q: How many fighters make up the Haqqani network and how much violence are they responsible for in Afghanistan?</strong><br> A: The network is believed to be composed of several hundred core members and thousands of fighters with varying degrees of affiliation and loyalty, according to the Combating Terrorism Center in West Point, N.Y. A U.S. defense official estimated the group's size at 2,000 to 4,000 militants. U.S. officials have told The Associated Press that the Haqqani network is responsible for less than 20 percent of all U.S. and NATO casualties in Afghanistan. <br> <em>Caption: Afghani and U.S. soldiers patrol Afghan villages asking about Taliban and Haqqani network activity in the area in the Paktika Province, Afghanistan on October 31, 2011. U.S. soldiers were trying to determine if insurgents passed through the villages and how they were treating the people. They entered the men of the villages into their biometric database, taking finger-prints and retinal scans(Photo by Joshua Partlow/The Washington Post via Getty Images)</em>

  • <strong>Q: What is the Haqqani network's relationship with the Taliban and al-Qaida?</strong><br> A: The Haqqani network has pledged allegiance to Taliban leader Mullah Omar, but the group largely operates independently. The elder Haqqani developed close ties to slain al-Qaida chief Osama bin Laden during the Soviet war in Afghanistan when both of them spent months together on the front lines, according to the Washington-based New American Foundation. The network's ties to al-Qaida and other foreign militant groups have remained strong, one of the reasons why it has become such a potent force in Afghanistan. <br><em>Caption: A militant suspected of being a member of Al-Qaeda sits at a checkpoint in Azan in the southern Yemeni province of Shabwa on March 31, 2012. (STR/AFP/Getty Images)</em>

  • <strong>Q: Does the Haqqani network pose a threat to the U.S. homeland?</strong><br> A: The U.S. intelligence community believes the Haqqani network is focused on attacking local enemies, with no aspirations to attack the United States, said a U.S. defense official. But the group's ties with al-Qaida and other transnational militant groups are a concern to the U.S. <br><em>Caption: A 2007 wanted poster showing Siraj Haqqani, leader of the Haqqani group faction. (AP Photo/Bagram Air Base)</em>

  • <strong>Q: What is the Haqqani network's relationship with Pakistan?</strong><br> A: Ties between Pakistan's intelligence agency and the elder Haqqani stretch back to the Soviet war in Afghanistan. U.S. officials have accused Pakistan of continuing to support the group, but Islamabad has denied the allegation. The U.S. has demanded Pakistan target the Haqqani network in North Waziristan, but it has refused. Many analysts believe Pakistan is reluctant to target a group that could be a potential ally in Afghanistan after foreign forces withdraw. <br> <em>Caption: Afghan prisoners of war being lined up in Khost, Afghanistan on Wednesday, April 20, 1991. (AP Photo/Saeed Bangash)</em>