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.
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)