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"By directing policy toward an unlikely scenario of a short-term democratic transition on the island and rejecting most tools of diplomatic engagement, the US is left as a powerless bystander, watching events unfold at a distance," the report says.

It stops short of calling for the trade embargo to be lifted but does urge: an end to restrictions imposed during the Bush administration on travel and remittances to Cuba reinstituting formal co-operation on migration and tackling drug-trafficking allowing Cuba to buy US agricultural products on credit.

In introducing the legislation on the Senate floor, Kerry, chair of the Foreign Relations Committee, warned, "An alarming percentage of the Pakistani population now sees America as a greater threat than al Qaeda. "Until we change that perception there is, frankly, very little chance of ending tolerance for terrorist groups or persuading any Pakistani government to devote the political capital necessary to deny such groups ... the sanctuary that they've been able to receive."

Speaking at a news conference capping his 100th day in office, Obama said the United States has "huge national security interests in making sure that Pakistan is stable" and doesn't end up a "nuclear-armed militant state."

After making two visits to Pakistan in less than three weeks, Adm. Michael Mullen, chairman of the U.S. Joint Chiefs of Staff, is "very alarmed by the growing extremist threat in Pakistan and remains frustrated particularly by the political leadership's inability to confront that threat," according to his chief spokesman.

Clinton and Defense Secretary Robert Gates have called Taliban gains in Pakistan an "existential threat" to the country.

The bill takes into account the fluid situation in Pakistan, leaving military aid to be determined on a year-by-year basis. But it requires Obama to certify Pakistani forces are making progress in combating al Qaeda and the Taliban and not interfering with civilian rule in order for aid to continue, a condition both the Obama administration and the Pakistani government have opposed.

The bill also calls for strict benchmarks to measure the effectiveness of the aid. In addition to requiring Obama to submit a report to Congress outlining a strategic plan for the aid, the administration is to submit a report every six months detailing how the money is spent and judging its effectiveness. Clinton and Gates are to submit a comprehensive cross-border strategy for the Pakistani-Afghan border, as well as annual reports on the progress of Pakistani Security Forces.

Obama is calling for additional $1.5 billion in spending annually for five years to boost civilian development in Pakistan as part of his strategy for the region.

U.S. Senators John Kerry and Richard Lugar introduced a bill on Monday to authorize the funds, primarily for projects like roads, schools and hospitals. Kerry said while the funding was mainly intended for civilian projects, the administration could submit a plan directing some of it to military uses. Congress is considering an additional $2.3 billion in aid for Pakistan, including $400 million for counterinsurgency.

Secretary of State Hillary Clinton has accused Islamabad of abdicating to the Taliban by agreeing to impose Islamic law in the Swat valley and Obama has expressed concern the government is "very fragile" and unable to deliver basic services.

Hawks in the Pakistani establishment fear Karzai's government is too close to arch-rival India and see support for the Taliban as a way of maintaining influence in Afghanistan.