Pakistan's unprecedented crackdown on its homegrown Taliban may have weakened the militants but the insurgency is still a threat to the unpopular U.S.-backed government.

The stakes are high and nuclear-armed Pakistan is being pulled in several directions. Washington wants the Pakistani military to hunt down Afghan Taliban groups crossing over the border to attack U.S. troops in Afghanistan.

But Pakistan is already stretched against its own militants, who have a history of bouncing back and have started to carry out suicide bombings again after a relatively quiet period.

It seems to me that this is a tactical retreat and the structure and the militant network still exists, said Khadim Hussain, a researcher with the private Arayana Institute for Regional Research and Advocacy.

There is a relative lull in militant attacks but there is a question mark about how long this lull will last.

The battle is draining Pakistan's sluggish economy, already battered by chronic power cuts and starved of foreign investment.

Pakistani officials are boasting of major successes, despite the fact militants have demonstrated they will attack all kinds of targets -- from a volleyball game to the headquarters of the powerful military -- to destablise the state.

We have shaken them, they are running helter-skelter. They are on the run, said Fiaz Toru, a top home ministry official in North West Frontier Province (NWFP), home to most militants.

ELUSIVE TALIBAN

Granted, Taliban bases were destroyed in a major offensive in South Waziristan on the Afghan border and the military said it had cleared insurgents out of Bajaur, another Taliban sanctuary.

But officials acknowledge the Taliban often melt away during offensives, sometimes returning to areas taken over by the state.

They fled the assault in South Waziristan, for instance, and regrouped in other ethnic Pashtun tribal areas such as North Waziristan.

It's a familiar pattern.

The army launched an offensive a year ago to clear Taliban fighters out of Swat Valley, from where the militants had pushed out towards the capital, Islamabad.

Luckily for Pakistan's military, the public started backing the state in the battle. This was because they were angered by the Taliban's austere version of Islamic rule involving public executions and whippings for those deemed immoral.

But the Swat crackdown also raised concerns that militants would simply flee to Mansehra district, just to the east.

Suspected Islamist militants stormed an office of a U.S.-based, Christian aid agency near Mansehra on Wednesday, killing six Pakistani aid workers after singling them out and then bombing the building.

Deep down, Pakistani officials may not be as confident as their boasts suggest, even in Peshawar, a key city on the road to Afghanistan where security has been tightened and security checkpoints abound.

We have made Peshawar comparatively peaceful but our main concern is now that they may be running sleeper cells in southern and eastern districts of the province, said a senior security official involved in the anti-Taliban crackdown.

More than 700 civilians were killed in attacks in NWFP in 2009, most of them in its capital Peshawar, eroding confidence in the country's security forces. On Thursday, a roadside bomb killed another four people in the city.

A new push by the Taliban, which staged a suicide bombing that killed 13 people at a police intelligence office in eastern Lahore city on Wednesday, would renew pressure on weak President Asif Ali Zardari, who can't afford new political crises.

Such a push may not be possible for now. It is widely believed that Pakistan Taliban leader Hakimullah Mehsud was killed in a U.S. drone aircraft missile strike in January, a big blow to the Taliban.

Nevertheless, analysts say the Taliban are capable of producing one leader after another. Mehsud's predecessor was also killed in a drone attack.

Despite ongoing security challenges, Washington expects Pakistan also to go after Afghan Taliban groups who cross the border to attack U.S. forces in Afghanistan.

Pakistan has arrested the Afghan Taliban number two, Mullah Abdul Ghani Baradar, earning praise from the Americans. But an all-out siege against all Afghan militant groups would open new fronts and likely cost more Pakistani lives.

Hundreds of police and army troops have died in the fight against the Pakistani Taliban in the past year.

We can't afford to do things in a hurry. We have to move at our own pace. While we are consolidating our gains in South Waziristan and Swat we can't afford to go to North Waziristan right away, said a senior security official.

(Editing by Michael Georgy and Paul Tait)

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