US says sorry to Pakistan, opens Afghan supply lines

In this June 12, 2012 file photo, Secretary of State Hillary Rodham Clinton speaks at the State Department in Washington.

WASHINGTON (AP) -- Ending a bitter seven-month standoff, Secretary of State Hillary Rodham Clinton apologized to Pakistan on Tuesday for the killing of 24 Pakistani troops last fall and won in return the reopening of critical NATO supply lines into Afghanistan. The agreement could save the U.S. hundreds of millions of dollars in war costs.

Resolution of the dispute also bandages a relationship with Pakistan that will be crucial in stabilizing the region. The ties have been torn in the past year and a half by everything from a CIA contractor who killed two Pakistanis to the unilateral U.S. raid on Osama bin Laden's Pakistan compound.

But the accord carries risks for both governments - threatening to make Pakistan's already fragile civilian leadership look weak and subservient to the United States while offering fodder to Republicans, including presidential candidate Mitt Romney, who contend that President Barack Obama says "sorry" too easily.

The first trucks carrying NATO goods should move across the border on Wednesday, U.S. officials said. It could take days to ramp up supplies to pre-attack levels, but around two dozen impatient truck drivers celebrated the news in a parking lot in the southern city of Karachi by singing, dancing and drumming on empty fuel cans.

"We are sorry for the losses suffered by the Pakistani military," Clinton said, recounting a telephone conversation she had with Pakistani Foreign Minister Hina Rabbani Khar concerning the deaths that led Pakistan to close the supply routes. "I offered our sincere condolences to the families of the Pakistani soldiers who lost their lives. Foreign Minister Khar and I acknowledged the mistakes that resulted in the loss of Pakistani military lives."

"I am pleased that Foreign Minister Khar has informed me that the ground supply lines into Afghanistan are opening," Clinton added in her statement.

It marked the first time any U.S. official formally apologized for the deaths, a step hotly debated within the Obama administration and one demanded by Pakistan before it would reopen the supply routes. Pakistani lawmakers also wanted Washington to halt all air strikes in the country and stop shipping weapons and ammunition to Afghanistan through Pakistani airspace, demands the U.S. has ignored. Negotiations stumbled at one point over transit fees Pakistan sought to charge.

The November incident was the deadliest among the allies in the decade-long fight against al-Qaida and other extremist groups along the Afghan-Pakistani frontier.

An American investigation found that Pakistani forces fired first and U.S. soldiers responded in self-defense. It blamed bad maps, poor coordination and Islamabad's failure to provide the locations of its borders for the failure to determine if Pakistani forces were in the area. Pakistan argued that its troops shot at militants who were nowhere near coalition soldiers, and accused the U.S. of launching a deliberate attack.

The breakdown of the U.S.-Pakistani partnership arrived at an awful time, only weeks after Clinton and CIA Director David Petraeus went to Islamabad to patch up the relationship and secure a Pakistani commitment to snuff out support given by its intelligence services to the Taliban - support that Washington sees as a threat to the Afghan war effort.

The Obama administration, in an election year, expressed regret for the deaths but dug in its heels over the word "sorry," fearful it might open the president to criticism from Republicans already critical of Pakistan's links with militants fighting in Afghanistan.

It is also unclear what the apology will mean for the U.S. call for Pakistan to crack down on the militant Haqqani network, which is believed to use Pakistan as a rear base for attacks on American troops in Afghanistan.

Having titled his campaign book, "No Apology," Romney accuses Obama of having gone "around the world and apologized for America." The accusation refers to Obama's trip to Cairo early in his presidency, when he sought to repair U.S. relations with the Muslim world. Clinton's remarks made no reference to an "apology," though she did use the word "sorry."

Obama made no comments about Pakistan on Tuesday, leaving Clinton's statement as the only official U.S. explanation of the agreement. It was released just as Pakistani civilian and military leaders were meeting to discuss whether to reopen the routes, and there was no confirmation from Islamabad of a decision for more than two hours.

"The main thing is that a superpower has acknowledged our principled stance, and they have shown flexibility," said Information Minister Qamar Zaman Kaira, speaking in Urdu. "It was not the issue of money. It was the issue of our sovereignty," he said, adding that American authorities assured Pakistan there would be no repeat of the incident.

The prime minister's office said the government reopened the supply lines in and out of Afghanistan to help its northern neighbor's "transformation process" more than a decade after bin Laden used the country to launch the Sept. 11, 2001, terrorist attacks and the U.S. responded by helping overthrow the Taliban.

It stressed that re-opening the supply lines would help the U.S. pull out of Afghanistan sooner, saying the transition was in "Pakistan's interest." The statement sought to head off the inevitable political backlash in a country where anti-American sentiment is rife and the United States is often blamed for internal problems.

Still, Pakistan's more conservative political groups rejected the decision. Amirul Azim, a top leader of Pakistan's radical Jamaat-e-Islami party, said, "The main thing is that we should not reopen the NATO supply route, and we should isolate ourselves from this so-called war against terrorism."

The Pakistani Taliban vowed to attack the supply trucks once they started moving.

"We will do our best to stop the NATO supply and will never allow someone to ship weapons for killing Muslims," Pakistani Taliban spokesman Ahsanullah Ahsan told The Associated Press by telephone from an undisclosed location.

The fallout over the re-opened supply lines could hurt Pakistan's civilian government, which was re-established four years ago after a history of military coups. It has struggled to assert itself against the powerful Pakistani army and hardline Islamist religious leaders and politicians, who will likely point to the several parliamentary demands the U.S. ignored, including the call for an "unconditional apology" for the attack. Washington mentioned mistakes on both sides.

Clinton said Pakistan wouldn't charge any new transit fee and the reopening would help the U.S. draw down its forces in Afghanistan "at a much lower cost."

The U.S. government has never paid transit fees directly. Pakistan charges companies $250 per truck for transit, and the U.S. accounts for those fees in its contracts with those companies, so it pays indirectly. During negotiations Pakistan had asked for a flat fee of up to $5,000, but Washington offered extensive road construction projects to sweeten the deal.

With the supply lines closed, the U.S. has been forced to use more costly transportation routes through Russia and Central Asia. Defense Secretary Leon Panetta had estimated the cost at an extra $100 million a month, warning that it could get more expensive as the U.S. started to withdraw equipment in advance of the 2014 troop drawdown in Afghanistan.

Capt. John Kirby, a Pentagon spokesman, said that once the backlog of materiel clears the re-opened supply routes, "we expect to be able to save between $70 million and $100 million per month."

The $100 million a month estimate would mean the lengthy standoff cost U.S. taxpayers some $700 million, and denied Pakistan's revenue-starved government millions of dollars in transit fees.

The total could be more.

The Pentagon asked Congress last week for approval to transfer $2.1 billion from other funds to cover costs largely resulting from the closure of the Pakistan supply routes.

Three separate transfers totaling $1.7 billion covered increased fuel and transportation costs for the Army resulting from the closed routes. A fourth transfer of about $370 million was for the Air Force, which had to increase the transportation of supplies by air in part to compensate for the shutdown of the ground routes through Pakistan. The budget request did not specify how much of the $370 million was related to the Pakistan problems and how much was just additional support for the war.

Much of those added costs already have been incurred, but the Pentagon plans to do a review of the transfers to see whether any of the money can be saved, although no major changes are expected.

Panetta said Tuesday he welcomed Pakistan's decision.

"We remain committed to improving our partnership with Pakistan and to working closely together as our two nations confront common security challenges in the region," he said.

According to a senior defense official, the agreement also could cost the U.S. as much as $1.1 billion. The official, who spoke on condition of anonymity because the details were not final, said the Pentagon intends to submit $1.1 billion in approved requests for reimbursement of money the Pakistan government has spent on counter-terrorism operations that were incurred largely along the border.

The requests for aid are approved by the defense secretary and then Congress is notified. Lawmakers can vote to reject them.

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Twenty dead in Taliban siege of Afghan hotel

An Afghan policeman walks at the Spozhmai hotel on the outskirts of Kabul

(Reuters) - Elite Afghan police backed by NATO forces ended a 12-hour siege on Friday at a popular lakeside hotel outside Kabul, leaving at least 20 dead after Taliban gunmen stormed the lakeside building, bursting into a party and seizing dozens of hostages.

The night-time assault on the hotel with rocket-propelled grenades, suicide vests and machine guns again proved how potent the Islamist insurgency remains after a decade of war.

The commander of NATO forces in Afghanistan said the attack bore the signature of the Taliban-linked Haqqani group that he said continued to operate from Pakistan, a charge that could further escalate tensions with Islamabad.

General John Allen's comments come days after U.S. Defense Secretary Leon Panetta said Washington was at the limits of its patience with Pakistan over the existence of militant networks including the Haqqanis.

Pakistan says it is doing everything it can to fight militants on its side of the border and accuses Afghanistan of trying to shift the blame for its failure to combat the insurgency.

At the hotel, terrified guests jumped into the lake in the darkness to escape the carnage, Afghan officials and residents said. Up to 300 people had been inside the hotel when the attack began.

Afghan interior ministry spokesman Sediq Sediqqi said 12 to 15 civilians, two hotel guards and a policeman were killed in the gunbattle at the Spozhmai hotel, overlooking Qargha Lake. Five attackers were also killed.

The attack, quickly claimed by the Afghan Taliban, again showed the ability of insurgents to stage high-profile raids even as NATO nations prepare to withdraw most of their combat troops by the end of 2014 and leave Afghans to lead the fight.

"Afghan National Security Forces and coalition military sources acknowledge that this attack bears the signature of the Haqqani network, which continues to target and kill innocent Afghans and blatantly violate Afghan sovereignty from the safety of Pakistan," General Allen said in a statement.

Blood was splattered over the hotel floor and the crumpled body of a man lay in the garden. Women and children were among the wounded.

"We heard a heavy explosion from a rocket-propelled grenade. We tried to escape, but we were surrounded by suicide bombers. We hid ourselves behind a tree until morning. God protected us," said Abdullah Samadi, 24.

The gunmen, Samadi said, had been closely watching their prisoners and searching for illegal stocks of wine.

"Around dawn they came closer to us and we had to jump in the water. We were there until 9 a.m. and then the situation got better and we slowly, slowly swam toward security forces," he said.

Sediqqi said the Taliban were using civilians as human shields to defend themselves and held about 50 people hostage late into Friday morning.

Elite Afghan quick-response police backed by NATO troops freed at least 35 hostages in an operation that only began in earnest after sunrise to help security forces avoid civilian deaths in night-time confusion.

The Taliban complained wealthy Afghans and foreigners used the hotel, about 10 km (6 miles) from the center of Kabul, for "prostitution" and "wild parties" ahead of the Friday religious day holiday.

Launching their annual offensive this spring, the Taliban threatened to attack more government officials and rich Afghans, but the hotel assault was one of few in which multiple hostages were taken since the start of the war, now in its 11th year.

President Hamid Karzai said attacking a place where people went for picnics was a sign of defeat for the enemies of Afghanistan.

"This is a crime against humanity because they targeted children, women and civilians picnicking at the lake. There wasn't even a single soldier around there," said General Mohammad Zahir, head of the Kabul police investigation unit.

Television pictures showed several people wading out of the lake onto a balcony and clambering over a wall to safety.

NATO attack helicopters could be seen over the single-storey hotel building and a balcony popular with guests for its sunset views, while a pall of smoke rose into the air.

NEW FACE OF INSURGENCY?

Soldiers and police fanned out around the hotel at dawn, arriving in cars and armored Humvee vehicles and taking cover behind trees flanking the lake and a nearby golf course.

Qargha Lake is one of Kabul's few options for weekend getaways. Restaurants and hotels that dot the shore are popular with Afghan government officials and businessmen, particularly on Thursday nights.

Guests at the Spozhmai must pass through security checks before entering the hotel, where tables with umbrellas overlook the water, but security is relatively light for a city vulnerable to militant attacks.

Violence across Afghanistan has surged in recent days, with three U.S. soldiers and more than a dozen civilians killed in successive attacks, mostly in the country's east, where NATO-led forces have focused their efforts during the summer fighting months.

NATO commanders, halfway into the process of transferring security responsibility to Afghan forces, are racing through training for the Afghan army and police, including holding basic literacy classes for recruits.

Well-planned assaults in Kabul in the past year have raised questions about whether the Taliban and their al Qaeda-linked Haqqani network allies have shifted tactics to embrace attacks on landmarks, foreigners and Afghanistan's elite, extending a guerrilla war once primarily waged in the countryside.

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US officials: 3 US troops killed in Afghan attack

A burqa-clad Afghan woman walks past a police station which was attacked by militants in Kandahar, south of Kabul, Afghanistan, Tuesday, June 19, 2012.

KABUL, Afghanistan (AP) -- American officials say three U.S. service members and an Afghan interpreter have been killed in a blast that also left 17 Afghans dead in eastern Afghanistan.

The U.S. Embassy said Wednesday that three NATO service members and an Afghan interpreter died in the explosion. A U.S. official speaking anonymously to discuss casualties ahead of the official release says that the foreign troops killed were Americans.

Afghan officials said the strike in Khost province was a suicide bomber who rammed a vehicle packed with explosives into a military convoy.

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Pakistan: Al-Qaida No. 2 at house hit by US drone

A CIA drone strike Monday, June 4, 2012, targeted al-Qaida's second in command, Abu Yahia al-Libi, in Pakistan

PESHAWAR, Pakistan (AP) -- Pakistan has evidence that al-Qaida's second-in-command was in a house destroyed by a U.S. drone strike in the country's northwest tribal region, but it is unclear whether he was killed, intelligence officials said Tuesday.

U.S. officials have said they were targeting Abu Yahya al-Libi in Monday's strike in Khassu Khel village in the North Waziristan tribal area and were "optimistic" he was among those killed. They spoke on condition of anonymity because of the classified nature of the drone program.

If al-Libi is confirmed killed, he would be the latest in the dozen-plus senior commanders removed in the clandestine U.S. war against al-Qaida since Navy SEALs killed Osama bin Laden last year.

Militants and residents in the area told Pakistani agents that al-Libi was in the house when it was hit, Pakistani intelligence officials said. They said the mud and brick house was completely destroyed in the attack.

A vehicle used by al-Libi was destroyed during the strike, said one of the officials. Agents intercepted a militant phone call indicating an Arab was killed in the attack, but it is unclear if they were talking about al-Libi, who was born in Libya, said the official.

A local Taliban chief said al-Libi's guard and driver were killed in the strike, but the al-Qaida commander was not there. Al-Libi did survive a previous strike, said the Taliban chief.

The intelligence officials spoke on condition of anonymity because they were not authorized to talk to the media. The Taliban spoke on condition of anonymity for fear of being targeted by the Pakistani army.

The White House maintains a list of terrorist targets to be killed or captured, compiled by the military and the CIA and ultimately approved by the president.

The U.S. has stepped up drone strikes in Pakistan recently, carrying out seven in less than two weeks. The flurry follows a relative lull driven by tensions between Washington and Islamabad over American airstrikes last year that killed 24 Pakistani soldiers.

Pakistan seized the opportunity to renegotiate its relationship with the U.S. and demanded Washington stop drone strikes in the country - a demand the U.S. has ignored. The attacks are unpopular in Pakistan because many people believe they mostly kill civilians, an allegation disputed by the U.S.

Pakistan called Deputy U.S. Ambassador Richard Hoagland to the Foreign Ministry on Tuesday to protest the drone strikes.

"He was informed that the drone strikes were unlawful, against international law and a violation of Pakistan's sovereignty," said a statement sent by the Foreign Ministry to reporters.

Members of the Pakistani government and military have supported the strikes in the past, but that cooperation has come under strain as the relationship between the two countries has deteriorated.

The State Department's Rewards for Justice program had set a $1 million reward for information leading to al-Libi, who had filmed numerous propaganda videos urging attacks on U.S. targets after he escaped a prison at Bagram Air Base in Afghanistan in 2005.

Al-Libi took the second-in-command spot when Egyptian-born Ayman al-Zawahri took charge of al-Qaida after bin Laden's death. As al-Qaida's de facto general manager, al-Libi is responsible for running the group's day-to-day operations in Pakistan's tribal areas and manages outreach to al-Qaida's regional affiliates.

"This is one of the more prominent names" among the targets of drone strikes in Pakistan, added former CIA officer Paul Pillar.

He said al-Libi's death would help bolster the CIA's push to continue the drone program despite the continued political resistance from Pakistan and collateral damage.

Al-Libi's death would be "another reason not to accept Pakistan's demand for an end to drone wars," added Brookings Institute's Bruce Riedel, a former CIA officer and adviser to the White House on Afghanistan and Pakistan policy.

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French Election: Hollande defeats Sarkozy 51.62 pct to 48.38 pct

French president-elect Francois Hollande wave to supporters with his companion

PARIS (AP) -- France has awoken to a new era after electing Socialist Francois Hollande as president, a leftist pledging to buck Europe's austerity trend and NATO's timetable for Afghanistan.

After an appearance before thronging crowds on Paris' Place de la Bastille in the early morning hours Monday at which he pledged "to finish with austerity," Hollande was back at work, arriving at his campaign headquarters around 10:30 a.m. local time.

Hollande has his work cut out to fulfill the hopes his victory has stirred on France's Left, overjoyed to have one of their own in power for the first time since Socialist Francois Mitterrand was president from 1981 to 1995.

Sarkozy is now the latest victim of a wave of voter anger over spending cuts in Europe that has ousted governments and leaders in the past couple of years.

Final results from France's presidential election show Hollande narrowly defeated Sarkozy with 51.62 percent of the vote, or 1.13 million of the 37 million votes cast in Sunday's election.

Sarkozy, who finished the first round about half-a-million votes behind Hollande, failed in his bid to attract sufficient votes from supporters of far-right leader Marine Le Pen.

The head of the National Front party refused to endorse either candidate and said she would cast a blank vote. In that, she was followed by more than 2 million others, a total far higher than in previous elections.

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Afghanistan's Karzai slams United States over massacre

Afghan President Hamid Karzai

(Reuters) - Afghan President Hamid Karzai on Friday lashed out at the United States for failing to fully cooperate with an investigation into the massacre of 16 Afghan villagers by a U.S. staff sergeant and questioned whether only one soldier could have been involved.

A series of blunders by the United States, including the killings in Kandahar province on Sunday and the inadvertent burning of copies of the Koran at a NATO base last month, has further strained already tense relations between the countries.

"This has been going on for too long. You have heard me before. It is by all means the end of the rope here," Karzai told reporters at the heavily fortified presidential palace.

Flanked by senior officials, a tired and sometimes angry Karzai listened to village elders and the families of victims of the massacre, and dressed somberly in black for the start of an expected two days of talks to discuss the killings.

Some at the meeting shouted, some demanded answers, but all said they wanted any soldiers involved punished.

"I don't want any compensation. I don't want money, I don't want a trip to Mecca, I don't want a house. I want nothing. But what I absolutely want is the punishment of the Americans. This is my demand, my demand, my demand and my demand," said one villager, whose brother was killed in the nighttime slaughter.

Furious Afghans and lawmakers have demanded that the soldier responsible be tried in Afghanistan, but despite those calls, the U.S. staff sergeant was flown out on Wednesday.

"The army chief has just reported that the Afghan investigation team did not receive the cooperation that they expected from the United States. Therefore these are all questions that we'll be raising, and raising very loudly, and raising very clearly," Karzai said.

Karzai appeared to back the belief of the villagers, and many other Afghans including the country's parliament, that one gunman acting alone could not have killed so many people, and in different locations some distance apart.

"They believe it's not possible for one person to do that. In (one) family, in four rooms people were killed, women and children were killed, and they were all brought together in one room and then put on fire. That one man cannot do," Karzai said.

TWIN INVESTIGATIONS

With twin investigations still underway by both U.S. and Afghan officials, any discovery of more than one soldier involved in the massacre would be a disaster for NATO, with Western leaders needing to win over Afghans ahead of a withdrawal by most foreign combat troops in 2014.

Civilian casualties caused by NATO forces hunting insurgents are a major source of friction between the Afghan government and its Western backers, and have damaged efforts to win the "hearts and minds" of locals in the decade-old war.

"Our families are finished and our houses are destroyed," said a furious Hajji Abdul Samad Aka, who lost 11 members of his family in the killings in two villages of Panjwayi district.

An unnamed U.S. official told The New York Times the attack by the accused soldier was a result of "a combination of stress, alcohol and domestic issues - he just snapped."

The lawyer for the soldier said the staff sergeant was upset at having to do a fourth tour of duty in a war zone and was likely suffering from stress after seeing colleagues wounded.

Anger over the massacre spilled into weekly Friday prayers at a major mosques in central Kabul with one cleric calling the shooting "unforgivable" and questioning how a soldier with alleged mental problems could be in the U.S. military.

"Revenge for the blood of these victims will be taken either today, tomorrow, in 10 years or the next 100 years," said Mullah Ayaz Niazi at Wazir Akhbar Khan mosque in Kabul's diplomatic enclave, which is also home to NATO headquarters.

The soldier accused of the shooting was attached to a small special forces compound similar to others around the country which underpin NATO's anti-insurgent strategy.

On Thursday, Karzai called for NATO troops to leave Afghan villages and confine themselves to major bases, underscoring fury over the massacre and clouding U.S. exit plans.

He also demanded the handover of security to Afghan police and soldiers by 2013, a year ahead of schedule.

Such a move could undercut U.S. President Barack Obama's strategy for Afghanistan and hamper efforts to mentor Afghan police and help with local governance.

In a further blow to NATO hopes of a negotiated end to the decade-old war, the Afghan Taliban said they were suspending nascent peace talks with the United States, following the massacre and ahead of the traditional summer fighting months.

The United States said it was committed to political reconciliation involving talks with the Taliban but progress would require agreement between Kabul and the insurgents.

"The Taliban leadership were and may still be serious about talks, but instead of discussing how to end the war, they will now be persuading the rank and file to go out again this year and fight," Kate Clark of the Afghanistan Analysts Network said.

"That another round of fighting and killing is now on the agenda is a difficult prospect to face," she wrote in a blog.

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Iranian company wants to send toy drone to Obama

Toy-Drone made by Iran

Tehran, Iran (CNN) -- An Iranian non-profit company says it will honor U.S. President Barack Obama's request that Iran return a drone that crashed there last year.

But instead of the actual drone, the company says it will send miniature toy versions. A lot of them.

"We plan to send a full squadron of 12 to the White House for President Obama as a present," said Reza Kioumarsi, a spokesman for the Aaye Art Group, a Tehran-based non-profit, non-governmental company that makes novelty items.

The company is trying to determine what Obama's favorite color is before sending the drones, which are 1/80th the size of the real drone, Kioumarsi said.

In December, Obama said the U.S. has asked Iran to return the highly classified RQ-170 Sentinel drone.

"We've asked for it back. We'll see how the Iranians respond," Obama said at the time.

This is probably not the response Obama was seeking.

Iran has said the country's armed forces had downed the drone near Kashmar, some 225 kilometers (140 miles) from the border with Afghanistan on December.

President Mahmoud Ahmadinejad gave a speech in December that seemed to suggest that Iran wouldn't return it.

"The North Americans at best have decided to give us this spy plane," Ahmadinejad said.

The RQ-170 Sentinel is one of the United States' most sophisticated drones and flies at up to 50,000 feet. It is designed to evade sophisticated air defenses.

One former intelligence official said it's "impossible to see" and discounted Iranian claims that it had been brought down by some form of electronic counter-measures. "It simply fell into their laps," he said -- after satellite communication was lost.

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Pentagon budget cuts will reshape U.S. military

The Pentagon

(Reuters) - The Pentagon unveiled a 2013 budget plan that would cut $487 billion in spending over the next decade by eliminating nearly 100,000 ground troops, mothballing ships and trimming air squadrons in a bid to create a smaller, agile force with a new strategic focus.

The funding request, which includes painful cuts that will be felt across the country, comes at a historic turning point for the military as it winds down 10 years of war in Afghanistan and Iraq and shifts its strategic focus to the Asia-Pacific region and the Middle East.

The budget plan, sharply criticized by some lawmakers, sets the stage for a new struggle between President Barack Obama's administration and Congress over how much the Pentagon should spend on national security as the country tries to curb its trillion-dollar budget deficits.

"Make no mistake, the savings that we are proposing will impact all 50 states and many districts, congressional districts across America," Defense Secretary Leon Panetta told a news conference at the Pentagon on Thursday.

"This will be a test of whether reducing the deficit is about talk or action."

Panetta, previewing a budget to be made public February 13, said he would ask for a $525 billion base budget for the 2013 fiscal year, the first time since before the September 11, 2001, attacks that the Pentagon has asked for less than the previous year. That compares with $531 billion approved this year.

Panetta said he would seek $88.4 billion to support overseas combat operations, primarily in Afghanistan, down from $115 billion in 2012 largely due to the end of the war in Iraq and the withdrawal of U.S. forces there at the end of last year.

Congress ultimately controls the Pentagon's purse strings and regularly intervenes to change the size and detail of military spending as it sees fit. The Defense Department's budget accounts for about 20 percent of total federal spending.

Republican lawmakers who oversee military affairs on Capitol Hill sharply criticized the plan.

Senator John McCain said it "ignored the lessons of history" by imposing massive cuts on the military, and Representative Buck McKeon said it reflected "Obama's vision of an America that is weakened, not strengthened, by our men and women in uniform."

MORE CUTS TO COME?

The 2013 budget is Panetta's first as defense secretary and is the first to take into account the Budget Control Act passed by Congress in August that requires the Pentagon to cut $487 billion in projected spending over the next decade.

The budget plan does not take into account an additional $600 billion in defense cuts that could be required after Congress failed to pass a compromise agreement to cut government spending by $1.2 trillion. The Pentagon could face cuts of another $50 billion a year, starting in 2013, unless Congress changes the law.

Panetta said he hoped once lawmakers understood the sacrifice involved in reducing the defense budget by almost a half a trillion dollars, they would make sure to avoid another $500 billion in additional cuts that would "inflict severe damage to our national defense for generations."

The budget begins to flesh out a new military strategy announced by the Pentagon earlier this month that calls for a shift in focus from the ground wars of the past decade towards efforts to preserve stability in the Asia-Pacific region and the Middle East.

"To ensure an agile and ready force, we made a conscious choice not to maintain more force structure than we could afford to properly train and equip," Panetta said.

The budget plan would provide new challenges for the Pentagon's top suppliers, such as Lockheed Martin, Boeing, General Dynamics, Northrop Grumman and Raytheon. The Arca index of defense stocks closed Thursday down 0.7 percent.

The plan retains but slows the purchase of weapons like Lockheed's F-35 Joint Strike Fighter, the Pentagon's largest procurement program, as well as submarines, amphibious assault ships and other vessels. It would retain a fleet of 11 aircraft carriers.

The Pentagon would boost its emphasis on special operations forces like those who carried out the raid in Pakistan that killed al Qaeda leader Osama bin Laden last year and rescued two aid workers this week from kidnappers in Somalia.

It would also increase its emphasis on cyber operations, expand its work on drone aircraft, go ahead with a long-range bomber and proceed with other weapons that would allow it to project power from a greater distance.

Those capabilities are needed as countries like Iran and China develop arms that could threaten U.S. aircraft carriers in international waters near their shores.

General Martin Dempsey, the top U.S. military officer as chairman of the Joint Chiefs of Staff, warned against "parsing through each cut, each change, to look for a winner or loser," saying the plan should be judged for how it adapts the military to a changing security environment.

While the cuts announced on Thursday would affect all major defense contractors, consultant Loren Thompson said shipbuilders would be hit particularly hard because of the plan to cut 16 vessels from the total planned for the next five years.

The plans could affect work flow at Huntington Ingalls' shipyards in Pascagoula, Mississippi, and Newport News, Virginia.

The size of the active-duty Army would be trimmed to 490,000 over five years from its wartime peak of 570,000 in 2010 and the size of the Marine Corps would fall to 182,000 from its high of about 202,000.

Military pay increases would begin to slow after two more years of growth, and fees would be increased on healthcare benefits for military retirees, those who served more than 20 years, both above and below the age of 65.

In addition, the Pentagon would:

- Delay development of a new ballistic missile submarine by two years.

- Eliminate six of the Air Force's tactical-air fighter squadrons and retire or divest 130 aircraft used for moving troops and equipment.

- Retire seven Navy cruisers and two smaller amphibious ships early, postpone the purchase of a big-deck amphibious ship by one year and postpone the planned purchase of a number of other vessels for several years.

- Eliminate two Army heavy brigades stationed in Europe and compensate by rotating U.S. based units into the region for training and exercises.

- Study the possibility of further reducing the size of U.S. nuclear arsenal.

- Begin a new round of talks on closing bases made unnecessary by the smaller force.

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