Islamic militants are using a recent peace deal with the Pakistani government to consolidate their hold of the northern region of the country, expanding their training and recruitment and fortifying alliances with Al Qaeda [Images] and foreign fighters, a media report has said.

The result is virtually a Taliban mini-state, the New York Times quoted diplomats and intelligence officials from several nations as saying.

The militants are openly flouting the terms of the September accord in North Waziristan, under which they agreed to end cross-border help for the Taliban insurgency that revived in Afghanistan with new force this year, the officials said.

The area is becoming a magnet for an influx of foreign fighters, who not only challenge government authority in the area, but are even wresting control from local tribes and spreading their influence to neighboring areas, several American and NATO officials and Pakistani and Afghan intelligence officials told the paper.

This year more than 100 local leaders and government sympathisers or "American spies" have been killed, several of them in beheadings, as the militants use a reign of terror to impose what President Pervez Musharraf [Images] calls a creeping "Talibanisation", the report said.

Last year, at least 100 others were also killed.

While the tribes once offered refuge to militants when they retreated to the area in 2002 after the American invasion of Afghanistan, that welcome is waning as the killings have created new tensions and added to the region's volatility.

"They are taking territory," one Western ambassador in Pakistan told the paper. "They are becoming much more aggressive in Pakistan." "It is the lesson from Afghanistan in the 90s," he added.

"Ungoverned spaces are a problem. The whole tribal area is a problem."

In recent weeks, Pakistani intelligence officials said the number of foreign fighters in the tribal areas was far higher than the official estimate of 500, perhaps as high as 2,000 today, the New York Times reported.

These fighters include Afghans and seasoned Taliban leaders, Uzbek and other Central Asian militants, and what intelligence officials estimate to be 80 to 90 Arab terrorist operatives and fugitives, possibly including Al Qaeda leaders Osama bin Laden and his second in command, Ayman al-Zawahiri.

The tightening web of alliances among these groups in a remote, mountainous area increasingly beyond state authority is potentially disastrous for efforts to combat terrorism as far away as Europe and the United States, intelligence officials warn.

They and Western diplomats told the paper that it also portends an even bloodier year for Afghanistan in 2007, with the winter expected to serve as what one official described as a "breeding season" to multiply ranks.

"I expect next year to be quite bloody," the United States ambassador in Afghanistan, Ronald Neumann, said in a recent interview.

"My sense is the Taliban wants to come back and fight. I don't expect the Taliban to win, but everyone needs to understand that we are in for a fight."

One of the clearest measures of the dangers of this local cross-fertilisation, the New York Times says, is the suicide bombings.

Diplomats with knowledge of the area's Pashtun tribes say they have little doubt the tactic emerged from the influence of Al Qaeda, since such attacks were unknown in Pakistan or Afghanistan before 2001.

This year suicide attacks have become a regular feature of the Afghan war and have also appeared for the first time in Pakistan, including two in this frontier province in recent weeks, indicating a growing threat to Pakistan's security.