Oct. 23 (Bloomberg) -- The U.S. Congress passed a defense spending bill imposing restrictions on military assistance to Pakistan, in a bid to ensure aid is spent fighting the Taliban and not used to build up defenses against neighboring India.

Military payments to Pakistan must be in the interests of U.S. national security and mustn’t “affect the balance of power in the region,” according to a provision attached to the defense authorization bill passed yesterday by the Senate.

The restriction comes as the Pakistani army continues its biggest offensive against militants in the northwestern tribal region bordering Afghanistan, where 28,000 soldiers have been deployed to fight guerrillas blamed for 80 percent of terrorist attacks in the country.

U.S. military officials say that tensions with India over the divided Himalayan region of Kashmir have in the past diverted Pakistan from the fight against extremism. India and Pakistan have fought three wars since independence in 1947, two over Kashmir. Their peace process stalled after the November terrorist attacks on Mumbai, which India blamed on a Pakistan- based militant group.

The restrictions on military aid may trigger complaints in Pakistan and fan anti-U.S. sentiment.

Earlier this month, Pakistani opposition lawmakers and the military said conditions attached to a $7.5 billion economic aid package signed by President Barack Obama undermined the nation’s sovereignty. That legislation provides funds over five years to build roads, schools, power facilities and other projects serving civilians.

Pakistan has received about $7.6 billion in military reimbursements from the U.S. for its support of counterterrorism efforts since 2001.

‘Balance of Power’

The bill requires that, before the U.S. reimburses Pakistan for expenses incurred battling militants, the secretaries of Defense and State report to Congress on whether the money was spent in a way that is consistent with “the national security interest of the United States” and doesn’t “adversely impact the balance of power in the region.”

The measure also requires the Pentagon, in spending $700 million to improve Pakistan’s counterinsurgency skills, to assess whether that country’s government “is making concerted efforts” to fight the Taliban and al-Qaeda. It requires a quarterly report describing on a project-by-project basis how the money is spent.

“We can’t lose sight of the very reason Pakistan receives these funds; they are a reimbursement for expenses incurred fighting terrorists,” said U.S. Senator Robert Menendez, a New Jersey Democrat who has long sought restrictions on aid to Pakistan. The U.S. has to ensure its support “is not being squandered or diverted.”

Militant Attacks

Militants have mounted increasing attacks on Pakistan’s government and security forces, including an assault on the army headquarters earlier this month and commando-style raids on police complexes in the eastern city of Lahore. Seven attacks last week killed more than 150 people.

Gunmen killed an army officer and his guard when they opened fire on a military jeep in the Pakistani capital yesterday. A twin suicide bombing at the International Islamic University in Islamabad this week, the first to target a major university, killed five people and prompted the government to close schools nationwide for five days.

The offensive in South Waziristan aims to destroy the Taliban faction that was led by Baitullah Mehsud until his death in a U.S. missile strike in August.

The military says it expects to complete the operation in six to eight weeks.

To contact the reporters on this story: Ed Johnson in Sydney at ejohnson28@bloomberg.net; Janine Zacharia in Washington at jzacharia@bloomberg.net.

Last Updated: October 22, 2009 21:32 EDT