Nov. 19 (Bloomberg) -- President Pervez Musharraf rejected a U.S. call to end emergency rule, saying the restrictions won't undermine elections in Pakistan and are necessary to stop the nuclear-armed nation descending into chaos.

``We are facing the threat of terrorism,'' Musharraf said in an interview with APTN Television yesterday, according to the official Associated Press of Pakistan. The army is fighting non- Pakistani gunmen, elements of al-Qaeda and their local sympathizers and the country has ``suffered a lot of casualties in the war.''

Emergency rule ``is not compatible'' with free and fair elections, U.S. Deputy Secretary of State John Negroponte said at a news conference in Islamabad yesterday. He told Musharraf a day earlier to restore the constitution before elections.

Musharraf proposed to the Election Commission that national elections be held on Jan. 8, APP said today. More than two weeks into the state of emergency, Musharraf is intensifying the battle against Islamic militants while detaining thousands of opposition supporters and curbing non-state media.

The crackdown has strained relations with President George W. Bush, who wants Musharraf to crush Taliban and al-Qaeda terrorists in the country while moving Pakistan toward democracy.

Opposition parties say more than 15,000 supporters have been arrested in the past two weeks. Former Prime Minister Benazir Bhutto was detained at a residence in the eastern city of Lahore on Nov. 13 to prevent her from leading protest rallies.

Bhutto was freed from house arrest on Nov. 16 after the authorities lifted a seven-day detention order. She has returned to Karachi, the capital of her political stronghold in Sindh province, Agence France-Presse reported.

In Exile

Nawaz Sharif, another former prime minister, remains in exile in Saudi Arabia and Imran Khan, Pakistan's former cricket captain who leads an opposition party, is in jail under anti- terrorism laws.

Negroponte said the crackdown was unacceptable.

``Unfortunately, the recent police action against protesters, suppression of the media and arrest of political and human rights leaders run directly counter to the reforms that Pakistan has been undertaking in recent years,'' he said.

The army said Nov. 17 that security forces killed about 100 militants in the northwestern Swat Valley, about 250 kilometers (160 miles) from Islamabad, over the past three to four days.

Troops are fighting supporters of Muslim cleric Maulana Fazlullah, who is trying to impose Islamic law in the region.

Red Mosque

At least 600 people have been killed in 28 suicide bombings since July, when Musharraf ordered security forces to storm Islamabad's Red Mosque, ending a challenge to the government by clerics seeking to impose Islamic law in the capital.

The Pakistani president ended support for the Taliban regime in neighboring Afghanistan in 2001 after the Sept. 11 attacks on the U.S.

Musharraf imposed emergency rule Nov. 3 as an 11-member panel of judges was about to rule on the legality of his re- election as president. He fired the nation's top judge, saying the judiciary was undermining his government's fight against terrorism.

Musharraf said yesterday emergency rule and free and fair elections aren't incompatible.

``From 1965 to 1985, Pakistan was under emergency and there were three elections that were held,'' APP cited him as saying. ``The fairest was supposed to be in 1970.''

Musharraf has said he will step down as army chief and take the presidential oath as a civilian after the Supreme Court rules on his re-election.

Supreme Court

A 10-member panel of Supreme Court judges is scheduled to start hearing a challenge to Musharraf's re-election for a second five-year term today. He won the ballot by former lawmakers on Oct. 6.

Bhutto, speaking on CNN's ``Late Edition'' program yesterday, said Musharraf's resignation as army chief won't guarantee a fair election for Pakistan's legislature.

``A fair election doesn't just happen because one says one wants a fair election,'' she said. ``We have to see proof of that.''

Pakistan will invite international observers to monitor the election, Musharraf said, according to APP.

Bhutto wouldn't become prime minister in the event her Pakistan Peoples Party wins the ballot as the constitution bars a person from serving three terms in the post, he said. Bhutto was prime minister twice between 1988 and 1996.

To contact the reporters on this story: Khaleeq Ahmed in Islamabad at paknews@bloomberg.net; Michael Heath in Sydney at mheath1@bloomberg.net.

Last Updated: November 18, 2007 23:56 EST