Taliban's most senior military commander captured by the CIA in Pakistan raid

The arrest of the Afghan Taliban's top military commander in Karachi has raised concern about militants in the city but security analysts said Pakistan's commercial capital was unlikely to become an Islamist bastion.

U.S. and Pakistani officials said on Tuesday Mullah Abdul Ghani Baradar had been captured in a joint raid by Pakistani and U.S. spy agencies.

While investors have grown used to violence in Pakistan's ethnic Pashtun northwest on the Afghan border, trouble in Karachi has a more direct impact on financial markets.

A city of 18 million people, Karachi generates 68 percent of government revenue and 25 percent of Pakistan's gross domestic product.

"The initial reaction to the news of Mullah Baradar's arrest was 'oh no! not in Karachi!', but the fact that he has been arrested is good news in itself," said Khalid Iqbal Siddiqui, director of research at brokers Invest and Finance Securities.

"While the presence of such high-profile militants in the city is a concern, incidents of violence worry investors more and so far the feeling is that the fears of Talibanization here are exaggerated," he said.

The stock market did not react to Baradar's arrest on Tuesday and the index was up 1.13 percent at 9,880.25 at 0825 GMT on Wednesday.

The Taliban presence in the city has become a hot political issue in the city where rivalry has often sparked bloody clashes between party activists.

The Muttahida Qaumi Movement (MQM), Karachi's dominant political force, has been a vocal critic of the Taliban and has raised fears about the "Talibanization" of the city.

Karachi is home to the largest concentration of Pashtuns outside North West Frontier Province. Most members of the Taliban, both in Afghanistan and Pakistan, are Pashtun.

"TEMPORARY REFUGE"

Many of Karachi's Pashtuns back a Pashtun-dominated party that competes with the MQM and analysts say the MQM's warnings of Taliban infiltration are at least partly a political ploy.

Nevertheless, the Pashtun presence is believed to provide militants such as Baradar with networks of support and a big population pool in which to melt away and hide.

Karachi mayor Syed Mustafa Kamal, a member of the MQM, told Reuters in an recent interview the city was the Taliban's "revenue engine".

But analysts and officials say while the Taliban may be raising funds and hiding in Karachi, they were not able to impose their austere rule and turn neighborhoods into bastions.

"They can take temporary refuge here but Karachi is certainly not a place for them to create a base," said retired army general Moinuddin Haider, a former federal interior minister and governor of the Sindh province, of which Karachi is the capital.

"The intelligence agencies are very active here and it's not easy for them to come here and hide," Haider said.

Liberal political parties, including the country's biggest party led by President Asif Ali Zardari, also have strong grassroots support in Karachi.

Because of that, the Taliban are unlikely to find a fertile recruiting ground although they have sympathizers in some radical madrasas, or religious schools.

"They can come here when under pressure in other parts of the country but there can't be safe havens and safe bases for them here," Haider said.

Though far from immune to militant violence, Karachi has seen fewer attacks over the past couple of years compared with other cites such as Peshawar and Lahore.

"The danger of the Taliban in Karachi is only as big as in any other city in Pakistan. In fact, I would say it is less prone to such danger which is evident from the fewer attacks," said a senior security official who declined to be identified.

"I'm not saying that there are no Taliban here, but the hype of them taking over is probably more political than factual."


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