Islamabad:
The US has put bilateral engagements with Pakistan on hold till US official Raymond Davis, who has been arrested for fatally shooting two Pakistanis in Lahore, is released, Dawn reported Tuesday.
Diplomatic sources told the Dawn that the dispute could impact three major events planned this year - President Asif Ali Zardari's visit to Washington, the next round of US-Pakistan strategic dialogue and trilateral talks involving Pakistan, Afghanistan and the US.
Davis was arrested after he shot dead two people riding on a motorbike at a busy intersection in Lahore Jan 27. He called up the US consulate after the shooting and a team rushed to help him. The team's vehicle collided with a motorcyclist, killing him.
The US is stressing that Davis should be released as he holds a diplomatic passport.
Foreign Minister Shah Mehmood Qureshi last week postponed a visit to Germany to take part in an international security conference after Washington told Islamabad that Secretary of State Hillary Clinton might not be able to meet him because of the dispute, the media report said.
A diplomatic source said that delay in Zardari's visit that has been planned to take place next month "would send wrong signals around the world and would also embarrass him at home".
Similarly "delaying the strategic dialogue would have serious implications", he added.
"The US decision to postpone all bilateral contacts can put Pakistan at a great disadvantage during the negotiations," the source was quoted as saying.
The diplomatic row could impact $1.5 billion of annual assistance for Pakistan.
"Pakistan has agreed in principle to grant diplomatic immunity to Mr Davis and send him back to the US," a senior diplomatic source said in Washington.
"But the government (of Pakistan) is scared of political repercussions, particularly after the suicide (by one of the victim's widow Sunday)," the source added.
Islamabad has put Raymond Davis and three other Americans on a list that prohibits them from leaving the country.