Washington: US Congress has pushed ahead to freeze USD 700 million aid to Pakistan until Islamabad comes up with a strategy to fight the spread of Improvised Explosive Devices (IEDs) in the region, a step which is likely to deepen crisis between the two countries.

Reflecting a bipartisan toughening of stand, the negotiating panel of the House of Representatives and the Senate, on Monday unanimously agreed to freeze the 700 million aid to Pakistan as they reached a compromise on a sweeping USD 662 billion Defense Authorization Bill for the year 2012.

Besides, stringing aid to Pakistan, the military spending bill also targets Iran's Central Bank and sets new hurdles for closing Guantanamo Bay prison for al-Qaeda fighters.

The legislation will now face vote in both the Houses this week amid warnings by President Obama that he would veto any bill that required military custody of suspected extremists who target US.

Pakistan is one of the largest recipients of US foreign aid and the freeze, when it is empowered by the Congress, would form only a small portion of billions of dollars of civil and military assistance it gets each year.

But the freeze could lead to greater cut backs as demands rise in the US to penalise Islamabad for failing to act against militant groups on its soil, who kill US soldiers in Afghanistan.

Locally made IEDs are the most effective weapons used by terrorists against US and Nato forces in Afghanistan.

"This freeze includes the majority of the USD 1.1 billion in Pakistan Counterinsurgency Fund," the House Armed Services Committee said in a statement, after the members of the House of Representatives and the Senate reached an agreement on the Annual Defense Bill.

The bill, which sets policy and spending priorities for the Pentagon, is generally considered must-pass legislation.

The Defense Authorization Bill 2012 "limits the amount of funds available for the Pakistan Counterinsurgency Fund (PCF) until the Secretary of Defence provides Congress a strategy on the use of the PCF and on enhancing Pakistan's efforts to counter the threat of IEDs," said the Senate Armed Services Committee in another separate statement.

The US wants "assurances that Pakistan is countering IEDs in their country that are targeting our coalition forces," House Armed Services Chairman Buck McKeon said.

"We have had some shaky relations lately with Pakistan. We need them, they need us," he said

The new military spending would authorise USD 662 billion for military personnel, weapon systems, national security in the Energy Department and the wars in Iraq and Afghanistan, reflecting a winding down of decade-old conflicts.

The bill provides USD 27 billion less than Obama requested and USD 43 billion less than Congress gave the Pentagon a year ago.

Senate Armed Services Committee Chief Carl Levin commenting on moves on Iran said, "They are going to pay a bigger and bigger price should they continue towards nuclear weapons."