ISLAMABAD - Pakistan's army chief dismissed U.S. allegations that his spy agency had helped Afghan militants attack the U.S. Embassy in Kabul, saying Friday the charges were baseless and part of a public "blame game" detrimental to peace in Afghanistan.

Army Chief Gen. Ashfaq Pervez Kayani's terse statement suggested Islamabad had no immediate intention of acting on renewed American demands that it attack the Haqqani militant faction in their main base in northwest Pakistan. It also ramped up a dispute between the two nominally allied nations that has exposed their increasingly deteriorating relationship.

Adm. Mike Mullen, chairman of the Joint Chiefs of Staff, on Thursday accused the army's Inter-Services Intelligence agency of supporting Haqqani insurgents in planning and executing a 22-hour assault on the U.S. Embassy in Afghanistan last week and a truck bomb that wounded 77 American soldiers days earlier.

Kayani said in a statement that the allegations were "very unfortunate and not based on facts."

The claims were the most serious yet by an American official against nuclear-armed Pakistan, which Washington has given billions in civilian and military aid over the last 10 years to try to secure its co-operation inside Afghanistan and against al Qaeda.

Kayani's statement appeared to imply that Pakistan's contacts with the Haqqani network were part of efforts to bring it to the negotiating table. The United States, Kabul and European countries all agree that a peace deal will be needed to end the war, though not all agree on whether the Haqqanis, which have links to al Qaeda, should be included.

The statement said that "on the specific question of contacts with Haqqanis ... Admiral Mullen knows fully well which ... countries are in contact with the Haqqanis. Singling out Pakistan is neither fair nor productive."

Kayani, regarded as the most powerful man in Pakistan, said the "blame game" between it and the U.S. should give way to constructive dialogue over the future of a peaceful Afghanistan.

The Haqqani insurgent network is widely believed to be based in Pakistan's North Waziristan tribal area along the Afghan border. The group has historical ties to Pakistani intelligence, dating back to the war against the Soviets in Afghanistan in the 1980s.

Mullen's words marked the first time an American official had tied Pakistan's intelligence agency directly to the attacks and signalled a significant shift in the U.S. approach to Islamabad. In the past, U.S. criticism of Pakistan largely had been relayed in private conversations with the countries' leaders while American officials publicly offered encouraging words for Islamabad's participation in the terror fight.

Kayani said Mullen's allegations were "especially disturbing in view of a rather constructive meeting" he had with Mullen in Spain last week.

Mullen did not provide specific evidence backing up his accusations or indicate what the U.S. would do if Pakistan refuses to cut ties to the Haqqani network. The U.S. has repeatedly demanded that Pakistan attack the insurgents and prevent them from using the country's territory.

Earlier, Pakistan's prime minister, Yousuf Raza Gilani, alluded to both countries' mutual need for each other -- Pakistan's for U.S. financial assistance and international support, and Washington's need for Islamabad's co-operation in the anti-terror fight and in helping negotiate a peace deal in Afghanistan.

"They can't live with us. They can't live without us," Gilani told reporters. "So, I would say to them that if they can't live without us, they should increase contacts with us to remove misunderstandings."

Pakistani officials Friday reiterated claims that the United States was seeking to make Pakistan a scapegoat for its failings in Afghanistan. They have also complained recently that militants chased out of Pakistan by the army are now using Afghan soil to attack targets inside the country.

The relationship between the two countries has never been smooth, but it took one of its hardest hits when U.S. commandos sneaked into Pakistan on May 2 and killed al Qaeda chief Osama bin Laden in a garrison town not far from Islamabad.

The covert raid outraged the Pakistani government because it was not told about it beforehand, while bin Laden's presence in Abbottabad raised further suspicions among U.S. officials about the country's duplicity in the anti-terror fight.