WASHINGTON - The Bush administration is preparing to present President-elect Barack Obama with a strategy review that calls for continued covert strikes into Pakistan's territory from Afghanistan as a way of reversing the gains that militants have made in destabilizing the two neighbouring countries, a leading US newspaper reported Sunday. The review contains an array of options, including telling Pakistan's military that billions of dollars in American aid will depend on the military's being reconfigured to effectively fight militants, The New York Times said without identifying its sources. "That proposal amounts to a tacit acknowledgment that roughly $10 billion in military aid provided to Pakistan as 'reimbursements' for its efforts to root out militant groups has largely been wasted". The payments have been the source of increasing criticism on Capitol Hill and from independent review groups, which have concluded that Pakistan diverted much of the money to build up its forces against India, the dispatch said. Revamping the aid to the military was part of a three-month study of what has gone wrong in the seven-year war along the Pak-Afghan border. The study calls for a new and broadly regional approach to insurgencies that move freely across the mountainous border between Afghanistan and Pakistan. "In the short term, it calls for continued covert strikes into Pakistani territory from Afghanistan, though the American military has been reluctant to repeat the kind of ground attack that led to an open exchange of fire with Pakistani border forces in September," according to The Times. The report, which is expected to be presented to Mr Obama's top national security advisers in the next week or two, was the product of a highly unusual strategy review that was begun in mid-September, just four months before President Bush leaves office. "We've gone seven long years proclaiming that Pakistan was an ally and that it was doing everything we asked in the war on terror," the newspaper quote an unidentified one senior official involved in drafting the report as saying. "And the truth is that $10 billion later, they still don't have the basic capacity for counterinsurgency operations. What we are telling Obama and his people is that has to be reversed." It said, "As a war that Mr Bush once believed he had won came back to life in 2005 and 2006, the White House began a series of strategic reassessments, the most recent one reporting in the fall of 2006, just before the forced resignation of Donald H. Rumsfeld as secretary of defence. But those past studies looked primarily at the dynamics in Afghanistan. The current one, headed by the White House war czar, Lt Gen Douglas Lute, took a far broader view. The drafts prepared for the incoming Obama administration suggest that the United States has never focused sufficiently on nation-building, jobs creation, construction of schools and roads, and, most important, pushing the Pakistani government to focus on counterterrorism and counterinsurgency, the dispatch said. It also urges Obama to take a far more regional approach to the problem, something he has indicated in speeches he is inclined to do. "The Pashtun tribes treat these countries as one territory, and we have to begin to do something similar," one official familiar with the report was quoted as saying, declining to speak on the record because the contents of the report are confidential. The report includes options, not "recommendations," so that Obama would not be put in the position of endorsing or rejecting Bush's suggested policies. It was completed just before the terrorist attacks in Mumbai last month, and the reaction to those events is likely to complicate some of the central options even before they are handed off to Obama. Asked about the study, a White House spokesman, Gordon Johndroe, said only: "We are concluding our review. We intend to pass it to the new team, since most policy adaptations would take place on their watch. This is another part of our efforts to ensure a smooth transition."