BUNER, Pakistan, (Reuters) – A Pakistani Taliban commander withdrew his fighters from a key northwestern valley on Friday, amid growing alarm in the United States that the Taliban were creeping closer to the capital of nuclear-armed Pakistan.

Fears for Pakistan’s stability have heightened in the past week after the Taliban took control of Buner, a valley just 100 km (60 miles) and less than five hours drive from Islamabad.

The order for the Taliban’s retreat from Buner was given by Fazlullah, the Taliban commander in neighbouring Swat valley, where the government has already caved in to militants’ demands for the imposition of Islamic law.

“Our leader has ordered that Taliban should immediately be called back from Buner,” Taliban spokesman Muslim Khan told Reuters. He said there were only around 100 fighters in Buner.

Government and Taliban representatives went to Buner, along with Maulana Sufi Mohammad, a radical Muslim cleric who brokered the Swat deal, to tell the fighters to vacate the district.

Fazlullah’s aide Mehmood Khan said the militants were returning to Swat, and witnesses saw them leaving Buner in the early evening.

It was unclear whether the Taliban’s withdrawal was in response to a carrot or a stick, and worries abound over whether Pakistan lacks the capacity and intent to fight militancy.

Army chief General Ashfaq Kayani issued a statement aimed at dispelling those doubts and calming a mounting sense of crisis.

The army “will not allow the militants to dictate terms to the government or impose their way of life on the civil society of Pakistan,” the statement quoted Kayani as saying.

Kayani’s comments, issued after meeting with his commanders, reinforced expectations of an imminent offensive in Swat, analysts aid.

The Taliban spokesman was quoted in the past week as saying al Qaeda would be given refuge in lands under Taliban control.

U.S. Secretary of State Hillary Clinton said Pakistan’s policies in Swat abdicated authority to the Taliban, while Defense Secretary Robert Gates urged Pakistani leaders to act against foes who posed an “existential threat” to the state.

The United States and other Western allies need Pakistan’s help to defeat al Qaeda and stabilise neighbouring Afghanistan.

Earlier this month parliament forced a reluctant President Asif Ali Zardari to sign a regulation to introduce sharia, Islamic law, in Swat valley in order to pacify the Taliban.

Emboldened by the government’s readiness to appease them, the Taliban moved into Buner from Swat, triggering alarm over their proximity to Islamabad.

News of the Taliban withdrawal helped extend a rally in the Pakistani share market, which bounced 4 percent on Friday after three days of sharp declines.

Hitherto, the government has appeared reluctant to sanction the use of force in Swat, but Kayani said the “operational pause, meant to give the reconciliatory forces a chance,” should not be interpreted as a concession to the militants.

The military is confronted across the northwest by a Taliban menace that is now threatening to spread into Punjab province and the heart of the country.

Prime Minister Yousaf Raza Gilani asked parliament to show “moral courage” to stop the Taliban, while rebuffing concerns that Pakistan’s nuclear weapons were at risk from the militants. “The country’s defence is in strong hands and our nuclear programme is in safe hands,” he said.

On Thursday, air force jets bombed militant targets in the Orakzai tribal region west of Peshawar.

Some 11 fighters were killed, taking the toll to 40 in three days of bombing, according to a military spokesman.

Casualty estimates cannot be independently verified. Meanwhile, Taliban were also seen in another northwestern district of Shangla, manning checkpoints they had set up near Shahkot and Purn villages, according to intelligence officials.

Shangla, east of Swat and linked to Buner through a mountain pass, was the scene of fierce fighting between militants and security forces when the Pakistani military launched an offensive in late 2007 against militants loyal to Fazlullah.

The moves to defuse tensions in Buner came after intelligence officials in Peshawar briefed politicians from all the major parties in North West Frontier Province.

The militants ambushed a convoy of Frontier Constabulary killing one policeman on Thursday, as the government deployed more than 270 of the militiamen in Buner to restore authority.

Taliban occupied the mountain slopes according to senior police officer Arsala Khan, but residents said Taliban fighters had been coming into Buner town praying in their mosques and telling people to observe strict Islamic laws.