Pakistan, Pervez Musharraf resigns from the post of army chief and handed over the responsibility to Ashfaq Parvez Kayani, 52, former chief of Pakistan's spy agency, at a ceremony in Rawalpindi.

Kayani, a graduate of a U.S. military academy, is considered loyal to Musharraf, non-political and a proponent of Pakistan's support for the U.S. war on terrorism, for which it has received $10 billion in aid since 2001. Kayani was a military aide to opposition leader Benazir Bhutto when she was prime minister in the 1980s.

“Kayani has served under Musharraf at different posts and he has his confidence,'' Talat Masood, a retired general, said in a telephone interview with boolmberg in Islamabad. ``He is a professional soldier and has the commitment to fight the country's war against terrorism on the instruction of a civilian government.''

Pervez Musharraf will be sworn in as a civilian president on Thursday, a day after resigning from the army chief, leaving him with vastly reduced powers and Washington and rest of the world with a far more complex Pakistan to deal with in its fight against Al Qaeda and the Taliban.

Though finally stepping down, he is likely to retain much of his old power as a civilian president, fortified by his emergency decree on Nov. 3, and loyalists he chose at the top of the military, according to Pakistani officials and analysts. Musharraf changed a constitutional order to ensure he retains the authority to lift the state of emergency, not Kayani.

U.S. State Department spokesman Sean McCormack stated ,``It's a positive step, He has fulfilled a commitment that he has made to the Pakistan people and to other key international actors '' in Washington today.”

``We welcome Musharraf's stepping down from the army because this was one of our biggest demands,'' Farhatullah Babar, Bhutto's spokesman, said in a phone interview. Bhutto agreed to a power-sharing agreement with Musharraf in which he would remain as president if he let go of the military and allowed elections in January. She abandoned that agreement after Musharraf imposed emergency rule on Nov. 3 and put her under house arrest twice in a week.

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