By Mubashir Bokhari
LAHORE, Pakistan (Reuters) - A Pakistani court resumed on Thursday the trial of CIA contractor accused of killing two Pakistanis in a case that has strained relations between the United States and its important Asian ally.
The American contractor, Raymond Davis, 36, shot dead two men in the eastern city of Lahore on January 27. He said he acted in self-defense and the United States says he has diplomatic immunity and should be repatriated.
The case has inflamed anti-American sentiment in Pakistan and is testing the often-fraught ties between the allies. Pakistani efforts against Islamist militants on its border with Afghanistan are seen as crucial for ending the Afghan war.
The trial resumes a day after Pakistani Taliban militants shot dead a government minister, Shahbaz Bhatti, who was also the only Christian in the cabinet, for his criticism of a law that mandates the death penalty for insulting Islam.
Hardline religious parties, which have been campaigning vociferously to prevent any reform of the blasphemy law, have also called for Davis to be hanged.
The United States had retaining a retired judge, Zahid Hussain Bokhari, who is also a former government prosecutor, to help with the Davis case, Bokhari said.
"The U.S. consulate has contacted me and I will represent Raymond Davis," Bokhari told Reuters before the hearing.
Security was tight at Kot Lakhpat jail, where the trial is being held for security reasons. Machine guns were installed on top of water towers inside the jail and concrete barriers were placed on the road leading to it.
Davis, a former U.S. special forces officer, has been charged with double-murder and faces possible execution.
There have been conflicting accounts about the identity of the two men Davis shot, with Davis and a police report indicating they were armed robbers while Pakistani media and some officials have portrayed them as innocent victims.
On March 14, the Lahore High Court will decide whether Davis enjoys diplomatic immunity, another contentious issue that the government has said must be decided legally, at the risk of angering the United States and jeopardizing up to $3 billion a year in U.S. military and civilian aid.
But with public anger and anti-American feeling running high, President Ali Asif Zardari's unpopular government had little choice but to let the case go through the courts.
In addition to causing a diplomatic standoff, the case has strained relations between the CIA and Pakistan's main Inter-Services Intelligence (ISI) spy agency, which says it did not know of Davis' presence in the country.
Relations between the spy agencies -- essential to the almost decade-old war in neighboring Afghanistan -- took a blow in December, when the CIA station chief in Islamabad was forced to leave the country after his name was published in a court filing over attacks in Pakistan by pilotless U.S. aircraft.
The latest case has made things worse, as even the usually tight-lipped ISI noted.
"Post incident conduct of CIA has virtually put the partnership into question ... it is hard to predict if the relationship will ever reach the level at which it was prior to the Davis episode," the ISI said in a letter to the Wall Street Journal last month.
(Additional reporting by Sheree Sardar; Writing by Chris Allbritton; Editing by Robert Birsel)