* Death, if confirmed, could be big blow to Haqqani network
* U.S. blames Haqqani for some of boldest Afghan attacks
* Drone strikes indicate U.S. was looking for major target
By Michael Georgy
ISLAMABAD, Aug 25 (Reuters) - A U.S. drone in Pakistan may have killed a top commander of Haqqani insurgents behind some of the biggest attacks on Western and Afghan government targets in Afghanistan, sources said on Saturday, but this was denied by a senior Haqqani leader.
Pakistani intelligence officials and militant sources said Badruddin Haqqani, the network's head of operations who is also believed to handle its vital business interests and smuggling operations, may have been killed during the strike this week in Pakistan's tribal North Waziristan.
One senior Pakistani intelligence official said Badruddin had fled a compound that he and other militants were in after it was hit by a missile, then was killed by a second drone strike on a car that he was in.
However, Maulvi Ahmed Jan, a senior Haqqani network commander, denied Badruddin had been killed. He said a distant relative, 13-year-old Osama, was killed in the strike and his funeral had been mistaken by locals for Badruddin's.
The insurgents would soon provide proof that Badruddin was alive, Jan said.
"We have proudly announced before when our people died in action or in drone strikes. Jihad against the occupying forces in Afghanistan is our mission and death is certain in fighting them. Why would we keep it secret?" he said.
Afghanistan's Taliban movement, allies of the Haqqani network, also said Badruddin was alive.
There was no official word on Badruddin's fate from the network. Other intelligence officials were cautious.
"Our informers have told us that he has been killed in the drone attack on the 21st but we cannot confirm it," said one of the Pakistani intelligence officials.
If Badruddin's death is confirmed, it could deal a major blow to the Haqqanis, one of the United States's most feared enemies in Afghanistan.
The Haqqanis are the most experienced fighters in Afghanistan and the loss of one of the group's most important leaders could ease pressure on NATO as it prepares to withdraw most of its combat troops at the end of 2014.
"We are 90 percent sure that he was in the same house which was attacked with a drone on Tuesday," said another Pakistani intelligence official.
Sources close to the Haqqqani network also said Badruddin was believed to be in the house, hit by a drone strike as militants were planting explosives in a vehicle meant to be used for an attack on NATO forces in Afghanistan.
"The drone fired two missiles on the house last Tuesday and killed 25 people, most of them members of the Haqqani family," one of the sources said.
Pakistani Taliban and tribal sources said they believed Badruddin was killed in the drone attack.
One of Badruddin's relatives said he was alive and busy with his "jihad activities".
"Such claims are baseless," he told Reuters. Another relative told Reuters that Badruddin was "alive and well".
SERIES OF DRONE STRIKES
A series of drone strikes in North Waziristan this week suggest the CIA, which remotely operates the aircraft, was after a high-value militant target in the unruly area.
The deaths of militants in such strikes are difficult to confirm as they often occur in areas of regions in the northwest such as North Waziristan that are hard for authorities to reach.
U.S. officials blame the al Qaeda-linked network for some of the boldest attacks in Afghanistan, including one on embassies and parliament in Kabul in April which lasted 18 hours, killing 11 Afghan security forces and four civilians.
The United States accuses Pakistan's intelligence agency of supporting the Haqqani network and using it as a proxy in Afghanistan to gain leverage against the growing influence of its arch-rival India in the country.
Pakistan denies the allegations.
Militant groups from Afghanistan and Pakistan have formed alliances and often cross the porous border for operations.
A NATO air strike in eastern Afghanistan has killed a commander of the Pakistani Taliban, both NATO and the Taliban said on Saturday.
Both sides identified the dead commander as Mullah Dadullah and said several of his comrades were also killed in the attack on Friday.
A NATO statement did not say who carried out the assault, but the alliance is alone in having the air power to conduct such an operation. It said Dadullah's deputy, Shakir, was also killed.
"Dadullah, also known as Jamal, was responsible for the movement of fighters and weapons, as well as attacks against Afghan and coalition forces," the statement said.
It said Afghan and coalition forces backing the Kabul government had "conducted a post-strike assessment" and found that there had been no civilian casualties or damage to civilian property.
Pakistani Taliban officials, as well as Pakistani intelligence officials said Dadullah had been killed in a house in eastern Konar province, along with 12 bodygards. They said he was the leader of the Taliban in Pakistan's Bajaur tribal agency, near the border with Afghanistan.
Dadullah, in his 40s, replaced Maulvi Faqir Mohammad last year after Mohammad told the media that the Taliban were holding peace talks with the government.
The Pakistani Taliban, committed to the same Islamist principles as the Taliban ousted from power in Kabul in 2001, replaced Mohammad with Dadullah to undercut the secret negotiations, Taliban commanders say.
Some Pakistani Taliban fighters and commanders were forced to flee into Afghanistan after the Pakistani army launched a series of offensives against them in 2008 and 2009.
But they still carry out cross-border raids on Pakistani armed forces. In June, the Pakistani Taliban said they beheaded 17 Pakistani soldiers in a cross-border raid.