"There's a common outrage, a common response wherever you look," said Carl Levin, chairman of the US Senate's armed services committee. He clearly wasn't looking far enough.

The good senator was responding to the news that Pakistan has jailed the doctor who ran a fake vaccination campaign to provide information for US intelligence on the whereabouts of Osama bin Laden. Dr Shakil Afridi took blood samples from children living in a compound in Abbottabad which, when tested by the CIA, matched the DNA of the world's most wanted man. US special forces swooped on the hideout and executed the al-Qa'ida leader.

Dr Afridi's role in finding Bin Laden – which his nation's secret service had so conspicuously failed to do – constituted "treason", Pakistan has decided, and jailed him for 33 years. Washington reacted with fury. Pakistan was "a schizophrenic ally". Senators slashed $33m from US aid to Pakistan – $1m for each year of Dr Afridi's sentence. But in Pakistan you find outrage of a different kind. Government ministers call Dr Afridi a "traitor" who "co-operated with foreign intelligence". Some in Pakistan's newspapers want to see him hanged.

It is two years since David Cameron sparked a diplomatic row by tactlessly accusing Pakistan of "looking both ways" on terrorism. Everyone knew he was right, but Pakistan's main funder, the United States, had deliberately refrained from such plain speaking because Pakistan's ambivalence towards tackling terrorism was seen as preferable to outright hostility. And the reality is that Pakistan has lost more civilians than any other nation to Islamist terror attacks – some 30,000 Pakistani civilians and 3,000 soldiers have died at the hands of the Pakistani Taliban – while at the same time the country has high levels of support for extremists in its population, religious leaders and intelligence service, the ISI.

Understandably, Washington did not take Islamabad into its confidence when the Bin Laden raid was launched. But it is a false polarity to insist, as many have, that the ISI is either closet Islamist or incompetent – those being seen as the only explanations for Bin Laden's five years in hiding, 800 yards from Pakistan's equivalent of Sandhurst.

The answer to the puzzle is to be found much further north – in the lawless Khyber tribal region which was carved out of Afghan territory by colonial Britain as a buffer to protect the Raj. A century on, it is still a frontier belt where Pakistani and Afghan Taliban freely mingle. It was here that Dr Afridi was found guilty under the Federally Administered Tribal Areas laws dating back to 19th century British rule. An assistant political commissioner acted as prosecutor, judge and jury. Dr Afridi had no lawyer. He was unable to cross-examine witnesses or put his own side of the story, though he did not at least get the death penalty as he might have elsewhere in Pakistan.

Yet here can be found the explanation for the double game Pakistan plays on Islamic extremism. The region is the stronghold for a network of militants known as the Haqqani, a largely independent Taliban faction with bases in north Waziristan, just across the border from Afghanistan.

The ISI sees the Haqqani as a vital bulwark against Pakistan's greatest enemy, India. What terrifies it is that the nation against whom Pakistan has fought three wars since 1947 will increase its influence in Afghanistan when US troops pull out. The disputed state of Kashmir is not far away. The terrorism of the Haqqani, the Taliban faction that Nato most fears, is seen by some in the ISI as a useful way of undermining Indian interests without the need for a conventional war. It even has a jargon name for it: defence in depth. The ISI is divided as to whether Islamic extremism or US imperialism is the bigger enemy. But India is always in the back of its mind.

To that add a widespread feeling that Pakistan is routinely humiliated by the US. The Bin Laden raid is but one example. Last year, a CIA operative shot dead two men in the street in Lahore and claimed diplomatic immunity. Next, Nato helicopters killed 24 Pakistani soldiers at Salala and refused to apologise. Then there are the US drone attacks in north Waziristan that often kill civilians and which Islamabad condemns as "illegal, counterproductive and totally unacceptable". Drones killed another 12 people last week.

All these, Pakistanis insist, are violations of its sovereignty. In response it has closed supply routes to Afghanistan, forcing Nato to open a longer northern route which is twice as expensive. Negotiations to reopen them have foundered, causing Barack Obama to snub President Asif Ali Zardari at last week's Nato summit in Chicago.

It is in this context that the jailing of the hapless Dr Shakil Afridi must be seen. A $33m cut in aid sounds big. But it is small change in the $2bn a year America gives to the Pakistani army and a £7bn wider aid package which the US hopes will help turn this military-dominated Islamist nuclear power into a more stable and democratic ally.

"You're either with us or against us in the fight against terror," George Bush said after 9/11. The reality has proved a lot less simple. America and Pakistan are not so much bitter enemies as bitter allies, locked together in a danse macabre. It is individuals such as Dr Shakil Afridi who pay the price. He will not be the last.