Tribal elders met Wednesday with an Al Qaeda-link (search) militant chief whose men have kidnapped two Chinese engineers in a lawless region near the Afghanistan (search) border but failed to secure their release, tribal leaders said.

Militant leader Abdullah Mehsud (search) said negotiations for the release of the two Chinese could only start when five of his fighters, who are holding the pair in a house surrounded by security forces, are allowed to travel with the hostages to where he is hiding in nearby mountains, said Qayyum Sher, one of 24 elders at the meeting.

During the talks, Mehsud — a former Guantanamo Bay (search) prisoner who is thought to have forged ties with Al Qaeda since his release — offered to release a Pakistani driver and security guard kidnapped Saturday along with the Chinese, who were building a dam in the area.

But the elders declined the offer, saying the Chinese must be released first, Sher said.

Brig. Mahmood Shah, chief of security for Pakistan's northwestern tribal regions, confirmed the meeting occurred but claimed it went well.

"We hope that we will get our Chinese guests back very soon," he said.

On Tuesday, Shah said the kidnappers would not be allowed to leave the area with the hostages. He said troops were refraining from the use of force for the safety of the hostages, who have had explosives strapped on them.

The talks started late Tuesday and continued into the early hours of Wednesday at an undisclosed location in the rugged South Waziristan region.

Mehsud, 28, came back to Pakistan in March after about two years' detention at the U.S. base at Guantanamo Bay, Cuba. He was captured by U.S.-allied Afghan forces in Kunduz, northern Afghanistan, in December 2001 while fighting for the Taliban, Pakistani officials said.

It was not clear why U.S. authorities released Mehsud. After he returned to his tribal homeland in South Waziristan, he became a rebel leader and has opposed Pakistani forces that are hunting Al Qaeda fighters in the semiautonomous area.

The News daily paper in Islamabad said Tuesday that Mehsud, who uses an artificial leg after losing a limb to a land mine while fighting for the Taliban, has become "a hero to anti-U.S. fighters active in both Afghanistan and Pakistan."

A Pakistani intelligence official, speaking on condition of anonymity, said Mehsud is believed to have recently forged ties with Al Qaeda and is receiving financing from the terror group. Foreign militants, mainly from Uzbekistan, are loyal to him, the official said.

Pakistan's military has staged a series of offensives this year targeting Al Qaeda fighters in South Waziristan and claims to have broken up several terrorist hideouts and training camps. The fighting has killed dozens of militants, soldiers and civilians.

The remote region is also a suspected hiding place of Usama bin Laden and his top lieutenant, Ayman al-Zawahri, although there is no firm evidence on their whereabouts.