UPDATE 3-Egypt criticises U.S. aid cuts, Washington says not severing ties
* Army-backed cabinet finds U.S. decision strange
* Kerry says some aid could resume, depending on poll plan
* U.S. decision exposes differences with Saudi Arabia
* Washington will still support counter terrorism in Sinai
CAIRO, Oct 10 (Reuters) - Egypt criticised on Thursday a U.S. decision to curtail military and economic aid to Cairo after a crackdown on the Muslim Brotherhood, although Washington stressed it was not severing ties with its long-standing ally.
The army-backed government insisted Egypt would not bow to U.S. pressure, with the cabinet saying it found the decision strange at a time when the country was "facing a war against terrorism".
However, U.S. Secretary of State John Kerry said Washington would consider resuming some of the aid "on a basis of performance" in following the interim government's "roadmap" that promises to lead to fair elections.
Washington faces a dilemma in dealing with its major regional ally; Egypt controls the strategic Suez Canal and has a peace treaty with neighbouring Israel but its army overthrew in July the first freely-elected president, Islamist Mohamed Mursi, after mass protests against his rule.
In some of the worst civilian violence in modern Egyptian history, security forces crushed protests by Mursi's supporters. However, militant Islamists, who have been attacking Egyptian forces in the Sinai peninsula for some time, have begun staging assaults in or near major cities including Cairo.
The United States said on Wednesday it would withhold deliveries of tanks, fighter aircraft, helicopters and missiles to Cairo as well as $260 million in cash aid, but left some other aid programmes intact.
The Egyptian cabinet criticised the decision. "The government expressed the strangeness of the decision which was issued at such a vital time during which Egypt is facing a war against terrorism," it said in a statement said.
Foreign Ministry spokesman Badr Abdelatty also reacted with defiance. "The decision was wrong. Egypt will not surrender to American pressure and is continuing its path towards democracy as set by the roadmap," he told the Radio FM station.
However, he also said Egypt was "keen on continuing good relations with the United States".
The U.S. position exposes differences with its Gulf ally Saudi Arabia, which had welcomed Mursi's removal and has lavished financial support to the new government. It also raises the question of where Egypt, the second largest recipient of U.S. aid after Israel, could now turn for more military aid.
Kerry said Washington wanted to make certain the roadmap to new elections remained a primary goal of the interim government.
"The interim government understands very well our commitment to the success of this government... and by no means is this a withdrawal from our relationship or a severing of our serious commitment to helping the government," he told reporters on a visit to Malaysia.
Washington has long provided Egypt with about $1.55 billion in annual aid, including $1.3 billion for the military.
An Egyptian military source declined to give details on what effect the decision could have on military hardware as disclosing such information would harm national security.
The U.S. State Department has said it would continue military support for counter terrorism, counter-proliferation and security in the Sinai, which borders Israel. It will also continue to provide funding in areas such as education, health and private sector development.
Egypt's private, anti-Islamist leaning Tahrir newspaper was bolder in its criticism, with a headline proclaiming, "Let the American aid go to hell".
The Brotherhood refuses to work with the military, which it says staged a coup and sabotaged Egypt's democratic gains after a revolt toppled autocratic President Hosni Mubarak in 2011. The military denies it carried out a coup, saying it responded to the will of the people.
Security forces have crushed two pro-Mursi protest camps, killing hundreds, and arrested scores from the group, including much of the senior leadership.
Mursi has been held in a secret location since his overthrow. He is due to face trial on Nov. 4 on charges of inciting violence, in a move that is likely to further inflame tensions between the army and the Brotherhood.
The government also declared a state of emergency and imposed a curfew. A court order has banned the Brotherhood, Egypt's oldest and most influential Islamist group, that dominated national elections since Mubarak's overthrow.
In the latest violence, pro-Mursi supporters clashed with security forces and political opponents on Sunday, with state media reporting 57 people dead.
Raising the risk of more bloodshed, the Brotherhood's political wing, the Freedom and Justice Party, called for a "million-man march" in Cairo on Friday to head towards Tahrir Square, cradle of the demonstrations that overthrew Mubarak.
On Thursday, one police and three army conscripts were killed in a car bomb attack in the Sinai, security sources said.
Brigadier Abdelnasser al-Adheb was quoted as telling state-run website al-Ahram that security forces had arrested "five terrorist elements" who were behind an attack at a state security building in South Sinai earlier this week in which three conscripts were killed.
Egypt has for decades been among the largest recipients of U.S. military and economic aid because of its 1979 peace treaty with Israel.