By Steve Holland

WASHINGTON, Jan 2 (Reuters) - Republican presidential candidates squabbled over the crisis in Pakistan on Wednesday as the assassination of Pakistani opposition leader Benazir Bhutto echoed through the U.S. campaign.

Arizona Sen. John McCain and former Massachusetts governor Mitt Romney battled over who could best deal with nuclear-armed Pakistan and rival Rudy Giuliani, the former New York mayor, used Bhutto's death to illustrate why he is ready to tackle foreign policy challenges if elected.

Pakistan has offered candidates a challenging theoretical test as Iowa prepares to kick off on Thursday the state-by-state contests that will determine the Republican and Democratic candidates who will face off in the November presidential election.

The Giuliani campaign launched a television advertisement using images of Iranian President Mahmoud Ahmadinejad, Bhutto, an explosion and al Qaeda leader Osama bin Laden as examples of foreign policy challenges the next president will face.

"In a world where the next crisis is a moment away -- America needs a leader who's ready," the announcer says.

Giuliani has based his presidential campaign on his response to the Sept. 11 attacks as New York's mayor.

IMPORTANT U.S. ALLY

Bhutto's assassination last Thursday has fueled doubts about stability and the transition to democratic rule in nuclear-armed Pakistan, an important ally in the U.S. anti-terrorism drive.

McCain, who spent five years as a prisoner in the Vietnam War and touts his own national security credentials, took a shot at Romney for his reaction to Bhutto's slaying.

Romney had said after her death, "If the answer for leading the country is someone that has a lot of foreign policy experience, we can just go down to the State Department" and pick one.

A McCain Web ad replayed the comment, and followed it with an announcer saying: "Is he serious? We live in a dangerous world. And these are serious times. America needs a president who is serious about foreign policy. John McCain is the one man prepared to lead America in a time of crisis."

Romney said in response he was comfortable with his own experience as a leader able to assemble experts to help him make critical decisions.

"And, if you want an expert in Pakistan I guess we could go to the State Department and pick out somebody who's been at the Pakistan desk. But if you want a leader, and a person who's led in critical times, and in critical ways, I think I fit the bill," Romney said.

Democrats have also battled over the issue.

Delaware Sen. Joe Biden, a foreign policy heavyweight, accused rival Hillary Clinton of not understanding Pakistan after the New York senator and former first lady suggested that Pakistani President Pervez Musharraf is up for re-election this month.

"Musharraf was elected -- fairly or unfairly -- president six months ago," Biden said in Iowa. "It's about a parliamentary election"

(Additional reporting by Andy Sullivan in Iowa, editing by Patricia Zengerle)

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