WASHINGTON - President Barack Obama Friday announced a ban on U.S. spying effort on heads of allied states, amid growing anger in the world over revelations that the National Security Agency (NSA) had tapped phone calls of 35 world leaders.

Obama’s decision comes as a response to a deepening diplomatic crisis over the recent NSA’s spying scandals. After more than six months of controversy over U.S. surveillance policies, Obama, in a major speech said that - barring a specific threat - he has ordered an end to eavesdropping on dozens of foreign leaders and governments who are friends or allies, a move the White Hope hopes will restore trust in the intelligence community and in the government’s ability to balance national security and privacy interests.

Obama also said he is taking steps to protect the privacy of foreigners by extending to them some of the protections currently given to Americans.Privacy concerns arose after former U.S. spy contractor Snowden's damaging disclosures about the sweep of NSA's monitoring activities. "The reforms I'm proposing today should give the American people greater confidence that their rights are being protected, even as our intelligence and law enforcement agencies maintain the tools they need to keep us safe," he said.

Relations between the United States and Germany were frayed after reports surfaced last year that the NSA had monitored the mobile phone of German Chancellor Angela Merkel. Brazilian President Dilma Rousseff postponed a state visit to Washington to protest US tactics. "The leaders of our close friends and allies deserve to know that if I want to learn what they think about an issue, I will pick up the phone and call them, rather than turning to surveillance," Obama said.

Analysts said Obama is trying to balance public anger at the disclosure of intrusion into Americans' privacy with his commitment to retain policies he considers critical to protecting the United States. The steps Obama put in motion are aimed at adapting regulations to keep up with rapid changes in surveillance technology that permit NSA analysts to monitor private communications globally. Among the list of reforms, Obama called on Congress to establish an outside panel of privacy advocates for the secret Foreign Intelligence Surveillance (FISA) Court that considers terrorism cases. The former chief judge of the FISA court had opposed such a step.

While the speech was designed to address concerns that U.S. surveillance has gone too far, Obama's measures were relatively limited. One of the biggest changes will be an overhaul of the government's handling of bulk telephone "metadata." He said the programme will be ended as it currently exists. In a nod to privacy advocates, the government will not hold the bulk telephone metadata, a decision that could frustrate some intelligence officials.

In addition, Obama said the US the government will need a judicial review before the database, which lists millions of telephone calls, can be queried unless there is a true emergency. Obama also decided that communications providers would be allowed to share more information with the public about government requests for data.

Obama has asked Attorney General Eric Holder and the intelligence community to report back to him before the metadata program comes up for reauthorization on March 28 on how to preserve the necessary capabilities of the program, without the government holding the metadata.

Obama made clear that his administration's anger at Snowden's revelations has not abated. Snowden, living in asylum in Russia, is wanted on espionage charges, although some Americans would like him to be granted amnesty for exposing secrets they feel needed to be made public.

"The sensational way in which these disclosures have come out has often shed more heat than light, while revealing methods to our adversaries that could impact our operations in ways that we may not fully understand for years to come," Obama said, mentioning the former NSA contractor by name.

Obama said US intelligence agencies will only use bulk collection of data for fighting terrorism protecting US troops and allies, and combating crime.

Obama said the transition from the existing programme would proceed in two steps. “Effective immediately, we will only pursue phone calls that are two steps removed from a number associated with a terrorist organization instead of three,” he said. “And I have directed the attorney general to work with the Foreign Intelligence Surveillance Court so that during this transition period, the database can be queried only after a judicial finding, or in a true emergency.”

The president also addressed another major NSA surveillance programme which involves collection of e-mail and phone calls of foreign targets located overseas, including when they are in contact with US citizens or residents.

He acknowledged that the information has been valuable, Holder and Director of National Intelligence James Clapper to develop new protections, including the duration of time the government can hold foreigners’ data and restrictions on its use - essentially extending to foreigners some of the protections currently given to Americans. The president said he also wants to see whether there are greater protections that can be placed on the information collected from foreign targets about US citizens, with respect to the way analysts gain access to and use that data. Obama said the new directive he issued Friday “will clearly prescribe what we do, and do not do.” He said the United States would use signals intelligence only “for legitimate national security purposes, and not for the purpose of indiscriminately reviewing the e-mails or phone calls of ordinary people.” The United States, he added, will not “collect intelligence to suppress criticism or dissent” or to give US companies a competitive advantage.

Unless there is a compelling national security purpose, Obama said, “we will not monitor the communications of heads of state and government of our close friends and allies.” Friendly leaders “deserve to know that if I want to learn what they think about an issue, I will pick up the phone and call them, rather than turning to surveillance,” he said.

Obama’s directive applies to NSA bulk collection and spells out that it should be used only for countering terrorism, the proliferation of weapons of mass destruction and cyberthreats, for combating transnational crime and to protect the US military and allied forces. As he made the case for reforms, Obama also cautioned that “we cannot unilaterally disarm our intelligence agencies.” And he caustically criticized foreign intelligence services that “feign surprise” over disclosures of US surveillance while “constantly probing our government and private sector networks and accelerating programs to listen to our conversations, intercept our e-mails or compromise our systems.”

He noted that some countries that “have loudly criticized the NSA privately acknowledge that America has special responsibilities as the world’s only superpower and that they themselves have relied on the information we obtain to protect their own people.