Foreign soldiers targeted

There was a 22 per cent increase in attacks and a two per cent rise in civilian casualties compared to the previous three months, the report said.

More than two thirds of attacks in the country were aimed at soldiers serving with the US-led multinational force, but most of the casualties were Iraqis.

More than two thirds of attacks were aimed at
soldiers with the multinational force [AFP]
Fifty-four per cent of all attacks took place in Baghdad and the predominantly Sunni Muslim al-Anbar province in the west. 

These figures could underestimate the bloodshed as the defence department's figures exclude most attacks, as the Iraq Study Group report noted.

"There is significant under-reporting of the violence in Iraq," the Iraq Study Group said.

The Pentagon said that the al-Mahdi Army "has replaced al-Qaeda in Iraq as the most dangerous accelerant of potentially self-sustaining sectarian violence in Iraq."

Shia militia

Sadr's militia is believed to have up to 60,000 fighters and has been accused of carrying many attacks on Sunnis.

The 30-strong Sadrist bloc in Iraq's parliament is also a key part of prime minister Nuri al-Maliki's ruling coalition.

Iraq's National Reconciliation and  Dialogue Project, aimed at building ties between mainstream Shia and Sunni political groups, had "shown little progress" as sectarian violence "has steadily increased despite meetings among religious and tribal leaders," the report said. 

The Pentagon released the report just hours after Robert Gates was sworn in as the new US defence secretary, replacing Donald Rumsfeld.

Gates, who announced he would soon travel to Iraq to hear directly from US military commanders, said at his swearing-in ceremony that "failure in Iraq ... would be a calamity that would  haunt our nation, impair our credibility and endanger Americans for decades to come."