Iraqi soldiers during joint patrol mission with US soldiers near Youssifiyah, south of Baghdad, 30 Nov 2007

A new U.S. Defense Department report on Iraq says that despite a significant reduction in violence over the past three months, the Iraqi government has been lagging in taking necessary political and economic steps to solidify the security gains.

The Pentagon's quarterly assessment on progress in Iraq also says that Iraqi forces have grown in size and capabilities, but they still depend on the U.S. for logistics and training.

The report also warned that Iran is continuing to train and provide support for Shi'ite militias in Iraq. But it did not specify whether there has been a decline in the shipment of Iranian arms - particularly the armor piercing deadly roadside bombs.

The U.S. military has previously called Iran the "principal supplier" of training and funding to insurgent groups. Iran has denied those accusations.

U.S. and Iranian officials have met three times this year in Baghdad to discuss security issues in Iraq, but the talks ended inconclusively with each side blaming the other for violence in the nation.

Officials recently postponed another meeting that was planned for this week, citing Iranian scheduling conflicts.

Some information for this report was provided by AFP and  AP.