BAGHDAD (Reuters) - The U.S. military has succeeded in delivering a crippling blow to al Qaeda in Iraq, but this has only served to highlight "the other big problem" -- the power of Shi'ite militias, Washington's envoy to Iraq said on Thursday.
Ambassador Ryan Crocker said the new U.S. "surge" strategy, which saw 30,000 extra troops sent to Iraq, had significantly reduced sectarian violence in Baghdad, the former al Qaeda stronghold of Anbar province and elsewhere.
"Al Qaeda in Iraq has shown extraordinary persistence but clearly their abilities have been badly damaged. In a sense that puts into highlight the other big problem, which is the militias, particularly JAM," he told journalists in Baghdad.
JAM is the acronym for the Jaish al-Mehdi, otherwise known as the Mehdi Army, the feared militia force commanded by Moqtada al-Sadr. The cleric ordered a ceasefire in August so that he could reorganize the militia, which has splintered into factions, many of which are believed to be beyond his control.
"We have seen JAM Militant transform into JAM Incorporated. They may not be shooting at us or Iraqi soldiers, but (they are) controlling gas stations, real estate, trade and services," Crocker said.
"That is a major challenge to the state and it would be a difficult problem to tackle but one that has to be."
The big question was the intentions of neighboring Iran, which Washington accuses of aiding the militias. Crocker said there were indications that Iran was using them as a proxy to boost its influence and weaken the Iraqi government.
U.S. officials say Iran supplies the militias with funding, training and weapons, including rockets, mortars and roadside bombs known as explosively formed penetrators that have killed scores of U.S. soldiers.
Iran denies the charge and says it supports Iraq's government and respects its territorial integrity.
Crocker said Iran's involvement in Iraq "continues to be a mixed, cloudy picture", but noted several positive developments such as Sadr's ceasefire announcement and the sharp drop in mortar attacks on the heavily fortified Green Zone that houses the Iraqi government and U.S. embassy.
The U.S. military has blamed many of those attacks on militias using Iranian-made weapons.
"It is unclear to us what role, if any, Iran might have played in it, but again it is important for us to continue to push them to try ... to bring their practices into line with their stated policies," he said.
He said he expected more talks with Iran on improving Iraq's security, despite the U.S. decision on Thursday to designate Iran's Revolutionary Guards Corps a proliferator of weapons of mass destruction and its Qods force a supporter of terrorism.
U.S., Iranian and Iraqi officials held the first meeting of a sub-committee intended to improve cooperation on Iraqi security in August.
"There are no discussions currently scheduled, but my expectation is that we will have another round at some point," Crocker said.