(Updates with White House)

By Ahmed Rasheed

BAGHDAD, Aug 30 (Reuters) - Iraq's foreign minister said on Thursday the government had made progress in responding to U.S. goals for improved security and political reconciliation ahead of key reports soon to be delivered to the U.S. Congress.

The U.S. commander in Iraq, General David Petraeus, and U.S. ambassador Ryan Crocker will testify before Congress on either Sept. 11 or 12.

Their reports on Iraq's security and political situation could prompt a shift in U.S. President George W. Bush's Iraq policy amid calls from opposition Democrats and some senior Republicans for U.S. troops to start leaving Iraq.

"The whole world is waiting anxiously to see what these reports will indicate," Foreign Minister Hoshiyar Zebari told a news conference.

Zebari said there had been a "great deal" of progress on the security front in Iraq, while an agreement at the weekend by the country's top five Shi'ite, Sunni Arab and Kurdish leaders to boost national reconciliation was a "significant move".

Sceptics have questioned how much of that deal -- which included consensus on easing curbs on former members of Saddam Hussein's Baath party returning to government jobs -- will translate into action given the paralysis gripping the Shi'ite-led administration of Prime Minister Nuri al-Maliki.

The deal also called for the release of many detainees held across Iraq. Both issues are at the heart of complaints from disaffected Sunni Arabs, dominant under Saddam.

"I am hopeful that come September 11 or 12 you will see more political progress along these lines," Zebari said.

But while he expressed optimism, the Washington Post reported that Iraq had only met three out of 18 goals set by Washington for political and security progress, according to a draft of another major report being prepared for Congress.

The findings by the Government Accountability Office (GAO), the investigative arm of Congress, are at odds with a more positive assessment by the White House in July that Iraq had met eight out of 18 benchmarks, the newspaper said.

"STRIKINGLY NEGATIVE"

The report, which the Post described as "strikingly negative", is due to be delivered to Congress on Tuesday, a week before the testimony by Petraeus and Crocker.

"While the Baghdad security plan was intended to reduce sectarian violence, U.S. agencies differ on whether such violence has been reduced," the draft obtained by the Post said.

The White House on Thursday played down the GAO report, saying the standards were too high to meet; Democrats said it bolstered their argument that the United States must withdraw combat troops from Iraq.

"It's no secret that many of the benchmarks have not been met," White House spokesman Tony Snow said.

U.S. commanders in Baghdad say sectarian violence has fallen since Bush sent 30,000 extra troops to Iraq. In particular, they say sectarian death squad killings in the capital have halved.

Some of the violence has been blamed on the Mehdi Army militia of anti-American Shi'ite cleric Moqtada al-Sadr.

On Wednesday, Sadr suspended all armed action by the militia after gun battles in the city of Kerbala killed dozens. But Ahmed al-Shaibani, a senior Sadr aide, warned U.S. forces not to take advantage of the order.

"We say to the Americans, don't be happy. The resistance does not end," Shaibani said without elaborating.

Iraq's parliament has yet to pass any laws Washington regards as vital to healing the sectarian divide between Shi'ites and Sunni Arabs, including de-Baathification and legislation that will equitably share the country's oil wealth.

Zebari urged lawmakers to work faster when parliament reconvenes on Sept. 4 after a summer break. Lawmakers complain the government has yet to submit the key laws to parliament. (Additional reporting by JoAnne Allen in Washington)

AlertNet news is provided by