By Kristin Roberts

WASHINGTON, Sept 7 (Reuters) - The top U.S. commander in Iraq, Gen. David Petraeus, said on Friday the Iraqi government's progress toward national reconciliation, a key justification for increased troops levels, was disappointing.

In a letter to troops three days before he briefs Congress on the war in Iraq, Petraeus said coalition forces had made uneven progress in establishing security but had the upper hand against insurgents.

"Up front, my sense is that we have achieved tactical momentum and wrested the initiative from our enemies in a number of areas of Iraq. The result has been progress in the security arena, although it has, as you know, been uneven," Petraeus wrote to coalition forces.

But he said Iraqi politicians had not made the gains hoped for when the Bush administration added 30,000 U.S. troops to the war under the "surge" strategy.

"Many of us had hoped this summer would be a time of tangible political progress at the national level as well," he said.

"One of the justifications for the surge, after all, was that it would help create the space for Iraqi leaders to tackle the tough questions and agree on key pieces of 'national reconciliation' legislation. It has not worked out as we had hoped."

"All participants, Iraqi and coalition alike, are dissatisfied by the halting progress on major legislative initiatives," he said.

The Bush administration boosted troop levels -- now at 168,000 --- as part of a strategy to improve security and allow Iraqi politicians time to advance legislation seen by Washington as critical to long-term stability.

CONGRESS AWAITS REPORT

Petraeus is due to deliver his long-awaited assessment of progress under that plan next week when he appears before congressional committees starting on Monday.

The general's report will fuel debate on Capitol Hill as lawmakers weigh whether to approve more funding for the war and as Democratic leaders argue Washington should start bringing home some of its troops.

The New York Times reported on Thursday that Petraeus told President George W. Bush he wanted to maintain heightened troop levels in Iraq well into next year but could accept the withdrawal of about 4,000 troops starting in January.

He also is expected to discuss what senior military and defense officials call the "natural" course of the "surge," meaning the gradual reduction of troop levels starting in April due to the availability of U.S. forces.

Petraeus, in the letter, did not reveal what he would tell lawmakers.

He said his assessment and recommendations would reflect the strain on U.S. forces from multiple and extended deployments and the challenges that remain.

"I will go before Congress conscious of the strain on our forces, the sacrifices that you and your families are making, the gains we have made in Iraq, the challenges that remain, and the importance of building on what we and our Iraqi counterparts have fought so hard to achieve."

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