(Corrects paragraph 10 of Aug. 31 story to show the reference to a 75 percent reduction in killings referred only to Baghdad and compared August with last December, in line with a clarification issued by the newspaper) CANBERRA, Aug 31 (Reuters) - The U.S. troop surge in Iraq has thrown al Qaeda off balance and led to a reduction in sectarian violence and bombings, the U.S. commander in Iraq was quoted on Friday by an Australian newspaper as saying. "We say we have achieved progress, and we are obviously going to do everything we can to build on that progress and we believe al Qaeda is off balance at the very least," General David Petraeus told the Australian in an interview after briefing Australia's defence minister, Brendan Nelson, in Baghdad. Petraeus and U.S. ambassador Ryan Crocker will testify before the U.S. 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. Bush urged coalition allies to make pullout decisions based on security conditions on the ground. "Failure in Iraq would lead to, in my judgment, turmoil, chaos in the Middle East, and other attacks on the United States and other nations," Bush told Sky News Australia in an interview broadcast on Friday ahead of the next week's 21-member Asia-Pacific leaders summit in Sydney. "What matters is success and I believe we can be successful." Bush said two forms of extremism had converged on Iraq, counting Sunni extremists inspired by al Qaeda and Shi'ite extremists fostered by Iran. "We need all our coalition partners. Whether it be Afghanistan or Iraq, we've got more work to do, the free world has got more work to do." Petraeus told the Australian that there had been a 75 percent reduction in religious and ethnic killings in Baghdad, comparing August with last December, while the number of al Qaeda "kills and captures" was on the rise. Coalition deaths from roadside bombings were also declining since Bush sent an extra 30,000 troops to Iraq, he said, according to the newspaper. Nelson said he had received a frank assessment of progress during a 90-minute meeting with Petraeus and said "the message is that this is achievable". The meeting came as 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. Nelson planned to write to Iraqi Prime Minister Nuri al-Maliki about the paralysis in his administration and warn him that the "patience of open-hearted Australians should not be excessively tested". Australia, a close U.S. ally, was an original coalition member in Iraq and still has around 1,500 troops in and around the country, although with a election looming and support for the war low, the government is under pressure to withdraw. A survey by the foreign policy think tank Lowy Institute this week found 57 percent of Australians believed the country should not continue to have troops in Iraq, while 37 percent said Australian troops should remain. Australia's Labor Party opposition, ahead in opinion polls with elections due by the end of the year, has said it would withdraw about 500 combat troops from Iraq if it wins power.
