Iraqis stand at the site of an explosion in the Amin neighborhood of eastern Baghdad, Iraq Thursday, July 12, 2007 where U.S. troops and militants clashed. An Iraqi photographer and driver employed by Reuters news agency were killed while in the area, the London-based agency said. The victims were identified as photographer Namir Noor-Eldeen, 22, and driver Saeed Chmagh, 40, but the circumstances of their deaths were unclear. [AP]

Seven gunmen also died in the fight, a rare open street battle between American troops and policemen. Washington has demanded the government purge its police force of militants, and U.S. and Iraqi authorities have arrested officers in the past for militia links. But the Bush administration said in an assessment Thursday that progress on that front was "unsatisfactory."

The lieutenant was captured before dawn in eastern Baghdad, but the soldiers came under "heavy and accurate fire" from a nearby Iraqi police checkpoint, as well as intense fire from rooftops and a church, the military said in a statement.

As the Americans fired back, U.S. warplanes struck in front of the police position, without hitting it directly, "to prevent further escalation" of the battle, it said. There were no casualties among the U.S. troops, but seven gunmen and six of the policemen firing on the Americans were killed, the statement said.

The captured lieutenant was a "high-ranking" leader of a cell suspected of helping coordinate Iranian support for Shiite extremists in Iraq as well as carrying out roadside bombings against mortar attacks on U.S. and Iraqi forces, the military said. The lieutenant is believed to be linked to the Quds Force, a branch of Iran's elite Revolutionary Guards, it said.

A spokesman for the Iraqi Interior Ministry, which controls the police, said he had no immediate information on the clash and refused to comment.

The U.S. military accuses Iran's Quds Force of organizing Shiite militants into so-called "special groups" and arming them with weapons and explosives ¡ª including a particularly deadly form of roadside bombs called explosively formed penetrators. Iran denies the claims.

Infiltration by Shiite militias is pervasive in the Iraqi police, fueling a deep mistrust of the force among Iraq's Sunni Arab minority, who often accuse policemen of involvement in kidnappings and slaying of Sunnis ¡ª or at least ignoring them.

Friday's raid came amid a nearly month-old security crackdown in Baghdad by U.S. forces targeting Shiite militias and Sunni insurgents. A day earlier, U.S. troops battled militiamen in east Baghdad's Amin district in a fight the military said killed nine insurgents and two civilians ¡ª both Iraqi employees of the London-based Reuters news agency.

Iraqi police and hospital officials put the death toll higher, at 19, saying a woman and two children were among the dead.

The U.S. offensive in Baghdad ¡ª and parallel ones to the north and south ¡ª have brought a relative easing in attacks in the capital in recent weeks ¡ª though it remains far from calm, with occasional car bombs and police still reporting 20 to 30 bodies a day found dumped in the city, apparent victims of sectarian slayings.

On Friday, a volley of at least four mortars were fired from the city's dangerous southern districts at the Green Zone, the heavily fortified district where al-Maliki's offices and the U.S. Embassy are located. The mortars hit near the home of a senior Iraqi military official, killing two Iraqi soldiers, an Iraqi army official said, speaking on condition of anonymity because he was not authorized to release the information to the press.

There was no immediate word from American authorities on casualties. It would be the second time in a week that mortar fire into the Green Zone ¡ª nearly a daily occurence ¡ª has caused deaths. A heavy barrage Tuesday night killed three people, including an American.

The U.S. crackdowns ¡ª which began in mid-June, backed by an extra 28,000 troops sent this year ¡ª aim to pacify Baghdad and allow the govermnent to pass key laws intended to sway Sunnis away from the insurgency to support the political process.

But an interim report issued Thursday by the Bush administration showed only spotty progress, fueling claims by critics in Congress that the Iraqi strategy is failing. President Bush said it was too early in the strategy to judge and has vowed to veto a measure passed by Thursday by the Democratic-controlled House of Representatives to withdraw U.S. troops by spring 2008

A top adviser to Iraqi Prime Minister Nouri al-Maliki complained that Bush supporters and opponents in Washington "will both blame Iraqis" for the shortcomings.

Sami al-Askari said the government was serious about the measures. "From now until the end of the year, draft laws related to national reconciliation will be finished," al-Askari told U.S.-funded Alhurra television late Thursday.

But the benchmarks ¡ª including one to share control of the oil industry and its profits ¡ª have been held up for months by wrangling between Shiite, Sunni and Kurdish members of al-Maliki's coalition.

The even tougher benchmark of amending the constitution ¡ª which many Sunni Arabs see as paramount ¡ª has been relegated to a parliament committee. Sunnis want to blunt the constitution's provisions on federalism, but Kurds and Shiites want only limited changes.

At the same time, al-Maliki's administration has been severely weakened by a Sunni Arab boycott of his Cabinet and parliament over separate disputes.

President Jalal Talabani said there were "positive developments on the political level," particularly in the effort to reshape the Cabinet to establish "a front of moderate forces committed to the politial process and democracy in Iraq."

He also said the military offensives being waged by U.S. troops in and around Baghdad were making progress. "A successful campaign is on to eliminate terrorists and so far large areas of Diyala and Anbar have been cleared," Talabani said Thursday evening, referring to provinces north and west of the capital.