Kurdish people watch smoke billowing from Kobane as they gather upon a hill overlooking the Syrian town on October 15, 2014.

The Islamic State (IS) group “has made substantial gains in Iraq” despite US-led airstrikes against the Islamic militants, Washington's envoy to the international coalition fighting the jihadist organisation warned Wednesday.

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Although Iraqi government and Kurdish forces had succeeded in halting or pushing back the IS militants in some key battles including around Mosul dam, the group had "tactical momentum" in other areas, John Allen, a retired four-star US general, told reporters.

Allen also said it will take time to build up local forces that could defeat IS in Syria and Iraq, where the group has conquered vast swathes of territory.

Although the United States and its allies were carrying out air raids in both Syria and Iraq, Allen acknowledged the international coalition was most concerned with the situation in Iraq.

There, IS fighters have seized much of the western Anbar province and are closing in on the region west of the capital Baghdad.

"The emergency in Iraq right now is foremost in our thinking," Allen said, admitting that it was too early to say which side has the upper hand.

"I'd be careful about assigning a winner – winner or a loser," said Allen, the former commander of NATO forces in Afghanistan.

Speaking after a tour of the Middle East in which Allen spoke to coalition partners and Iraqi leaders, the presidential envoy emphasised that military power alone would not be enough to defeat the IS group – a point often made by the White House.

The goal was to give Iraq's new Prime Minister Haidar al-Abadi "the opportunity to build a stable government that is inclusive", said Allen.

US officials have repeatedly urged Baghdad to reach out to Iraq's alienated Sunni population and blame the Shiite-led government for sowing resentment that has been exploited by the jihadists.

‘Kobane could still fall’

Meanwhile, fighting continued to rage on Wednesday in the city of Kobane on the Syria-Turkey border, where Kurdish fighters have been defending the city from repeated IS attack for nearly a month.

On Wednesday, Kurdish fighters - backed by a flurry of US-led airstrikes - were reported to have stopped IS fighters from gaining more ground and had even recaptured some positions.

US Central Command said American aircraft struck the jihadists with 18 raids near Kobane on Tuesday and Wednesday, hitting 16 buildings occupied by the group.

Allen said the US had been carrying out airstrikes on IS positions in the city for “humanitarian” purposes.

“Clearly ... given the circumstances associated with the defence of that town, there was a need for additional fire support to go in to try to relieve the defenders and to buy some white space, ultimately, for the reorganisation on the ground,” he added.

The Pentagon said Wednesday “several hundred” jihadist fighters in and around Kobane had been killed by US-led airstrikes, but warned the IS group could still seize the besieged Syrian town.

"We believe that we have killed several hundred (IS) fighters in and around Kobane," Pentagon spokesman John Kirby told reporters.

"Kobane could still fall, it could very well still fall," Kirby added.

Allen, who is in charge of building the coalition against Islamic State, declined to be drawn on whether Turkey might allow coalition aircraft to use Incirlik Air Base for strikes against the militant group.

He was not asked directly whether Syrian Kurds were giving the coalition targeting information for their strikes around Kobane, as Kurdish officials say, but he suggested the United States was open to getting information from anywhere.

“Obviously, information comes in from all different sources associated with providing local information or potentially targeting information. And we’ll take it all when it comes in. It’s ultimately evaluated for its value,” he said.

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