WASHINGTON (Reuters) - Iran poses a significant threat to the long-term stability of Iraq and continues to support violent Shi’ite militias opposed to the Baghdad government, the Pentagon said on Tuesday.

“Despite persistent promises to the contrary, Iranian behavior continues to reflect a fundamental desire to oppose the development of a fully secure and stable Iraq,” the U.S. Defense Department said in its latest report to Congress on progress in Iraq.

The strongly worded 68-page report said Iran continues to host, train, fund, arm and direct militant groups intent on destabilizing Iraq and warned that Tehran would try to use Iraq’s provincial elections on January 31 to expand its influence through pro-Iranian candidates and parties.

“Countering malign influence and balancing soft Iranian influence remain priorities to stabilize Iraq and ensure the sovereignty of its people,” the Pentagon said in the quarterly report, titled: “Measuring Stability and Security in Iraq.”

It reiterated charges by U.S. military officials that Iran had tried to derail a status of forces agreement allowing U.S. troops to remain in Iraq. The pact was ratified by Iraq’s presidency council in December.

The Pentagon released the report on the same day that President-elect Barack Obama’s pick for secretary of state, Hillary Clinton, told the Senate that the Obama administration would take no options off the table in dealing with Iran.

The presence of 142,000 U.S. troops in Iraq has long been a source of tension with neighboring Iran, which Washington separately accuses of seeking nuclear arms in the guise of a civilian energy program. Iran denies that allegation.

President George W. Bush and top U.S. defense and military officials have also charged Shi’ite-dominated Iran with supplying roadside bombs capable of penetrating U.S. armor to Shi’ite militias in Iraq. Tehran also denies that accusation and blames lingering violence on the U.S. troop presence.

CIVILIAN DEATHS DOWN SHARPLY

Both U.S. and Iraqi officials have said recently that Iran appeared to be making a conscious effort to restrain Iraqi Shi’ites from carrying out attacks on U.S. and Iraqi forces.

The new report, which focuses on developments in Iraq from September through November 2008, said incidents involving the munitions known as explosively formed penetrators, or EFPs, have fallen to the lowest rate since early 2006 over the past few months.

The report said civilian deaths in Iraq were down 63 percent from a year earlier but noted an increase in assassinations, including al Qaeda attacks on Sunni leaders in Anbar province.

It also warned that progress could be halted or even reversed by the mishandling of challenges including upcoming elections, the transition of former Sunni militants to permanent employment, internal boundary disputes and the settlement of people displaced by years of warfare.

“The lack of essential services has now replaced security as the most important concern in the minds of most Iraqis, many of whom are not satisfied with the quality or availability of food, clean water, electricity, sewage services and health care,” the document said.