General Petraeus told a Pentagon news conference that his conclusion about the Karbala attack comes from the results of interrogations of the leaders of an Iraqi insurgent group affiliated with Iran called the Khazali Network.
"Iranian involvement has really become much clearer to us and come into much more focus during the interrogation of the members, the heads, of the Khazali Network and some of the key members of that network that have been in detention now for a month or more."
General Petraeus says the network received money and weapons from Iran, and that some of its members were trained inside Iran. He says a computer captured with some members of the organization contained a document proving its involvement in the Karbala attack, but he says there was no indication that Iranian agents were directly involved.
"We discovered, for example, a 22-page memorandum on a computer that detailed the planning, preparation, approval process and conduct of the operation that resulted in five of our soldiers being killed in Karbala."
In the January incident, insurgents attacked a building in Karbala. One US soldier was killed during the attack and four others were kidnapped. Three were later found handcuffed together and shot to death. The other had a bullet wound in his head and died as US forces were taking him to a hospital.
General Petraeus says the Iraqi group responsible for the attack is linked to Iran's elite Quds Force, which conducts special operations abroad. But he could not say whether senior Iranian leaders are involved in the Iraq operations.
"We do not, at least I do not, know of anything that specifically identifies how high it goes beyond the level of the Quds Force commander Soliman. Beyond that, it is very difficult to tell. We know where he is in the overall chain of command. He certainly reports to the very top. But, again, nothing that would absolutely indicate, again, how high the knowledge of this actually goes."
General Petraeus also criticized Syria for allowing foreign fighters to enter Iraq through its territory. He says the foreigners carry out 80 to 90 per cent of the suicide bombings in Iraq, which have killed hundreds of Iraqi civilians in recent weeks. The general says al-Qaida organizes those bombings, and he called the group "Public Enemy Number One" in Iraq.
In spite of the bombings, General Petraeus says some progress is being made toward establishing security in Iraq. He cited a sharp drop in sectarian killings in Baghdad, and increased cooperation from Sunni leaders, especially in al-Anbar Province. Still, he acknowledged that US and Iraqi casualties remain high and there is much work to do.
"Because we are operating in new areas, and challenging elements in those areas, this effort may get harder before it gets easier."
The general says the surge of US forces in Iraq will not be completed until mid-June, and he will not be able to make even a preliminary assessment of its success until September.
He said that assessment will be based on the security situation, but also on economic development, progress on key political issues and whether there are improvements in the Iraqi legal system. He also said Shiite militias must be brought under control for Iraq to have long-term stability.
General Petraeus tried to steer clear of the political debate in Washington, in which Congress, under the control of the Democratic Party, is trying to set a timetable for a US withdrawal from Iraq. But he did answer a question about what might happen in Iraq if a US withdrawal were to begin in October, as the Democrats want.
"My sense is that there would be an increase in sectarian violence, a resumption of sectarian violence, were the presence of our forces and Iraqi forces at that time to be reduced and not to be doing what it is that they are doing right now."
He said as bad as the situation in Iraq is now, it could get "much, much worse."
General Petraeus said Washington works on what he called an "American Clock" regarding the Iraq war, a clock that runs fast because of frustration over the length of the conflict and the number of US casualties. He said that, in Baghdad, what he called the "Iraqi Clock" runs more slowly because of the sharp political divisions.