NEAR FALLUJAH, December 18, 2004 (AFP) - The US military cannot recommend to the Iraqi interim government the return of residents to Fallujah, where insurgents are still holed out in the battle-scarred city.

"At some point we'll make a recommendation, we haven't reached that point," Lieutenant Colonel Dan Wilson, a deputy commander of the First Marine Expeditionary Force, told reporters in a military base near Fallujah late on Friday.

Thousands fled Fallujah last month ahead of a massive US-led onslaught to wrest control of the city from Sunni Muslim insurgents and the fighting has left much of it in ruins.

The Iraqi interim government said on Thursday that residents could begin returning to the city, west of Baghdad, as early as next week, saying that basic services and aid had been restored.

But US Marines, backed by a small Iraqi force, are still trying to crush the remaining insurgents holed up in the city.

"We foresaw that in this phase of the operation it could take weeks to clear out the remaining pockets (of insurgents). We did anticipate such difficulties ... but we never tied this to a timeline," the officer said.

"There is a lot of potential for danger in this town," he added.

"Unfortunately the insurgents are not cooperating like we would like them too, and we have to either capture them or kill them," he said.

Iraq 's interim minister of Industry and Mineral Resources Hajem al-Hassani told AFP on Friday that Fallujah's displaced residents "could return before the end of the month".

He also played down the impact of fighting in the city, describing it as "small confrontations".

Wilson said the marines "would really like to see it (the return) happen as quickly as possible.

"But not at the risk of the lives of the citizens and inhabitants of Fallujah."

But he added: "This transition is not going to happen overnight."

Some US officers complained that the recruitment of Iraqi troops was moving at a slow pace and that the quality of the forces was not up to par.

But according to Major Jim West of the First Marine Expeditionary Force "every day that goes by, the Iraqi national forces are getting better, stronger, and in parallel the Iraqi insurgents are getting weaker."

West and Wilson insisted however that fighting that broke out Friday in Fallujah, which left six marines dead, was not an example failure.

"We are not talking of a setback, but just about insurgents hiding in houses for a chance to kill a soldier," Wilson said.