According to senior US officials, details of the blueprint are still being revised. The plan is to be presented to Prime Minister Nuri Kamal al-Maliki before the end of 2006 and would be carried out over 2007 and beyond.

Iraq is likely to be asked to agree to a schedule of specific milestones, like disarming sectarian militia, and to a broad set of other political, economic and military benchmarks intended to stabilize the country.

Although the plan would not threaten Maliki with a withdrawal of American troops, several officials said the Bush administration would consider changes in military strategy and other penalties if Iraq balked at adopting it or failed to meet critical benchmarks within it, The New York Times website reported.

"If the Iraqis fail to come back to us on this, we would have to conduct a reassessment" of the American strategy in Iraq, a senior Pentagon official involved in drafting the blueprint said.

The plan is being formulated by General George W Casey Junior and Ambassador Zalmay Khalilzad, the top military and civilian officials in Iraq, as well as by Pentagon officials, the report said.