Jakarta – The US Embassy here is now full of praise for Indonesia's fight against terrorism, in a marked departure from the sharp criticism levelled by US officials at the government here for nearly two years.

After denying there was a terrorist threat here and calling travel warnings alarmist, the Indonesian police in recent months have rounded up more than two dozen suspected terrorists, including several men thought to be senior operatives of Al-Qaeda in South-east Asia.

The police have also increased security at the US Embassy and at residences of American diplomats.

"Progress on every one of our benchmarks has been extraordinary," US Ambassador Ralph Boyce said in a letter last week to American diplomats.

While Americans at home have been warned to buy duct tape and bottled water to prepare for terrorist attacks, Mr Boyce wrote that "there has been no new credible threat information against the official American community" in Indonesia for nearly two months.

A copy of the letter was provided to The New York Times by a recipient.

Mr Boyce wrote that he and his staff believe that the security situation here has "so dramatically improved" that it would be appropriate to allow the families of American diplomats to return. They were ordered out of the country after an attack on two nightclubs in Bali last October.

There is one sticking point, however – the increased possibility of a war with Iraq.

"The prospect of war with Iraq casts a cloud of uncertainty on our situation that warrants extreme caution," Mr Boyce wrote. "Previously friendly, moderate leaders have warned that war might unleash an enormous anger against the American community that could turn violent," he wrote.