WASHINGTON -- Iran continued to be the "foremost state sponsor of terrorism" in 2016, with groups supported by the country maintaining their ability to threaten the United States and its allies, a new report by the U.S. State Department says.

The report released on July 19 also noted that the Islamic State (IS) militant group, which it blamed for multiple attacks and "atrocities," was rapidly losing ground in Iraq and Syria, but it warned that fighters returning home could pose risks for countries in Central Asia and the Balkans.

The Country Reports on Terrorism has been issued annually since 2004 under a mandate that requires the State Department to provide Congress with regular updates on terrorism throughout the world.

The report took aim at Iran in a time of heightened tensions between Tehran and the United States, which has long accused Iran of sponsoring international terrorism and destabilizing the region. Iran has also been targeted by U.S. sanctions over its weapons programs and human rights violations.

Iran denies it supports terrorism or that it is seeking nuclear weapons.

'Destabilizing Role'

The State Department report said that "terrorist groups supported by Iran -- most prominently Hizballah -- continued to threaten U.S. allies and interests even in the face of U.S.-led intensification of financial sanctions and law enforcement."

It said the Iranian Islamic Revolutionary Guards Corps and Iranian "partners, allies, and proxies" were playing a "destabilizing role in armed conflicts in Iraq, Syria, and Yemen."

The report accused Iran of recruiting fighters "from across the region to join Iranian affiliated Shi'a militia forces engaged in conflicts in Syria and Iraq, and has even offered a path to citizenship for those who heed this call."

The State Department called Sunni-led IS and its eight recognized branches as the "most potent terrorist threat to global security."

It noted, though, that the extremist group had been driven out of a quarter of its territory once held in Iraq and Syria at the beginning of the year by a U.S.-led coalition of differing forces and that the losses have continued in 2017.

The report said that, with improved border security, IS has been unable to replenish its forces in the country after its heavy battlefield losses.

Still, the report said, IS remained a threat to global security.

The extremist group's "attacks outside its territorial strongholds in Iraq, Syria, and Libya were an increasingly important part of its terrorism campaign in 2016, with most of the attacks in Afghanistan, Egypt, Saudi Arabia, and Yemen, it said.

IS "continued to commit atrocities against groups in areas under its control, including Yazidis, Christians, Shi'a Muslims, Sunni Muslims, Kurds, and other groups," the report said.

Homecomings Spark Concern

For Central Asia and the Balkans, the report highlighted the danger of "terrorists" returning home after fighting with extremists as territory controlled by the groups in Iraq and Syria rapidly declines.

It cited figures showing that about 1,000 Tajik citizens have joined IS and other extremist groups in Iraq and Syria.

But it also warned that some countries are facing risks of attack by domestic extremists.

In Kazakhstan, "the government has long feared the potential return of foreign terrorist fighters from Iraq and Syria, but attacks [in June and July] refocused government attention on home-grown violent extremists."

Highlighting the difficulties in battling extremism, the report cited analysts as saying the government's "repressive approach" to countering the risk "could backfire."

It also warned of threats of extremist violence in Kosovo and Bosnia-Herzegovina because of returning fighters and funding by "foreign organizations."

Mixed Conclusions On Russia

The State Department offered mixed conclusions regarding Russia's efforts against terrorism and cooperation with others in fighting international extremism.

It said Russia "continued to disseminate threat information and occasionally responded to requests for information, although its responses were often not substantive or timely."

It criticized Russia's adoption of the so-called "Yarovaya" package in 2016, containing a series of legislative amendments which authorities said were designed to combat terrorism.

The amendments give "authorities broad additional powers, ostensibly to counter terrorism and extremism" but mainly "targeted the unsanctioned religious activities of minority Christian denominations," the report said.