DAYTON, Ohio (Reuters) - U.S. President George W. Bush praised Iraqi Prime Minister Nuri al-Maliki on Thursday for launching a "tough battle against militia fighters and criminals" in the oil city of Basra, citing it as evidence Baghdad is taking advantage of security gains by U.S. forces.

"Prime Minister Maliki's bold decision, and it was a bold decision, to go after the illegal groups in Basra shows his leadership and his commitment to enforce the law in an even-handed manner," Bush said. "It (Frankfurt: A0MLX5 - news) also shows the progress the Iraqi security forces have made during the surge."

The Iraqi government launched a major military operation in Basra on Tuesday, targeting districts of the city where the Mehdi Army militia of prominent Shi'ite cleric Moqtada al-Sadr has a strong presence.

The violence has killed more than 130 people and sparked angry protests and violence in Baghdad, including the Sadr City slum named after Sadr's father.

Bush's speech, at the National Museum of the U.S. Air Force in Dayton, Ohio, was one of a series of public addresses he has delivered in defence of the 5-year-old war ahead of congressional testimony and an administration decision next month on the way forward in Iraq after last year's increase in the number of U.S. forces in Iraq.

Iraq commander Gen. David Petraeus will give a status report to Congress in early April. The military will complete the withdrawal of about 20,000 troops by July, leaving about 140,000 in Iraq, approximately the same number as before last year's reinforcements, known as the surge.

Despite public pressure to bring more troops home from the unpopular war, Bush has said any decision would depend on recommendations from commanders on the ground and has warned the security gains could easily disappear if Iraq is not ready to assume more control.

He cited the Basra fighting as evidence Iraqi security capabilities are growing, saying Iraqis planned the campaign, were leading it and were providing extra troops for it.

"As we speak Iraqis are waging a tough battle against militia fighters and criminals in Basra, many of whom have received arms and training and funding from Iran," Bush said in his speech, which he said was "an update on the historic work our nation is undertaking in Iraq."

Bush also cited what he said were other gains from the reduced violence caused by the surge.

"Less visible are the political and economic changes taking place, from major pieces of legislation being passed to simple signs of normalcy. This progress isn't glamorous, but it is important," Bush said.

(Writing by David Alexander; editing by Mohammad Zargham)