Secretary of State Colin Powell on Wednesday delivered good news for countries aiming to defeat terrorism, but bad news for terrorists.

The State Department released its annual report "Patterns of Global Terrorism: 2002," (search) which said last year there were 199 terror attacks worldwide, a drop of 44 percent from the 355 attacks recorded in 2001.

"I'm pleased to report that unprecedented progress has been made across the international community. Nations everywhere now recognize that we are all in this together. None of us can combat terrorism alone. This global threat demands a global response. Concerted action is essential, and together we are taking that concerted action," Powell (search) said.

Powell said that many potential terrorists have been jailed as a result of their arrests following the Sept. 11 terror attacks (search), and more countries have started paying attention to terrorists in their midst.

"It is harder for terrorists to find safe haven," Powell said, adding that many "financial bloodlines" to terrorist networks have been severed.

A total of 725 people worldwide were killed last year in terror attacks, far below the 3,295 -- including thousands in the Sept. 11 attacks in New York, Washington and Pennsylvania -- who died in 2001.

Attacks on U.S. interests declined from 219 to 77. The drop was due mainly to a falloff in pipeline bombings in Colombia -- from 178 to 41.

The United States once again branded seven countries as sponsors of terrorism: Cuba, Iran, Iraq, Libya, North Korea, Syria and Sudan. As members of the list, the countries are banned from receiving U.S. weapons, barred from U.S. economic aid and effectively prevented from receiving World Bank loans.

The report said that Iraq's ties to terror groups included plans for possible attacks on the Untied States and other Western countries. The ties were cited by the Bush administration as one of its reasons for going to war to oust President Saddam Hussein.

The State Department coordinator for counterterrorism Ambassador Cofer Black said that Powell has sent to President Bush a recommendation that Iraq be removed from the list of terror-sponsoring nations now that there is no longer a government supporting terrorism. 

However, a government must be in office in Iraq in order for the state to be removed from the list. Black said Bush, who makes the final decision, will likely seek congressional input before making that decision.

More than $144 million in terrorist assets have been frozen by 165 countries since the Sept. 11 terrorist attacks in 2001, Powell said, and states that sponsor terrorism are "under international pressure."

But "terrorism still casts its grim shadow across the globe," he warned. "We cannot relax our efforts, our resolve, our vigilance."

Iran was designated the most active supporter of terrorism, with its supreme leader, Ayatollah Ali Khamenei. Referring to Israel as a "cancerous tumor," Iran's Islamic Revolutionary Guard Corps and Ministry of Intelligence and Security have lent assistance to Lebanese Hezbollah and Palestinian militant groups including Hamas, the annual report said.

Syria, which Powell is due to visit this week, permits some terror groups to maintain headquarters or offices in Damascus and helps Iran supply Hezbollah via Damascus, the report said.

But the Syrian government insists the offices are involved only in political and informational activities, the report said.

The White House has alleged that Syria not only has been producing chemical weapons but is providing safe harbor to Iraqi regime leaders seeking a hiding place from the coalition forces hunting them down.

Powell has said he would talk to President Bashar Assad about Syria's support for terror and U.S. allegations that it helped Iraq with military technology and did not stop Syrian fighters from joining the war against the U.S.-led coalition.

According to the State report, 30 U.S. citizens, including seven at a resort in Bali, Indonesia; five at Hebrew University in Jerusalem; and Daniel Pearl, the Wall Street Journal's South Asia bureau chief in Pakistan, were killed in 2002.

The American victims also included a hiker and a missionary in the Philippines; two American diners in a West Bank pizzeria; two attending church services in Islamabad, Pakistan; three people at a missionary hospital in Yemen; and Laurence Foley, an administrator of the U.S. Agency for International Development in Jordan.

The bombings in Bali (search) in October which killed 202 people, mostly foreign tourists, were the deadliest terror attacks since the Sept. 11 attacks in the United States.

In Africa, simultaneous attacks on a commercial airliner and a hotel in Mombasa, Kenya, in November were cited as dramatic evidence that sub-Saharan Africa continues to suffer from terror.

For the first time, Greece arrested members of the deadly November 17 group (search), the State Department said, in a significant step against domestic terrorism.

Despite the plagues terrorists lay on the world, Afghanistan was liberated from Taliban rule and Al Qaeda expelled as "the global war against terrorism was waged intensively with encouraging results," Black said.

"Al Qaeda terrorists are on the run, and thousands of them have been detained," he said in a statement. "More than one-third of Al Qaeda's leadership has been killed or captured."

Fox News' Teri Schultz and The Associated Press contributed to this report.