Islamic State clinging on to shreds of 'caliphate': US

The Islamic State group has lost most of the land it once held in Iraq and Syria but hopes to cling to scraps of a self-declared caliphate, a US official said on Wednesday.

The militant group lost 65 percent of the land they'd seized across much of northern Syria and large parts of Iraq since its peak in the summer of 2014, the US defence official said.

But the official said he does not think that "they have given up on their vision of their caliphate yet," noting the group hopes to hold on to parts of eastern Syria and western Iraq.

"They still believe they can function and are still making plans to continue to function as a pseudo-state centered in the Euphrates River valley."

IS now is looking beyond the seemingly inevitable loss of their strongholds of Mosul in Iraq and Raqqa in Syria.

In Mosul, Iraqi security forces backed by Western air power have recaptured the eastern side of the city and are making gradual progress into the western side in a bloody fight.

Hundreds of thousands of civilians are believed to still be trapped under extremist rule in the Old City, where Abu Bakr al-Baghdadi proclaimed a "caliphate" in his only public appearance in July 2014.

The official said Baghdadi is no longer in Mosul, and the hunt for the enigmatic figure is being led by groups outside the US-led anti-IS coalition, including US special operations forces.

IS militants realise their days are numbered in Mosul and, despite having spent two years building defensive measures in Raqqa, also understand they will lose that bastion too, the official said.

"Logically, any of those leaders would look at that situation and say from a military perspective 'this may be not be tenable for us to hold,'" the official said.

"Raqqa would probably not be the final battle against ISIS... There is still ISIS in the rest of the Euphrates river valley downstream that will have to be dealt with," he said using an alternative acronym for the Islamic State group.

About 15,000 IS fighters remain in Iraq and Syria, including some 2,500 in Mosul and the neighbouring town of Tal Afar and as many as 4,000 still in Raqqa, the official said.