(CBS) International terrorist attacks declined sharply in 2002 and the number of anti-U.S. attacks dropped as well, the State Department reported Wednesday.

The United States again branded seven countries — Cuba, Iran, Iraq, Libya, North Korea, Syria and Sudan — as sponsors of terrorism.

Despite the drop-off, Secretary of State Colin Powell said "we cannot relax our efforts, our resolve, our vigilance."

In releasing the annual report, Powell said that "with every passing month the campaign has intensified," and that for terrorists still on the loose "life has become harder."

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

Iraq's ties to terror groups, which the Bush administration cited as one of its reasons for going to war to remove President Saddam Hussein, included laying the groundwork for possible attacks on the United States and other Western countries, the 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.

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.

In 2002, there were 199 terror attacks worldwide, a drop of 44 percent from the 355 attacks recorded in 2001. A total of 725 people were killed last year, far below the 3,295 — including thousands in the Sept. 11 attacks in New York, Washington and Pennsylvania — who died in 2001.

Attacks on the United States declined from 219 to 77. The drop was due mainly to a falloff in pipeline bombings in Colombia — from 178 to 41.

The report praised Italy for "exemplary work against terrorism," citing prison sentences for members of a Tunisian group that marked "the first conviction of al Qaeda associates in Europe" since the Sept. 11, 2001, attacks.

The report said Spanish police, working with their French counterparts, "continued to score substantive success" against Basque separatist groups.

In addition to the joint Spanish-French efforts, the State Department said, France, Belgium and Britain and others were involved in the investigation of Richard Reid, convicted in February of attempting to light explosives in his shoes aboard a Paris-to-Miami flight.

The report said Germany continued to investigate extremists associated with the al Qaeda Hamburg cell that supported the Sept. 11 hijackers.

Thirty 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 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 in October which killed 202 people, mostly foreign tourists, was the deadliest terror attack 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.

The evil of terrorism continues to plague the world, but Afghanistan was liberated from Taliban rule and al Qaeda expelled as "the global war against terrorism was waged intensively with encouraging results," said Cofer Black, coordinator for counterterrorism at the State Department.

"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."

More than 165 countries have issued orders freezing more than $121 million in terrorist-related financial assets, the report said.

The seven countries listed as sponsors of terror are banned from receiving U.S. weapons, barred from U.S. economic aid, and effectively prevented from receiving World Bank loans.