They can stand with Annan but may not take a seat
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The UN's envoy to Iraq has said the Governing Council (GC) appointed this month in Baghdad is broadly representative and a first step towards restoring a government.
Sergio Vieira de Mello was presenting a report on the situation in Iraq to the Security Council.
Introducing his envoy, UN Secretary General Kofi Annan called for an early end to the military occupation and a clear timetable for restoring full sovereignty.
GC delegates invited to Tuesday's meeting in New York expressed disappointment that they had not been allowed to occupy Iraq's vacant seat at the UN.
The BBC's diplomatic correspondent, Barnaby Mason, says the US and Britain had been seeking UN endorsement of the GC and they got it.
British officials hope this mark of international legitimacy will make it easier for Arab governments to come forward to help the reconstruction of Iraq.
But France and Germany - leading opponents of the war - made clear that financial
support for reconstruction would only be forthcoming if international agencies had a say in how it would be spent.
'Broadly representative'
"Our collective goal remains an early end to the military occupation through the formation of an internationally recognised, representative government," said Mr Annan, introducing the report.
Mr Vieira de Mello said there was widespread support in Iraq for the UN to be given a strong role in bringing about a democracy.
He said the recent establishment of the "broadly representative" Iraqi Governing Council, whose members were chosen by the US-led coalition running the country, was a "significant step towards that goal".
The governing council will appoint a constitutional council whose tasks will be to draw up a new Iraqi constitution and set a date for elections.
On security, Mr Vieira de Mello's report offers the US assistance on issues such as clearing landmines but rules out the possibility of a UN police force working side-by-side with US troops.
German Ambassador Gunter Pleuger and his French
counterpart, Jean-Marc de la Sabliere, called for a
multilateral fund which would receive financial contributions towards rebuilding Iraq.
One day...
Three members of the GC - Adnan Pachachi, Ahmed Chalabi and Aquila al-Hashimi - were invited to the Security Council session in New York.
But despite the invitation and an earlier meeting with Mr Annan, the GC was not asked to take up the seat once occupied by Saddam Hussein's ousted regime.
"We look forward to the day when the UN Security
Council will see the governing council representatives as Iraq's representatives at the UN," Mr Chalabi told reporters after Tuesday's session.
However, an unnamed UN diplomat told AFP news agency that there had never been "any question that the delegation would be allowed to occupy the Iraqi seat and the issue was never brought up".
The BBC's David Bamford in New York says there is a sense at UN headquarters that it is now trying to regain the initiative, partly to reaffirm its relevance.
Our diplomatic correspondent adds that one unresolved question is whether the US might seek a further mandate from the UN in order to persuade more countries to send troops to Iraq.
He says several countries - including India, Russia and France - have indicated they might take part if that happened.