Despite pressure on the UN to return senior officials to Iraq, Annan said in a report to the Security Council that the expatriate staff would go to Baghdad on special visits from the Cypriot capital of Nicosia, or from a smaller office in Amman, Jordan.
"I cannot afford to compromise the security of our international and national staff," Annan wrote in the 26-page report, to be released on Wednesday. The UN had withdrawn its foreign staff from Iraq last month following the 19 August bombing of UN headquarters in Baghdad that killed 22 people, including Annan's special representative, Sergio Vieira de Mello.
Annan appointed New Zealander Ross Mountain, a senior humanitarian affairs official, as director of the UN team in Iraq until a replacement for Vieira de Mello is found.
The Secretary General's report to the 15-member Security Council was the first comprehensive analysis of the situation in Iraq since July, and raised as many questions as it answered.
He said he needed to ask himself in the coming months whether any future role allocated to the United Nations was "proportionate to the risks we are being asked to take, whether the political process is fully inclusive and transparent and whether the humanitarian tasks in question are truly life-saving or not."
A car bomb explosion wrecked the
UN offices in Baghdad last August
At the same time, Annan was aware that the United Nations would be the political face of the international community after the US-led occupiers hand over power to an Iraqi national government as scheduled in July.
He offered the extensive UN experience in organising elections, writing a constitution, setting up human rights bodies and continuing humanitarian aid in Iraq.
But he pointed out that "it would be important to have clarity both as regards what might be expected of us and about respective new possibilities."
During the transition period, he said, it would be helpful if US-led occupation authorities and Iraqi leaders could be specific in how the UN could be helpful.
In the meantime, he said the Cyprus office would be composed of about 40 political, human rights, public information, humanitarian, administrative and security officials.
"Failure to put the rebuilding of Iraq on a solid footing could have devastating consequences for the people of Iraq, the people of the region, and the international order as a whole"
This core team, to be set up next month, could be increased to 60 once a special representative is named.
Annan warned the United States and other military forces in Iraq against injuring defenceless civilians or raiding their homes, thereby encouraging support for insurgents.
He said those jailed - reported to be several thousands - should be protected under Iraqi laws and international conventions on the treatment of civilians under occupation.
"Failure to put the rebuilding of Iraq on a solid footing could have devastating consequences for the people of Iraq, the people of the region, and the international order as a whole," he said.