"The restoration of sovereignty is essential for stability and the United Nations is committed to doing whatever it can to help the people of Iraq to resume control of their destiny, to maintain their unity and territorial integrity, and to form a legitimate, democratic government based on the rule of law," Annan said in a speech to Japan's parliament on Tuesday.
The United Nations withdrew all its international staff from Iraq at the end of October, after two bombings of its Baghdad headquarters. The first, on August 19, killed 22 people including the chief of mission, Sergio Vieira de Mello.
"For the UN staff to go back in larger numbers and establish themselves, which we are prepared to do, the security condition must improve," Annan later told a news conference.
"Otherwise I risk repeating the experience of 19 August."
Annan, who arrived in Japan on Saturday for a five-day visit, said in a report issued in New York on Monday Iraq needed to set up an independent election commission immediately if it wanted fair elections before the end of the year.
But the report warned elections would probably not be possible until next year in the turbulent country.
The report, written by a UN electoral team, said Iraqis themselves doubted if electoral laws and institutions could be set up before May, after which at least eight more months would be needed before polls could be held.
The report did not make any recommendation on the key question of how Iraqis would select a caretaker government once the US-led occupation ends on June 30.
"Unfortunately, credible elections cannot take place by 30 June 2004," Annan said in his speech to parliament.
"Therefore, it is necessary for Iraqis to agree on an interim mechanism, to which sovereignty can be transferred and which can carry out essential functions during the time needed to prepare for and hold elections in the best possible conditions."
"The people of Iraq and others must see us for what we are - an impartial and independent world body, with no other agenda than to help their country at a time of need"
Annan reiterated the United Nations was willing to offer advice and help in organising elections once an interim government had been established.
"As we undertake this work, it will be essential for the United Nations to retain a clear, separate identity," Annan said.
"The people of Iraq and others must see us for what we are - an impartial and independent world body, with no other agenda than to help their country at a time of need," he added.