In a new report to the UN Security Council on Friday, Annan once again urges countries to contribute troops for a special force to guard UN staff in Iraq.
"Since December last year, the security environment in Iraq has not improved," Annan says.
"For the foreseeable future, the United Nations will remain a high-value, high-impact target for attack in Iraq."
So far there have been no firm commitments to the creation of the special force, despite pleas from many nations that the UN play a leading role in post-war Iraq.
"The UN Assistance Mission in Iraq and UN agencies and programmes will therefore continue to minimise administrative overheads and presence in Iraq by limiting their activities inside Iraq to the essential," Annan says.
The UN pulled out all foreign staff from Iraq in October following two bomb attacks on its offices in Baghdad. But a small team led by Annan's special representative Ashraf Jehangir Qazi is expected to return to Iraq shortly.
The Security Council this week will discuss the report and then renew the mandate for the UN mission.
The bulk of the UN staff at the moment is based in Amman while others operate from Kuwait, making occasional visits to Iraq.
Annan said despite the odds, local and international staff had managed to rehabilitate schools, start immunisation programmes, rehabilitate water treatment and power plants, procure food and help displaced people among other tasks.
One key activity has been helping to set up an election process for polls expected in January.