Chief inspector Demetrius Perricos raised a series of issues that members need to address in considering whether to wrap up the operation of the UN Monitoring, Verification and Inspection Commission or change its mandate.
But he also argued that UN inspectors could still play an important role, UN diplomats said.
"What seems clear now is that the idea that the mandate should be revisited is now becoming a reality," Brazil's UN ambassador Ronaldo Mota Sardenberg, the current council president, said after the meeting. "So this is a next step for the council."
But when this might be taken up is unclear.
Sardenberg said it was "very hard" to give a timetable, saying it would be good to wait for a permanent Iraqi government to be elected under a new constitution, which is expected in December.
Meanwhile, he said, members need to prepare by addressing the issues relating to inspections such as verification and certification that Iraq's weapons of mass destruction programmes have been dismantled.
"This is a complex process that is starting," Sardenberg said. "It doesn't mean that it will start only by the end of the year. It should start earlier than that."
Iraq funding UN
The interim Iraqi government has been waging a public campaign to stop using Iraqi oil revenue to finance the commission, known as UNMOVIC, which is responsible for eliminating Iraq's alleged biological, chemical and long-range missile programmes.
It wants to do the same with the International Atomic Energy Agency, which is responsible for getting rid of its alleged nuclear programme.
"The idea that the mandate should be revisited is now becoming a reality"
Ronaldo Mota Sardenberg, Brazil's UN ambassador and current council president
In a letter to council members before Tuesday's meeting, Iraq's UN ambassador Samir Sumaidai said Iraq's oil revenue is being used to fund two bodies "which have become irrelevant" - at a cost of more than $12 million annually for UNMOVIC and $12.3 million over the next two years for the IAEA.
He asked the council to transfer about $400 million of Iraq's oil money still in UN accounts to the country's development fund to be used for reconstruction and to address the immediate needs of the people.
UN inspections were initiated after the 1991 Gulf war in which invading Iraqi forces were ousted from Kuwait.
US barred UN inspectors
UNMOVIC and IAEA inspectors left Iraq just before the March 2003 US-led invasion of Iraq, and the US has barred them from returning.
But US teams continued the search and in a 6 October report, chief US arms inspector Charles Duelfer said his Iraq Survey Group found no weapons of mass destruction in the country, discrediting President George Bush's stated rationale for invading Iraq.
Sumaidai said the "new Iraq" has no intention of embarking on any new weapons programmes and therefore "cannot possibly represent a source of threat".
But according to UN diplomats, in his briefing to the council, Perricos asked whether the Iraq Survey Group's report was the final word or whether there was scope for an independent assessment of Iraq's disarmament - and if so who should do it and how.
Iraq asked the UN to return
$400 million for reconstruction
He said there was still a need to determine Iraq's biological, chemical and missile capabilities to ensure that they were rendered harmless, which included looking at manufacturing and research facilities, the diplomats said.
Perricos cited several outstanding questions that were not answered by the US inspectors: "What happened to 25 Al Samoud 2 missiles and 326 SA2 engines that UN inspectors didn't have time to destroy before they left?"
And what happened to bunkers at the former Muthanna chemical weapons site, 55km northwest of Baghdad, that had been under UN seal and contained hundreds of damaged chemical artillery rockets and toxic chemicals, the diplomats asked.
The chief UN inspector raised the possibility of getting more information from the Iraq Survey Group, but he also argued that UNMOVIC would be an independent way to assess Iraq's disarmament, where possible, and this would not have to take a long time.
Monitor dual-use items
If Iraq's disarmament is confirmed, Perricos said the council needed to decide if there was a need for dual-use items with both civilian and weapons that had been monitored by the United Nations to be monitored for a limited period of time.
This could assure trade partners that the items were not being misused and could help build confidence for a zone free of weapons of mass destruction in the Middle East which the council called for in its 1991 resolution, he said.
Perricos stressed that all these questions had to be decided by the council, the diplomats said.