The new Iraqi president also said he was confident that Iraqi Sunni clerics would be able to convince the country's Sunni minority to participate in the new government and renounce their support for the rebellion.

"Terrorism isn't only from the Sunnis. Much of it is carried out by al-Qaida and outsiders over whom the Sunni Arabs have no control," Talabani said in the interview with Brazillian paper O Estado de S Paulo published on Thursday, referring to the country's most feared group, al-Qaida in the Land of Two Rivers.

They also largely boycotted the January elections and, according to US and Iraqi officials, make up a sizeable portion of the homegrown movement working alongside other Arab fighters.

Surge in violence

Over the past two weeks, violence around Iraq has killed more than 400 people, including at least 69 people in a series of car bombings and attacks.

US forces are battling rebels as
well as training Iraqi personnel

But Talabani, who was in Brazil attending the two-day Summit of South American-Arab countries, said he was convinced that Sunni clerics would be able to "persuade them (Sunni Arabs) to return to the democratic process".

The newly elected Iraqi leader, on his first foreign trip as head of state, praised the outcome of the summit.

"Regarding Iraq, the declaration was good, supporting elections, democracy, the government formed by the National Assembly, condemning terrorism, supporting sovereignty and the independence of Iraq," he said

Talks with Lula

Talabani said he also met with the summit's host, Brazilian President Luiz Inacio Lula da Silva, for talks on increasing trade and political contacts between their countries.

"He expressed support for Iraq's struggle to regain total independence," Talabani told O Estado. "We will send an ambassador here, and we asked Brazil to send one too."

"We don't want Brazilian arms. We want other types of products"

Iraqi President Jalal Talabani

Trade ministers from the two countries will meet next month in Jordan, Talabani said. Brazil is hoping to revamp a once-thriving defense industry that provided both Iraq and Iran with arms in the 1980s, but he said Iraq is not looking to purchase weapons from Brazil.

"We don't want arms. We want other types of products," the Iraqi president said.

Talabani's term ends this year, but he said he planned to remain in political office with the backing of his Kurd minority.

"The Kurdish leadership decided I should have one of the two chief positions, prime minister or president," he said.

Situation report

In other developments, Iraq authorities and UN officials issued a report on Thursday highlighting the desperate situation of 27 million Iraqis who suffered for years under international sanctions and war.

Frustration has grown over lack
of basic goods and services

The report says 85% of Iraqi households lack stable electricity, only 54% have access to clean water and 37%t to sewerage, according to Iraq Living Conditions Survey 2004.

"If you compare this to the situation in the 1980s, you will see a major deterioration of the situation," newly appointed Planning Minister Barham Saleh said. He said 75% of households had clean water two decades ago.

In a separate development, Iraq war opponent Turkey said it would allow Britain and South Korea to use a military air base in the south of the country for operations in Iraq and Afghanistan, the Foreign Ministry said.

US planes also can use Incirlik base, the government said, but only to transport logistical supplies such as tents, food and spare parts.

Australian's fate

Meanwhile, Australia's Foreign Minister Alexander Downer said on Thursday he could not confirm reports that a deadline hanging over an Australian being held hostage in Iraq had been extended.

The fate of 63-year-old contractor Douglas Wood remained unknown, two days after the expiry of the deadline set by the kidnappers for Sydney to begin withdrawing its troops from Iraq.

Australia has about 550 troops stationed in Iraq and plans to send 350 more.