One month after US Marines helped jubilant Iraqis pull down a huge statue of Saddam Hussein in central Baghdad, the US was to put a resolution Friday to the UN Security Council seeking an end to almost all sanctions against Iraq.

Meanwhile Iraqi opposition leaders laying out the plans for a new democratic government were insisting that officials from Saddam's Baath party be banned from political life.

As in the showdown at the United Nations before the Iraq war started on March 20, the United States faced a new diplomatic battle with other major powers.

US ambassador to the UN John Negroponte said he would submit a draft resolution to the Security Council calling for the lifting of sanctions and for Iraq's oil revenues to be put in a special fund to be controlled by US-led occupying forces for 12 months.

Negroponte said the United States wants the resolution adopted by June 3, when the current six-month phase of the UN-run oil-for-food programme expires.

The draft would immediately lift all UN sanctions imposed on Iraq after its invasion of Kuwait in August 1990, excepting an arms embargo.

It would also set up an Iraqi Assistance Fund, to meet the humanitarian needs of the Iraqi people, for economic reconstruction, for the "continued disarmament of Iraq" and other purposes.

"The president wants the Security Council to act quickly and there is no need for a lengthy debate," White House spokesman Ari Fleischer told a press briefing in Washington.

But in Moscow a senior US envoy, Assistant Secretary of State Kim Holmes, failed to convince Russia to support lifting the UN sanctions.

Russian Foreign Minister Igor Ivanov said sanctions that blocked humanitarian aid should be removed, but he insisted that a complete end to the economic blockade must take place in line with existing UN resolutions.

Deputy Foreign Minister Yury Fedotov said this still required proof that Iraq did "not possess weapons of mass destruction and the means of producing them". He called for UN inspectors to return to Iraq.

But Negroponte said US and British forces "have taken over the process of inspecting for weapons of mass destruction in Iraq" and that the US administration does not see an immediate role for the UN disarmament agency.

Meanwhile, Iraqi leaders and US officials held their first talks in Baghdad late Thursday on forging an interim government since a new US official was named to run the war-battered nation.

Two new seats were added to the Council of Five, a core group of leaders tapped by the US to oversee the birth of a democratic government after Saddam's fall.

Ahmad Chalabi, from the US-backed Iraqi National Congress, said they had agreed to ban former members of Saddam's Baath party from political life, but there was no word on this from US officials.

It was all but impossible under Saddam's regime to hold a position of importance without being a party member, and the US is working with Baathists to restore the nation's infrastructure.

Another four political parties also agreed to join efforts to organise a national congress, due to begin by the end of May, that will form a government and fill the political void that many Iraqis blame for post-war chaos.

Water and electricity are still scarce, crime is rampant on the streets and US soldiers face isolated attacks.

Washington this week named Paul Bremer as the new civil administrator for Iraq. He will be above Jay Garner, the top US civilian official for Iraq until Bremer's appointment Tuesday, who is now expected to focus on rebuilding and let Bremer oversee the political rebirth of the nation.

Garner's Office for Reconstruction and Humanitarian Aid has made appointments to key ministries in recent days, and on Thursday said a special Iraqi court was likely to be set up to try crimes against the Iraqi people.

The creation of the interim government should see appointments to the 23 main Iraqi ministries, which were in place under Saddam, with the top spots likely going to the council members now leading the negotiations.

They are Massoud Barzani and Jalal Talabani, the main Kurdish leaders, Abdul Aziz al-Hakim, head of the Supreme Assembly of the Islamic Revolution in Iraq, Iyad Allawi from the Iraqi National Accord and Chalabi.

It remains unclear how long an interim government would run the country before an election is held, or when the US and its coalition allies would be ready to hand over power.

Political parties are flourishing in Iraq, but Washington has made clear that its old friends will be in charge of the country.

In northeastern Iraq, US officers said Friday their forces had taken over all the checkpoints held by the armed Iranian opposition group, the People's Mujahedeen, as part of a previously arranged ceasefire agreement.

But the Mujahedeen are still occupying some five base camps defended by tanks, artillery and armoured vehicles near the Iranian border, Lieutenant Colonel John Miller said.

US military officials refused to comment on the group's future or any ongoing negotiations. The ceasefire deal has angered Tehran, which has accused the US of double standards in its war on "terrorism." Amid fears of a cholera epidemic in southern Iraq, officials from international aid agencies met with British commanders in the southern city of Basra Thursday to coordinate efforts and identify key sites of contaminated water.

UN World Food Programme chief James Morris will visit Baghdad on Sunday to review what the agency says is the world's biggest humanitarian operation. – Sapa.