"On the question of the military presence, it is a difficult issue. The US is in a way trapped in Iraq, trapped in the sense that it cannot stay and it cannot leave," Annan told a press conference.
"The timing of its departure will have to be optimal," he added.
An eventual withdrawal of US forces should "not lead to a further deterioration", Annan cautioned.
He said Washington should instead "try and get it to a level that when it withdraws, the Iraqis themselves will be able to maintain a situation that would ensure a reasonable secure environment".
The debate in the United States over options in Iraq has intensified in recent weeks, with the military reportedly ready to temporarily increase its troops there by up to 30,000 soldiers, while expanding training for Iraqi forces.
The Washington Post reported on Monday that three basic options had emerged from a strategy review at the Pentagon, led by a hybrid that would beef up US forces for a short period to dampen sectarian violence.
A sizeable boost in US troops would run counter to the strong current of public anger over Iraq, which swept Democrats to power in Congressional elections earlier this month.
Annan said in Geneva that one key immediate step for Iraq was to revise its constitution to ensure that power and revenue was shared fairly between its feuding communities, especially to allay the fears of Sunnis.
Iraqi lawmakers voted unanimously to set up a committee to amend the constitution in September.
Iraq is riven by fighting between rival Sunni and Shia factions. The Kurdish minority's dream of independence has also been put on hold while parliament debates plans for the country to become a federation of autonomous provinces.
The draft law Iraqi lawmakers began debating in September would split Iraq largely on ethnic and sectarian lines, confirming Kurdish autonomy and creating an oil-rich Shia homeland.
Annan also welcomed Syria's decision on Tuesday to resume diplomatic ties with Iraq after a 26-year break, and said other regional neighbours such as Iran should be part of the solution.
Both countries "have a positive role to play", he said.
Aides to Iraqi President Jalal Talabani said on Monday he would fly to Iran late this week for a meeting with President Mahmoud Ahmadinejad that could also include their Syrian counterpart, Bashar al-Assad.
The UN secretary general noted that Iraq's neighbours could use their the influence in both benign and malign ways, but stressed that a peaceful solution was in their best interests.
"An Iraq at peace is in the interest of all countries in the region, including Iran and Syria. So I urge them to help pacify Iraq," he said.
Copyright AFP (Agence France-Presse), 2006
