A sharp drop in Iraqi oil revenues has undermined the benefits of measures to speed delivery of humanitarian goods into Iraq, U.N. Secretary General Kofi Annan said in a report Friday.

Under a system adopted by the Security Council last summer, Iraq can use oil revenues to purchase humanitarian items, except those that could have a military use.

The new system allowed the approval of far more humanitarian-supply contracts. But those improvements haven't translated into concrete benefits for the Iraqi people, because their government is selling less oil than it could, Annan said.

A drop in oil exports have prevented Iraq from paying billions of dollars for goods it has ordered through the program oil-for-food program, Annan said.

Iraqi oil exports dropped to an average of less than 1 million barrels a day in recent months from an average of more than twice that much in 2000, Annan said, attributing the decline to Iraq's periodic suspensions of oil sales and its imposition of an illegal surcharge on customers.

"By the most conservative assessment, some $4 billion has been lost due to the low level of exports," Annan said.

Under Security Council resolutions, sanctions imposed on Iraq after its 1990 invasion of neighboring Kuwait remain in effect until weapons inspectors can verify that Iraq is free of weapons of mass destruction. An inspection team is to resume work Monday in Iraq after a nearly four-year absence.