Deputy Secretary General Louise Frechette of Canada, the number two in the worldwide organisation, tendered her resignation after the scathing report was presented internally but Annan declined it, spokesman Fred Eckhard announced.

"She was acknowledging the criticism," Eckhard said. "The secretary general said 'It wasn't your individual responsibility, it was the collective responsibility.'"

UN staff failed to follow security procedures, properly review the risks or understand the extent to which the United Nations would be a target in post-war Iraq, according to the report.

The August 19 suicide bombing left 22 people dead including the top UN envoy in Iraq, Sergio Vieira de Mello, and wounded more than 200, many of them seriously.

Instead of sacking Frechette or other members of the Steering Group for Iraq, who approved the UN's return to Iraq last May, Annan sent a letter expressing his "disappointment and regret" over the incident.

But Annan asked for and received the resignation of UN global security chief Tun Myat of Myanmar, the only senior official to be released despite the report's emphasis on errors up and down the chain of command.

Vieira de Mello's deputy Ramiro Lopes da Silva of Portugal, responsible for security on site at the Baghdad hotel where the UN staff were based, will be reassigned elsewhere with no security duties, Eckhard said.

An official from the UN staff union expressed fury at Annan's decision.

"There are 22 people dead and senior UN officials get to retire with their pensions," Guy Candusso, the union's first vice president, told AFP. "They still have to answer for their role."