But the proposal already faces opposition from Russia and France, raising concerns about another divisive diplomatic fray like the one that preceded the U.S.-led war to oust Saddam Hussein.
The U.N. resolution proposed by Washington would also create an international advisory board to audit how income from Iraq's oil industry is spent and ensure it is being used to benefit the Iraqi people, the council diplomats said, speaking on condition of anonymity.
President Bush ordered American sanctions against Iraq lifted Wednesday, allowing U.S. humanitarian aid and remittances to flow into Iraq.
"The regime that the sanctions were directed against no longer rules Iraq," Mr. Bush said on Wednesday. "No country in good conscience can support using sanctions to hold back the hopes of the Iraqi people."
In other developments:
The U.S. resolution would completely lift the crippling sanctions imposed after Iraq's 1990 invasion of Kuwait, which led to the 1991 Gulf War.
Russia and France, which both had lucrative contracts with Saddam's government under the oil-for-food program — which began in 1996 to help Iraqi civilians — have not been in a hurry to end it.
The United States also could face opposition from council members who want the world body to be a major player in creating an interim government for Iraq. U.S. officials have insisted that Washington and its allies in the war must remain in the lead.
Russia's Deputy Foreign Minister Yuri Fedotov said Wednesday that Moscow only wants a suspension of the embargoes on food and medicine.
Russia has circulated its own draft resolution calling for Annan to run the oil-for-food program until an internationally recognized Iraqi government comes to power.
Phasing out the oil-for-food program over four months — as the United States wants — would end U.N. control over Iraq's oil revenues. The United States wants to use the money to pay for Iraq's reconstruction.
American and European diplomats made conciliatory gestures on Wednesday, which might boost the fortunes of the proposed sanctions change.
U.S. Secretary of State Colin Powell and European Union security and foreign policy chief Javier Solana stressed Wednesday night that the democratic values and ties that have bound the United States and Europe for over 50 years can withstand an occasional difference.
"With the big changes going on in the world and the complexity of the problems we confront, it would be remarkable if we weren't in disagreement from time to time, if there weren't frictions among us," Powell said.
Mr. Bush, appearing with Spanish Prime Minister Jose Maria Aznar at the White House, declared: "The kind of atmosphere that existed prior to the war has changed and … people now want to work together for the good of the Iraqi people."
On Thursday, President Bush was welcomed a raft of Iraq supporters to the White House. They included Danish Prime Minister Anders Fogh Rasmussen, who has agreed to send peacekeepers; the Emir of Qatar, Sheik Hamad bin Khalifa Al Thani, where U.S. war operations were based; and the foreign ministers of the seven eastern European nations preparing to join NATO, six of them partners in Mr. Bush's Iraq coalition.