PLANS for the handover of power in Iraq to a democratically-elected government took a significant step forward last night with a new United Nations agreement.

Tony Blair hailed the UN Security Council resolution in America as "a milestone in international relations on Iraq".

The successful handover of sovereignty in Iraq is crucial to the political futures of both the Prime Minister and George Bush.

Mr Blair had touched down in Georgia for the G8 summit of world leaders, confident that there would be a United Nations consensus.

British officials said their hopes were high that final negotiations in New York would bear fruit and confirmation that the historic agreement had been reached came at 9.50pm.

The security council's decision was unanimous with 15 votes agreeing with the draft resolution which sets out the way forward for Iraq.

Welcoming the vote Mr Blair said: "We all now want to put the divisions of the past behind us and unite behind the vision of a modern, democratic and stable Iraq that can be a force for good, not just for Iraqis, but for the whole region and thus the whole world.

''The world community, speaking with one voice, has given its support to the new Iraqi Government led by Prime Minister Allawi.

''It has also expressed its clear support for the timetable to democracy and the holding of elections next year and it has supported the policies of Iraqi-isation of security in Iraq and the role of the multi-national force in bringing that about.

''The people of Iraq now know that the world community is united in helping them take charge of their future.

''And those who would try to stop that process also know that it is not just the new Iraqi Government they face, or the multi-national forces, or the UK, or the US, but the united world.

''There will be difficult and dangerous days in the coming weeks and months, but there should be no doubt about what it is we want to see happening in Iraq or our collective determination to bring it about.''

Agreement on a UN Security Council resolution, endorsing plans for the handover of sovereignty in Iraq, represents a huge boost for Mr Blair and Mr Bush.

It is seen as a reconciliation for the UN countries who had been split over the Iraqi war.

It also provides the perfect diplomatic backdrop to the G8 summit, as world leaders arrived on remote Sea Island, near Savannah, Georgia.

Mr Blair was last night having talks with his Japanese and Canadian counterparts before a working dinner of heads of government and breakfast talks today with President Bush.

The annual gathering of leaders of the largest industrial democracies - the US, UK, Canada, France, Germany, Italy, Japan and Russia - is also set to focus on the Middle East and Africa.

A host of regional leaders have been invited to special sessions of talks, from South Africa's Thabo Mbeki to King Abdullah of Jordan.

Measures to help debt relief in Africa and to press for social, economic and political reform in the wider Middle East are expected to be agreed at the gathering which ends tomorrow afternoon. But the focus last night was on the UN and Iraq.

Final talks securing the UN deal are believed to have taken place while Mr Bush visited France for the D-Day commemorations, and he had private talks with President Jacques Chirac before heading to Normandy.

American officials said then that Mr Chirac had expressed the view that there could now be unanimity in the UN Security Council