Annan says the UN peace mission in Abkhazia has been limited to small projects in the absence of high-level contacts since last summer. UN spokesman Stephane Dujarric on 20 January cited the difficulties.
"The recent political uncertainty in Abkhazia has limited the possibility of talks between the two sides," Dujarric said. "[Annan] hopes that the political situation will stabilize, allowing talks to resume."
There are hopes the peace process can resume following Abkhazia's self-styled presidential elections in mid-January.
Sergei Bagapsh was pronounced winner of the revote. His former opponent, Raul Khadjimba, will serve as his vice president and have significant powers.
The region's self-styled foreign minister and Georgia's foreign minister told Interfax this week they were ready to resume talks in Geneva under the auspices of the UN secretary-general's Group of Friends of Georgia.
The Group of Friends has tentatively planned its next high-level meeting for this spring.
Annan's report of 20 January stresses the need for dialogue on short-term measures, such as the return of displaced persons to Abkhazia. But it says the dialogue must ultimately address the core issue of the conflict: the political status of Abkhazia within Georgia.
Abkhaz leaders have repeatedly rejected such status and declared the province's independence.
The UN Security Council will meet next week to vote on extending the UN peace mission in Georgia by six months.
Georgia's UN ambassador, Revaz Adamia, told RFE/RL he would ask the Council to make a visit to Georgia and Abkhazia to improve its understanding of the situation there.
"I think this new [Abkhaz] leadership should know first the position of the international society and the Security Council itself will have the first-hand information from down on the ground," Adamia said.
Annan's report is critical of the Abkhaz leadership for failing to cooperate in a number of areas. It cites occasional Abkhaz restrictions on the movement of UN monitors at Sukhum airport, the Inguri bridge linking two key security zones, and the Psou River crossing on the Russian border.
It also notes the Abkhaz refusal to allow the UN mission to open a human rights office in the Gali border region and failure to permit UN civilian police to operate in Gali.
The Gali district is in special need of tougher law enforcement, the report says. It cites "numerous cases" of extortion, murder, robbery, and abduction in recent months.
But Abkhaz officials did allow the UN Development Program to begin a reconstruction program. The agency began an assessment mission in December for improving basic infrastructure in the agricultural sector in Gali, Ochamchira, and Tkvarcheli.
The UNDP's resident coordinator in Georgia, Lance Clark, told RFE/RL that Abkhaz and ethnic Georgians are working together on the projects. He called it a channel for reconciliation.
"The Georgians want to show through their support of this kind of project that they can work with the Abkhaz in at least the rehabilitation of this area, and I think the Abkhaz welcome the chance to go beyond humanitarian aid to really talking about significant rehabilitation," Clark said.
Other UN agencies, including the UN High Commissioner for Refugees, UNICEF, and the World Food Program have also maintained activities. They are focused on health care, rehabilitation of schools, and small income-generation projects in the region.