* African Union peacekeepers battling militants in Somalia
* Arms embargo imposed on Somalia by United Nations in 1992
* Somalia held first elections last year since 1991
By Michelle Nichols
UNITED NATIONS, Feb 1 (Reuters) - The U.N. Security Council should consider lifting an arms embargo on Somalia to help rebuild the country's security forces and consolidate military gains against al Qaeda-linked al Shabaab, U.N. chief Ban Ki-moon suggested in a report Friday.
The council imposed the embargo in 1992 to cut the flow of arms to feuding warlords, who a year earlier ousted dictator Mohamed Siad Barre and plunged Somalia into civil war. Council diplomats said the arms embargo was "under discussion" as the delegations have not reached a final agreement.
Somalia's president and prime minister were elected last year in the country's first national vote since 1991.
"Enhanced efforts are ... urgently needed to develop the Somali National Security Forces," Ban said in the report to the 15-member council. "In this regard, the Security Council may wish to consider the repeated request by the government for lifting the arms embargo."
Somalia wants help strengthening its poorly equipped and often ill-disciplined military that is more of a loosely affiliated umbrella group of rival militias than a cohesive fighting force loyal to a single president.
There are 17,600 U.N.-mandated African Union peacekeepers helping battle the Islamist rebels in Somalia. The African Union has also appealed to the Security Council to review the arms embargo on Somalia.
"Although security has improved considerably in Somalia, the struggle is far from over. The insurgents continue to carry out their attacks using terrorist attacks and targeted assassinations," Ban said.
"These spoilers will seize any opportunity to reverse the gains," he said. "We must continue to stay alert and deny them the space they seek. We should continue to explore the measures already identified, such as travel bans and asset freezes, as we determine when and to whom these must be applied."
Ban also recommended in the report that a new U.N. assistance mission to deliver political and peacebuilding support be established in Somalia and that the Security Council consider a U.N. or joint U.N.-AU peacekeeping mission once the combat operations against Al-Shabaab come to an end.
He said planning for the deployment of the new U.N. assistance mission should take place as soon as possible and that it be based in Somalia instead of neighboring Kenya, now that security has improved.
The Security Council needs to renew the mandate for the AU peacekeeping force in Somalia, known as AMISOM, by early March.
The council is also considering a call to permit the export of stocks of charcoal. It banned the sale abroad of Somali charcoal in last February in an attempt to cut off al Shabaab's funding.
The Security Council's Monitoring Group on Somalia and Eritrea, an independent panel that reports on compliance with U.N. sanctions, says charcoal exports from southern Somalia in 2011 generated over $25 million for al Shabaab. (Editing by Doina Chiacu)