Secretary-General Ban Ki-moon on Monday called the Iraqi parliament's approval of a law paving the way for the country's first provincial elections in four years "a milestone" in the process of national reconciliation but warned of possible election-related violence. In a report to the UN Security Council, Ban said the provincial elections "represent the most significant political event in the coming months in Iraq as they can advance political dialogue, establish representative provincial councils and empower community leaders to meet the needs of local citizens in cooperation with the government." "At the same time, there is potential for election-related violence and instability, as witnessed recently in Mosul" where attacks in early October forced nearly 10,000 Christians to flee their homes, he said. "It is therefore essential that the elections be organized in a secure environment and a transparent manner," Ban said. Provincial elections, expected to be held on Jan. 31, have been widely seen as a major step in forging power-sharing agreements among Iraq's religious and ethnic communities that the US believes are key to lasting peace. President George W. Bush's administration has been pressing the Iraqis to hold these elections to empower Sunnis, who launched the insurgency in 2003 and boycotted the last provincial ballot in January 2005, leaving power in the hands of Shi'ites and Kurds. Many Sunnis have since stopped fighting and forged ties with the US Some Iraqis and foreign observers fear, however, that the election could heighten tensions among Sunnis, Shi'ites and Kurds - especially in the ethnically mixed north where those groups are competing for power in the volatile city of Mosul and elsewhere. Trouble is also possible in the heavily Shi'ite south, where the two main Shi'ite parties in the national government - Prime Minister Nouri al-Maliki's party and the Supreme Islamic Iraqi Council - are competing. Ban's report, covering activities of the UN political mission in Iraq over the last three months, called the security situation in the country "fragile," reiterating that "national reconciliation remains the main priority in Iraq and for ongoing United Nations efforts in the country." "The passage of the provincial election law on Sept. 24 was itself a milestone in the national reconciliation process," he said. Ban cited changes in the election of candidates by open lists, a requirement that at least 25 percent of representatives be women, and an amendment to provide for minority representation, "although the final quotas were below the level recommended by the United Nations." He appealed to Iraq's diverse communities "to continue to work with one another in a spirit of dialogue and grand compromise" to resolve other key issues including decisions on disputed internal boundaries and adoption of constitutional and legislative measures in the political, economic and social fields. Ban told the council that the "satisfactory incorporation" of 100,000 Sunni fighters into the police, army, government organs and civilian life "will be a key determinant in consolidating security and stability gains in Iraq as state security forces take on increasing responsibility and improve their capacities across of the country." Many of the Sunni fighters, known as the Sons of Iraq, were former insurgents who turned against al-Qaida in Iraq and allied with the US to form neighborhood watch groups. About 54,000 of them in the Baghdad area were transferred from the US to Iraqi payroll Oct. 1.