Admitting that Britain has been divided by the Iraq war, Gordon Brown has said that the armed forces are set to play a changing role in the country.
Speaking at an event in Brighton, the chancellor also said it was important to achieve peace between the Israelis and Palestinians.
And he ruled out unilateral nuclear disarmament by the UK, saying there was no evidence it would lead to "reciprocal action" by other nuclear states.
On Iraq, Brown said: "I think we've got a choice here now, things are moving pretty quickly in the sense that we have got to look at what is best for the future of this whole region.
"We are a divided country over Iraq, there's absolutely no doubt about it.
"But it seems to me that when people look at what happens next, people do understand that this is a democratically elected government, that we've got a United Nations resolution which asks us to support that government.
"Our troops in Iraq now are trying to move from being in charge of security to making it possible for the Iraqi's themselves in Basra to be in charge of security."
He suggested that regeneration and economic development efforts could suffer from an early pull-out of British troops.
"There will be less troops in Iraq next month and the month after," he said. "But I think what we've got to recognise is that the role we are playing is changing."
Reflecting his economic interests, the chancellor said it was vital to have an "economic building block" for Middle East peace.
"Just as in Northern Ireland people realised they could have prosperity and peace and that a return to violence means a loss of peace and a loss of prosperity, we have got to build a peace to give prosperity to Palestinians," he said.
On Trident renewal, Brown suggested that global talks could lead to a reduction in nuclear armaments.
He said that "if we act multilaterally... then I think we can get results in the next couple of years".
