Congo rebels set up de facto administration: U.N. UNITED NATIONS (Reuters) - Rebels have set up a de facto administration in eastern Democratic Republic of Congo, U.N. peacekeeping chief Herve Ladsous said on Tuesday as the Security Council urged a political solution to the crisis rather than applying sanctions. Ladsous briefed the 15-member Security Council after his recent visit to Congo, or the DRC, and Rwanda, which has been accused by Kinshasa and U.N. experts of supporting the M23 rebel group. Kigali has repeatedly denied any involvement in the crisis. A high-level meeting on the DRC is due to be held next week during the U.N. General Assembly in New York. "The sovereignty of the Democratic Republic of Congo has to be respected," Ladsous told reporters. Clearly there needs to be some confidence rebuilt, especially between the two main neighbors DRC and Rwanda. M23 rebels, who have links to Bosco Ntaganda, a warlord wanted by the International Criminal Court on war crimes charges, have been fighting government soldiers in North Kivu province since April, displacing some 470,000 civilians. "M23 elements are concentrated in a corner of the eastern Kivu, which is next to the borders of Rwanda and Uganda," Ladsous told reporters. They are already establishing a sort of de facto administration, controlling population, taking 'taxes' from people who pass through and that ... is hardly acceptable. "There has been no major offensive in a military sense over the past five or six weeks, but clearly this can change very quickly and in many directions," he said. A U.N. mission in the DRC, known as MONUSCO, has more than 17,000 troops, but the force is stretched thin across a nation the size of Western Europe and struggles to fulfill its current mandate of protecting civilians. U.N. helicopter gunships frequently back up outgunned government forces, but even that firepower failed to prevent rebels from taking several towns in July. Last month, the DRC said it had asked the Security Council to place sanctions on Rwanda's defense minister and two top military officials for backing the rebellion. A U.N. experts report has accused Rwandan Defense Minister James Kaberebe, chief of defense staff Charles Kayonga, and General Jacques Nziza, a military adviser to President Paul Kagame, of being "in constant contact with M23." "Council members agreed that a political solution to the crisis is of the utmost priority," Germany's U.N. ambassador, Peter Wittig, president of the Security Council for September, told reporters after the briefing by Ladsous. "I detect a will to strengthen the political dialogue and not to focus on sanctions at this point in time," Wittig said. Dialogue, confidence building and cooperation between Kinshasa and Kigali are urgently needed to address also the root causes of the conflict. Rwanda has backed armed movements in the neighboring DRC, during the past two decades, citing a need to tackle Rwandan rebels operating out of Congo's eastern hills. Reporting by Michelle Nichols; Editing by Peter Cooney