Syria remains the top destination for Iranian arms shipments, in violation of a U.N. Security Council ban on weapons exports by the Islamic republic, according to a confidential report on Iran sanction violations obtained by Reuters on Wednesday.

Iran, alongside Russia, is one of Syria's few allies as it presses ahead with a 14-month assault on opposition forces determined to oust Syrian President Bashar al-Assad.

News of the report came as Tehran and the U.N. International Atomic Energy Agency were trying to bridge their differences on how to tackle concerns over Iran's nuclear program, and as Iran was preparing for talks with the five permanent council members and Germany in Iraq next week.

The new report, submitted by a panel of sanctions-monitoring experts to the Security Council's Iran sanctions committee, said the panel had investigated three large illegal shipments of Iranian weapons over the past year.

"Iran has continued to defy the international community through illegal arms shipments," it stated. "Two of these cases involved [Syria], as were the majority of cases inspected by the Panel during its previous mandate, underscoring that Syria continues to be the central party to illicit Iranian arms transfers."

The third shipment involved rockets that Britain said last year were headed for Taliban fighters in Afghanistan.

"The Panel recommends the designation (blacklisting) of two entities related to these interdictions," the report stated. The report also takes note of information concerning arms shipments by Iran to other destinations.

The kinds of arms that Iran was attempting to send to Syria before the shipments were seized by Turkish authorities included assault rifles, machine guns, explosives, detonators, 60 mm and 120 mm mortar shells and other items, the panel said.

The most recent incident described in the report was an arms shipment discovered in a truck that Turkey seized on its border with Syria in February. Turkey announced last year that it was imposing an arms embargo on Syria.

Diplomats told Reuters that the panel's draft report may be changed by the Security Council's Iran sanctions committee before it is submitted to the council itself for consideration.

It was unclear how long it would take the committee to submit the report to the Security Council. Last year's expert panel report on Iran was never made public because Russia blocked its publication.

The report also discusses Iran's attempts to circumvent sanctions on its nuclear program but notes that the four rounds of punitive measures the 15-nation Security Council imposed on Iran between 2006 and 2010 are having an impact.

"Sanctions are slowing Iran's procurement of some critical items required for its prohibited nuclear program," it said. "At the same time prohibited activities continue, including uranium enrichment."

Among the items Iran has attempted to procure for its nuclear program, the panel said, were nuclear-grade graphite, high-strength aluminum, aluminum powder, specialized alloys, maraging steel, carbon fiber, magnets, vacuum pumps, turbines, electrical switchboards and helium gas detectors.

"The Panel identifies the acquisition of high-grade carbon fiber as one of a number of critical items Iran requires for the development of more advanced centrifuges," the report said, adding that nations should be on alert for illicit attempts to acquire such items.

Iran rejects allegations by Western nations that it is secretly developing nuclear weapons. It has refused to suspend its enrichment program as demanded by the Security Council despite being hit with increasingly draconian sanctions by the U.N. and many world nations.

The report said Iran has been trying to circumvent U.N. and other unilateral sanctions on financial firms by using correspondence banking relationships with institutions not under sanctions, and appears to be relying on Iranians abroad to carry out such transfers. Transfer traffic has risen sharply, it said.

The panel said it had received information about a small firm set up abroad by an Iranian national that was involved in funds transfers to various recipients worldwide. The firm, which the report did not identify, had processed transfers amounting to some $11 billion over an 18-month period, it said.

The report discussed at length the Islamic Republic of Iran Shipping Lines, known as IRISL. While IRISL itself is not formally under U.N. sanctions, three of its subsidiaries are, and the council has warned U.N. member states to be vigilant regarding potential sanctions violations by IRISL.

The panel report said that Irano Hind Shipping Company, one of the IRISL subsidiaries subject to sanctions, continues to operate vessels. IRISL is a difficult company to monitor because it is constantly changing ownership, names and the national flags of its ships, the report said.

The panel said that IRISL, as Reuters has previously reported, has set up what appear to be front companies intended to operate vessels and obscure its ownership. Currently IRISL's more than 130 ships are owned by some 75 different companies, which the panel said was unusual for a major shipping line. IRISL and its affiliates have also been changing the names of their ships to remove the word "Iran" from their names.

Before the council passed resolution 1803 in March 2008, which warned all U.N. member states to be "vigilant" about IRISL, most of its vessels' names contained the word "Iran." Now fewer than 10 do, the panel said.

Since March 2008, IRISL and its affiliates have carried out more than 220 changes in ownership of vessels, the report said.

Turning to Iran's ballistic missile program, the report said it "continues to develop with additional launches, which are prohibited under resolution 1929," adopted in June 2010.

"The Panel takes note of the recent designations (U.N. Security Council blacklisting) ... of two (North Korean) entities and their links to Iran's ballistic missile program." The two North Korean companies linked to Iran's missile program are the Green Pine Associated Corp. and the Korea Heungjin Trading Company. The council's North Korea sanctions committee blacklisted them on  May 2.