An Iranian ship laden with arms seized by Yemeni authorities in January may also have been bound for Somalia, according to a confidential UN report seen by Reuters on Monday.

Yemeni forces intercepted the ship, the Jihan 1, off Yemen's coast on January 23. US and Yemeni officials said it was carrying a large cache of weapons, including surface-to-air missiles, being smuggled from Iran to insurgents in Yemen.

The confidential UN report, by the UN Monitoring Group on Somalia and Eritrea, cited Yemeni officials as saying that it was possible diesel carried aboard the ship could have been intended for shipment to Somalia.

The group, which tracks compliance with Security Council sanctions, raised concerns in the report about the flow of weapons to Islamist Al-Shabaab militants since the UN Security Council eased an arms embargo on Somalia's fragile Western-backed government earlier this year.

The report did not explicitly say that weapons on the ship were headed for Somalia, but one UN Security Council diplomat said that if it was true that the diesel was intended for Somalia, it could not be ruled out that other items on the ship, including weapons, might also have been intended for there.

Alireza Miryousefi, a spokesman for Iran's UN mission, rejected the suggestion that Iran could be connected in any way with arms supplies to Al-Shabaab.

"These are some baseless allegations and ridiculous fabrications about the Islamic Republic of Iran," he said. "This alleged report by the Monitoring Group on Somalia on arms shipments from Iran carries no basis or the minimum rationality."

A Western diplomat said that the fact that there were 16,716 blocks of C4 explosive on the Jihan 1 suggested a potential connection between Iran and Al-Shabaab in Somalia, as Huthi rebels, unlike Al-Shabaab, were not known to use C4.

The UN mission for Somalia did not respond immediately to a request for comment.

The UN experts wrote that according to Yemeni security officials, the arms and ammunition were well-packed in small containers concealed inside several large compartments filled with diesel fuel.

"Yemeni officials indicated that this arms consignment was to be delivered to the Huthi rebellion in north Yemen," the report to the Security Council's sanctions committee said. "However the Monitoring Group investigated if some of the Jihan 1 cargo could have been intended for delivery in Somalia."

"When asked about this, security officials confirmed that the diesel could have been bound for Somalia," the report said. "Members of the crew have also divulged to a diplomatic source who interviewed them in Aden that the diesel was bound for Somalia."

The potential Somalia connection was not raised in a recent report by the UN Panel of experts on Iran that monitors compliance with the UN sanctions regime against Tehran.

That report said five of the Iran panel's eight members found that all available information clearly placed Tehran at the center of the Jihan arms smuggling operation. But three panel members, who UN diplomats said were from Russia, China and Nigeria, said the Jihan incident was a "probable", not definite, violation of the UN ban on Iranian arms exports.

AL-SHABAAB REMAINS STRONG

The latest experts' report said Yemen was the top source of arms in Somalia.

The group wrote that authorities in Puntland, a semi-autonomous region of Somalia which has a fractious relationship with Mogadishu, had said that one reason they had passed a law banning Yemeni petroleum imports was the ease with which arms were smuggled in diesel containers like the ones on the Jihan 1.

"Additional evidence indicates the involvement of an individual entity based in Djibouti as part of a network that supplies arms and ammunition to Al-Shabaab in Somalia," it said.

The report said that Al-Shabaab remained strong, even though it had been driven out of a number of cities and towns.

"The military strength of Al-Shabaab, with an approximately 5,000-strong force, remains arguably intact, in terms of operational readiness, chain of command, discipline, and communication capabilities," it said. "At present, Al-Shabaab remains the principal threat to peace and security in Somalia."

The monitoring group said it was concerned about the possible export from Somalia of know-how in the manufacture of suicide vests and improvised explosive devices (IEDs) to Kenya and Uganda. It said it had analyzed a suicide vest discovered in Kenya in March, which was similar to ones used by Al-Shabaab.

This, the group said, "suggests a transfer of know-how between Al-Shabaab in Somalia and Al-Shabaab members or its sympathizers operating in Kenya."

Although piracy off Somalia's coast had decreased, it said some of the demobilised pirates were providing private security services to unlicensed fishing vessels off Somalia's coast.

"Puntland officials estimate that tens of thousands of tonnes of illegal catch has been fished from Puntland's coastline between 2012 and 2013 by hundreds of illegal fishing vessels," the report said.

"The vessels are predominantly Iranian and Yemeni owned and all use Somali armed security," it said.

The Monitoring Group said it was investigating reports that illegal fishing vessels were also being used to smuggle weapons.

While the reports were unconfirmed, the group had established "other connections between the illegal fishing networks and networks involved in the arms trade and connected to Al-Shabaab in north eastern Somalia," the report said.

The Monitoring Group said Puntland officials estimated that as many as 180 illegal Iranian and 300 illegal Yemeni vessels were fishing in Somali waters, along with a small number of Chinese, Taiwanese, Korean and European-owned vessels. - Reuters