Some 3,000 people have been killed by the conflict between December 2013 and August this year
(Corrects date on story, published on Tuesday, to Nov 4 from Oct 29)
* Report recommends peacekeepers monitor mining sites
* Sales continue despite 'blood diamond' ban
* Infighting on both sides complicates peace moves
By Daniel Flynn
DAKAR, Nov 4 (Reuters) - Gold and diamond sales are being used to finance conflict in Central African Republic and United Nations peacekeepers should monitor mining sites to clamp down on illicit trade, a U.N. panel of experts said.
In a report, the panel also said the peacekeeping mission (MINUSCA) should deploy troops to the remote north of the country and use drones to monitor the rebel-controlled region to put an end to simmering violence there.
The mission, which launched in September, is operating at only two-thirds of its planned 12,000-strong capacity.
Central African Republic was plunged into chaos when northern, mostly Muslim Seleka rebels seized control of the majority Christian country in March 2013, prompting a vicious backlash by the largely Christian 'anti-balaka' militia.
The panel said that some 3,000 people had been killed between December 2013 - when the U.N. Security Council imposed an arms embargo - and August this year. The number of civilian deaths was falling, however, the panel said.
The Kimberley Process - a group of 81 countries, including all the major diamond producers, formed to prevent 'blood diamonds' from funding conflict - imposed an export ban on raw gems from Central African Republic last year.
But since then, an additional 140,000 carats of diamonds, valued at $24 million, had been smuggled out of the country, the panel estimated.
Seleka fighters withdrew from the south of the country, including the capital Bangui, after their leader Michel Djotodia resigned the presidency in January under international pressure following months of killing of civilians, looting and rape.
In their northern enclave, the former Seleka fighters are imposing taxes on a wide range of goods from gold mining to coffee, livestock, and diamonds to fund their operations, the report found.
Former Seleka fighters were issuing mining licences to gold miners at the Ndassima mine near the rebels' headquarters of Bambari, in the centre of the country, it said.
The report found that there had been no progress on disarming the rebel factions since March and that any hopes of achieving peace were being complicated by splits within both the former Seleka rebels and the anti-balaka militia.
It suggested that interim President Catherine Panza's decision to name representatives of the armed groups to cabinet roles may have fuelled conflict.
"Competition among political representatives of armed groups for ministerial positions, as well as among military commanders for control of resources, accounts for of the recent infighting between former components of Seleka and rival factions of anti-balaka," said the report, dated Oct. 29 but only made public this week.
The panel found that attacks on civilians by armed groups and former Seleka units under the command of Brigadier General Mahamat Alkhatim - including burning of villages and forced displacement - had created a buffer zone between Chad and northern Central African Republic.
The panel did not find significant violations of a U.N. arms embargo imposed in December. (Reporting by Daniel Flynn; Editing by Mark Trevelyan)
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