* U.N. investigators issue 7th report on atrocities since 2011
* Both sides using shelling and sieges against civilians
* Government dropping barrel bombs, rebels set off car bombs
* Big power divisions, talks impasse worsen bloodshed
* U.N. team draws up fourth confidential list of suspects
GENEVA, March 5 All sides in Syria's civil war are using shelling and siege tactics to punish civilians and big powers bear responsibility for allowing such war crimes to persist, U.N. human rights investigators said on Wednesday.
In their latest report documenting atrocities in Syria, they called again on the U.N. Security Council to refer grave violations of the rules of war to the International Criminal Court (ICC) for prosecution.
"The Security Council bears responsibility for allowing the warring parties to violate these rules with impunity," the report by the U.N. commission of inquiry on Syria said.
"Such inaction has provided the space for the proliferation of actors in the Syrian Arab Republic, each pursuing its own agenda and contributing to the radicalisation and escalation of violence."
Divided world powers have supported both sides in Syria's three-year-old conflict and a diplomatic deadlock has exacerbated the bloodshed.
The independent investigators, led by Brazilian expert Paulo Pinheiro, said that fighters and their commanders may be held accountable for crimes, but also states which transfer weapons to Syria.
Syrian government forces under President Bashar al-Assad have besieged towns including the Old City of Homs, shelling relentlessly and depriving them of food as part of a "starvation until submission" campaign, the report said.
It said the Syrian air force had dropped barrel bombs on Aleppo with "shocking intensity", killing hundreds of civilians and injuring many more.
Insurgents fighting to topple Assad, especially foreign Islamic fighters including the al-Qaeda affiliated ISIS, have stepped up attacks on civilians, taken hostages, executed prisoners and set off car bombs to spread terror, it said.
The 75-page report, covering July 15-Jan. 20, is the seventh by the United Nations since the inquiry was set up in September 2011, six months after the anti-Assad revolt began.
The investigators have not been allowed into Syria, but their latest findings were based on 563 interviews conducted by Skype or by telephone with victims and witnesses still in the ocuntry or in person with refugees in surrounding countries.
FOUR LISTS OF SUSPECTS
All sides have violated the rules of war embodied in the Geneva Conventions, according to the team of two dozen who include former U.N. war crimes prosecutor Carla del Ponte.
It has now drawn up four confidential lists of suspects.
Despite some tactical gains by Syrian government forces backed by more foreign combat forces of Lebanese Hezbollah and Iraqi militia, the fighting has reached a stalemate, causing significant casualties and material losses, the report said.
"The government relied extensively on the superior firepower of its air force and artillery, while non-state armed groups increasingly resorted to methods of asymmetric warfare, such as suicide bombs and use of improved explosive devices."
As part of a strategy aimed at weakening the insurgents and breaking the will of their popular base, government forces have besieged and bombarded civilian areas, it said.
"Partial sieges aimed at expelling armed groups turned into tight blockades that prevented the delivery of basic supplies, including food and medicine, as part of a 'starvation until submission' campaign."
Rebels throughout Syria have "inflicted severe physical or mental pain or suffering on civilian populations in areas under their control", including on prisoners, it said.
Referring to the northern area of Raqqa that is under control of an al Qaeda affiliate, the Islamic State of Iraq and the Levant, the report said: "The acts committed by non-state armed groups ... in areas under their control against the civilian population constitute torture and inhuman treatment as a war crime and, in the context of (Raqqa), as a crime against humanity."
Rebels have encircled Nubl and Zahra, besieging 45,000 people in the two Shi'ite towns in Aleppo province, it said.
"The siege is imposed by groups affiliated to the Islamic Front, Jaish Al Mujahedeen, Jabhat Al-Nusra and the Syrian Revolutionary Front by checkpoints erected around the area and by cutting off their electrical and water supply lines."
The war, which enters its fourth year next week, has become "deeply fragmented and localised", with multiple front lines involving different parties with shifting priorities, according to the report.
Kurdish forces in northeastern provinces were fighting radical Islamic armed groups in a "distinct sub-conflict".
Thousands of foreign fighters have joined the fighting, fuelling the sectarian dimension of the conflict that threatens to destabilise the wider region, the investigators said.
War crimes had been committed on both sides, including torture, massacres, rapes and recruitment of child soldiers.
"Government forces are conducting a sniper campaign in Bustan Al Qasr (Aleppo). On one day alone in October, doctors treated five men shot in the groin. The same month, six pregnant women were shot in the abdomen," the report said.
On the rebel side, a 26-year-old man was detained on the ground of his sexual orientation in Oct. 2013. "He was beaten and hung by his arms from a ceiling by ISIS in Raqqa. On 31 October, a school headmistress was publicly lashed by ISIS in Raqqa for not wearing a hijab (Islamic head covering)." (Additional reporting by Oliver Holmes in Beirut Editing by Mark Heinrich)