UPDATE 1-Britain says Iran approached tanker in Omani waters - letter to U.N.

By Michelle Nichols

(Adds details from letter)

By Michelle Nichols

NEW YORK, July 20 (Reuters) - Britain told the United Nations Security Council on Saturday that a British-flagged tanker seized by Iran was approached by Iranian forces when it was in Omani territorial waters and the action "constitutes illegal interference."

"The ship was exercising the lawful right of transit passage in an international strait as provided for under international law," Britain's U.N. mission wrote to the Security Council. "International law requires that the right of transit passage shall not be impeded, and therefore the Iranian action constitutes illegal interference."

The letter, seen by Reuters, was also sent to U.N. Secretary-General Antonio Guterres.

Friday's action in the global oil trade's most important waterway has been viewed in the West as a major escalation after three months of confrontation that has already taken Iran and the United States to the brink of war.

It follows threats from Tehran to retaliate for Britain's seizure on July 4 of the Iranian tanker Grace 1, accused of violating sanctions on Syria.

"Current tensions are extremely concerning, and our priority is to de-escalate. We do not seek confrontation with Iran," the letter read. "But it is unacceptable and highly escalatory to threaten shipping going about its legitimate business through internationally recognised transit corridors."

Britain called on Iran to release the Stena Impero tanker and told the Security Council it was working to resolve the issue through diplomatic means. (Reporting by Michelle Nichols; Editing by Daniel Wallis)