LONDON, March 30 (bdnews24.com/Reuters) - Britain ruled out negotiating with Iran over the release of 15 military personnel seized in the Gulf after Tehran put off freeing a female captive on Thursday because of London's "wrong behaviour".

In an escalating row which pushed oil prices sharply higher, London drafted a strongly-worded statement for the UN Security Council and sought to persuade European Union members to join it in cutting back diplomatic relations with Tehran.

Britain reacted angrily when Tehran distributed a second letter purportedly from the only female captive, Faye Turney, confessing to entering Iranian waters. Calling the move blatant propaganda, the government labelled the letter's release "outrageous and cruel".

The spiralling six-day-old dispute pushed oil prices up more than 3 percent to $66 a barrel on worries oil supplies could be affected, and stoked Middle East tensions, already heightened over concerns about Iran's nuclear ambitions.

The two countries are at odds over whether the 15 Britons had been in Iranian or Iraqi waters when captured carrying out anti-smuggling patrols authorised by the United Nations and the Iraqi government.

Britain says satellite data proved its sailors and marines were seized last week in Iraqi waters. Iran responded on Thursday by showing video of the capture and charts it says show the capture took place in Iranian waters.

Iran had promised on Wednesday it would free Turney soon. But on Thursday Iranian military commander Alireza Afshar said her release had been "suspended".

"The wrong behaviour of those who live in London caused the suspension." Britain must apologise for entering Iran's waters and promise it would not happen again, he said.

Turney's second letter suggested her craft had crossed the Iranian border. Both her letters were in stilted English, leading some linguistic experts to suggest the text may have been written originally in Farsi and translated into English.

"Unfortunately during the course of our mission we entered into Iranian waters. Even through our wrongdoing, they have still treated us well and humanely, which I am and always will be eternally grateful," Thursday's letter said.

It also called for British forces to withdraw from Iraq.

"We have not seen this letter but we have grave concerns about the circumstances in which it was prepared and issued. This blatant attempt to use leading seaman Turney for propaganda purposes is outrageous and cruel," Foreign Secretary Margaret Beckett said in a statement.

Prime Minister Tony Blair said the prisoners' treatment was "a disgrace". "Obviously I felt the same way most people do, which is a sense of disgust that people would be used in that way," he told ITV news.

"What I'm afraid we can't do is end up in negotiation over hostages. What we can't do is say there's some kind of quid pro quo or tit-for-tat that goes on."

Late on Thursday, Iranian state television said President Mahmoud Ahmadinejad would consider a Turkish request to free Turney. It said Turkish Prime Minister Tayyip Erdogan asked Ahmadinejad to free the Briton in a telephone call.

Britain has proposed a text of a UN Security Council statement deploring Iran's action and calling for the prisoners' release.

The council was considering the statement on Thursday but could tone down its language. Diplomats reported that several council members -- including Russia, China, Indonesia and Qatar -- said they had no way of independently ascertaining where the incident took place and were therefore wary of condemning it.

Government sources said Britain, which has frozen all diplomatic business with Iran apart from discussions over the prisoners, would ask EU foreign ministers to follow its lead and adopt tough measures at a foreign ministers summit on Friday.

"It only makes sense if we get an EU consensus," a European diplomatic source said. "But there's willingness on all parts."

The French Foreign Ministry summoned Iran's ambassador on Thursday to demand the sailors' swift release, a sign of support among other EU heavyweights for the British position.

Oil prices remained near six-month highs on concerns that any escalation could hit oil supplies from the Gulf.

The crisis coincided with a UN Security Council resolution at the weekend hitting Tehran with sanctions over its nuclear programme. Tehran says it is not seeking atomic weapons and also denies US and British accusations it stokes violence in Iraq.

This week the United States has conducted its biggest war games in Gulf waters for years, with a second aircraft carrier arriving for the first time since the invasion of Iraq in 2003.

Undersecretary of State Nicholas Burns said the war games were not intended to provoke Iran.

US forces are holding five Iranians its forces arrested in Iraq earlier this year. But a senior US official said Washington would not swap them for the British personnel.

bdnews24.com/mi/1039 hrs.