* US doesn't want to press ahead with no-fly zone-envoys
* Russia, China also skeptical about no-fly zone
* Anti-Gaddafi Libyan envoy rejects oil escrow option
By Louis Charbonneau
UNITED NATIONS, March 9 (Reuters) - The U.N. Security Council is split on whether to authorize a no-fly zone over Libya as Britain and France consider tougher options for Tripoli, including setting up an escrow account for oil revenues, envoys said on Wednesday.
Britain and France have been preparing a draft U.N. resolution that would authorize a no-fly zone over Libya to prevent airstrikes against civilians in the North African country where rebels are seeking to oust long-time leader Muammar Gaddafi.
The United States, however, has made clear to London and Paris that the administration of President Barack Obama is in the throes of a policy review and is not ready "to go full steam ahead on a no-fly zone at the moment," a Western diplomat said on condition of anonymity.
The British and French, however, are consulting with Washington and other allies so that they are ready to submit a draft resolution to the 15-nation Security Council immediately in the event of an "egregrious act" against civilians by forces loyal to Gaddafi.
"If they were to bomb a school and kill a dozen children, the French and British are ready to move immediately with a draft on the no-fly zone issue," another diplomat said.
But the idea of a no-fly zone lacks sufficient support at the moment among council members. Veto powers China and Russia dislike it, India and South Africa are skeptical, and the Americans are undecided, envoys said.
"If we put it on the table today, I don't think there would be enough support for it," a diplomat said. But he added that no council members had categorically ruled it out.
In order to pass, Security Council resolutions need nine votes in favor and no vetoes from the five permanent members, which also include the United States, Britain and France.
"Other options are being discussed," another diplomat said. "One of those is an escrow account for Libyan oil revenues to prevent Gaddafi from getting all the nation's oil money."
British Foreign Secretary William Hague told parliament this week that a U.N.-administered escrow account similar to one set up for Iraq in the 1990s was an option being considered by Britain and its allies.
The United Nations' "oil-for-food" program in Iraq -- which allowed Iraq to sell oil in order to buy humanitarian goods -- was hit with allegations of widespread corruption, and U.N. officials have said privately that there is little appetite to get back in the business of administering oil revenues.
Libya's deputy U.N. ambassador Ibrahim Dabbashi, whose denunciation of Gaddafi last month sparked dozens of defections of Libyan envoys worldwide, said he did not support the idea.
"There is no need for this," Dabbashi, a key member of the Libyan opposition, told Reuters. "We have a government in place ready to take power. We don't support an escrow account."
Dabbashi said the Security Council should speed up talks on a no-fly zone and authorize it "as soon as possible."
Other options include modifying the Libyan arms embargo to allow the arming of the rebels. The arms embargo and other punitive measures were part of a Security Council sanctions resolution on Feb. 26. At the moment, an exemption would only be possible with the unanimous advance approval of all 15 council members.
But Russia and China, which consider Libya to be in the throes of a full-scale civil war, are loath to have the Security Council taking sides against Gaddafi, diplomats said. They added that other council members dislike the idea of the council explicitly authorizing the arming of Libyan rebels.
The key option, they said, remains the idea of a Security Council-authorized no-fly zone, which would be enforced by NATO but would ideally include participation of Arab and African nations to avoid the appearance of it being an exclusively U.S.-European military operation.
"Having Arabs and Africans would be helpful," a diplomat said, adding that even symbolic participation would be good.
The French and British are also waiting to see whether the Arab League, African Union and European Union will formally agree to support a no-fly zone, diplomats said.
Such a zone could take any number of forms, the envoys said, ranging from a military operation intended to shoot down any Libyan aircraft violating a flight ban to a zone where reconnaissance planes and satellites would monitor violations and pass the information to the International Criminal Court. (Editing by Jackie Frank)