* Britain drafts Syria resolution threatening sanctions
* Russia says sanctions threat should be a "last resort"
* Security Council must vote on Syria mission by July 20 (Adds Syria comment, British draft resolution details)
By Michelle Nichols
UNITED NATIONS, July 11 (Reuters) - International envoy Kofi Annan asked the U.N. Security Council on Wednesday to make clear to Syria's government and opposition that there would be "clear consequences" for not complying with his plan to end the 16-month conflict that has killed thousands.
But the Security Council differed greatly over what those consequences should be, with the United States, Britain, Germany and France insisting that Syria should be threatened with sanctions, while Russia said that should be a "last resort."
The deeply divided 15-member council must decide the future of a U.N. observer mission in Syria, known as UNSMIS, before July 20 when its 90-day mandate expires. It initially approved 300 unarmed military observers to monitor an April 12 ceasefire, which failed to take hold, as part of Annan's peace plan.
"He (Annan) called for the Security Council members to put aside their national interests and to put joint and sustained pressure on both parties with clear consequences for non-compliance," Britain's U.N. Ambassador Mark Lyall Grant said.
Britain circulated among Security Council members on Wednesday a draft resolution to extend UNSMIS for 45 days and place Annan's six-point peace plan and guidelines to create a transitional government in Syria under Chapter 7 of the U.N. Charter, which allows the council to authorize actions ranging from diplomatic and economic sanctions to military intervention.
"Our view is that this council needs to put that kind of plan under Chapter 7, make it clear that it is binding," said U.S. Ambassador to the United Nations Susan Rice, adding that a rollover of the current mandate would be "insufficient."
The draft resolution in particular threatens the Syrian government with sanctions if it does not stop using heavy weapons and withdraw its troops from towns and cities within 10 days of the adoption of the resolution.
The British text, drafted in consultation with the United States, France and Germany, counters a draft resolution circulated by Russia on Tuesday, which would extend UNSMIS for three months but makes no threat of sanctions.
"Kofi Annan did not ask us to apply sanctions," Russia's Deputy U.N. Ambassador Alexander Pankin told reporters after Annan's briefing. "He just said that the Security Council should ... send a signal that its suggested recommendations and actions have to be implemented or there will be consequences."
"But consequences does not mean necessarily actions under a certain chapter or certain article," he said. "Chapter 7 is a last resort, Chapter 7 is not a very efficient mechanism."
Russia and China have previously vetoed U.N. resolutions designed to pressure Assad. "We will support a rollover (of UNSMIS)," China's U.N. Ambassador Li Baodong told reporters before Annan's briefing.
Syria's Ambassador to the United Nations Bashar Ja'afari said that countries raising the threat of sanctions were not helping efforts to end the conflict and maintained that Damascus was committed to Annan's peace plan.
"But at the same time we are fully warning everybody that the other efforts deployed here or there, by this country or that country, to derail the six points plan of Mr Kofi Annan from its initial track would be extremely dangerous," he said.
"The success of Mr Kofi Annan's plan depends greatly on ceasing the arming and funding of the armed groups in Syria, Ja'afari told reporters.
Damascus has maintained all along that it is facing a "terrorist" conspiracy funded and directed from abroad, not least by resource-rich Gulf monarchies Saudi Arabia and Qatar, which have called for arming the fighters aiming to oust Assad.
One thing council members appeared to agree on was accepting U.N. chief Ban Ki-moon's recommendation for a shift in the emphasis of UNSMIS' work from military observers - who suspended most of their monitoring activities on June 16 because of increased risk amid rising violence - to the civilian staff focusing on a political solution and issues like human rights.
While the mandate for 300 unarmed military observers is likely to be unchanged, far fewer will be required for the suggested shift in focus of the mission.
Assad's forces have killed more than 15,000 people since a crackdown on pro-democracy protesters began in March 2011, some Western leaders say. Damascus says rebels have killed several thousand of its security forces.
Diplomats said Annan did not go into great detail about his lightning diplomatic shuttle this week to Damascus, Tehran and Baghdad - three capitals forming a Shi'ite Muslim axis of power in the Middle East.
Annan plunged into a tussle between the major powers on Tuesday, insisting that Iran, which strongly backs Assad and is regarded as an adversary of the West and Gulf Arabs, had a role to play in the drive to relaunch stalled peace efforts and begin talks towards a political transition. (Editing by Bill Trott and Jackie Frank)