* Several EU states looking at sending weapons
* East European states may supply ammunition
* EU studying how to stop Islamic State oil sales (Adds quotes, background)
By Adrian Croft and Barbara Lewis
BRUSSELS, Aug 15 (Reuters) - The European Union gave a green light on Friday to individual EU governments to supply arms and ammunition to Iraqi Kurds battling Islamist militants, provided they had the consent of authorities in Baghdad.
EU foreign ministers holding an emergency meeting in Brussels on the Iraq and Ukraine crises welcomed the decision by several EU governments to send weapons in response to an appeal by Iraqi Kurdish President Masoud Barzani.
The United States is already supplying weapons to Peshmerga fighters from Iraq's semi-autonomous Kurdish region, who are struggling to stem advances by militants from the Islamic State, an al Qaeda offshoot.
France and the Czech Republic have said they will send weapons to the Kurds. Britain and the Netherlands have said they would consider doing so.
Some EU members such as Sweden and Austria said they would not supply weapons, but the EU avoided a repetition of the dispute that split the 28-nation bloc last year over whether to arm Syrian rebels.
Some EU countries had been concerned that weapons sent to the region could end up in the hands of Islamic State. They also worry about whether EU states may legally send weapons directly to the Iraqi Kurds or must go via the Baghdad government.
Ministers agreed that arms shipments to the Iraqi Kurds "will be done according to the capabilities and national laws of the member states and with the consent of the Iraqi national authorities," they said in a statement.
German Foreign Minister Frank-Walter Steinmeier said Berlin would go to the limits of what was "legally and politically possible" for Germany in supplying military equipment. That should be clearer after he visits Iraq's capital and Kurdish region this weekend, he said.
U.S. and European officials said this week that the United States was asking European countries to supply arms and ammunition to Kurdish forces.
"The (Kurdish) forces generally have equipment from the Cold War era, and if individual countries decide to deliver, we will be looking to eastern European member states, especially regarding ammunition and replenishing ammunition stockpiles there," Steinmeier told reporters in Brussels.
The Czech Republic said on Friday it could start delivering firearms and munitions to the Iraqi Kurds at the end of August.
Several eastern European countries produce variants of the AK-47 assault rifle that are widely used by the Kurds.
"Some of the eastern European member states confirmed that they had the necessary ammunition and that they were ready to provide and deliver (that ammunition) with the help of countries who could transport them, and I understand that the UK has been already acting in that field," a senior EU official, speaking on condition of anonymity, said after the meeting.
The EU also said it would look at how to prevent Islamic State militants, who have overrun some oilfields in Syria and Iraq, from profiting from oil sales. Such sales appear to be one of Islamic State's main sources of financing, the senior EU official said.
"We need to get a better understanding of how this works and how can we eventually try to prevent that from happening, maybe not entirely but at least partially," he said.
One way to crack down on Islamic State's oil sales may be to close a loophole the EU may have created in its own sanctions on Syria.
The EU banned imports of Syrian oil in 2011 to intensify pressure on President Bashar al-Assad's government over its suppression of unrest. But in April 2013, it eased sanctions to allow purchases of oil from the moderate opposition in Syria. EU officials suspect Islamic State could now be exploiting that.
The EU ministers condemned atrocities and abuses of human rights, particularly against religious minorities in Iraq and Syria, and called for a swift investigation of what it said could be crimes against humanity. (Additional reporting by Alexandra Hudson and Michelle Martin; Editing by Larry King)