* Journalist Sotloff's family decries 'horrific tragedy'
* U.S. officials do not yet confirm video's authenticity
* Sotloff was kidnapped in Syria in August 2013
* Group also threatens a man it calls a British hostage (Adds comment from friend of Sotloff and Foley)
By William Maclean
DUBAI, Sept 2 (Reuters) - The Islamic State militant group released a video on Tuesday purporting to show the beheading of a second American hostage, journalist Steven Sotloff, raising the stakes in its confrontation with Washington over U.S. air strikes in Iraq.
A masked figure in the video seen by Reuters also issued a threat against a British hostage, a man the group named as David Haines, and warned governments to back off "this evil alliance of America against the Islamic State".
A statement released by Sotloff's family through a spokesman indicated the family considered the video to be authentic. "The family knows of this horrific tragedy and is grieving privately. There will be no public comment from the family during this difficult time," said the spokesman, Barak Barfi.
The purported executioner appeared to be the same British-accented man who appeared in an Aug. 19 video of the killing of American journalist James Foley, and it showed a similar desert setting. In both videos, the captives wore orange jumpsuits.
In Washington, the White House said it could not immediately confirm the authenticity of the Sotloff video. But several U.S. government sources said it appeared to be authentic.
Sotloff, a 31-year-old freelance journalist from Florida, was kidnapped in Syria in August 2013.
"I'm back, Obama, and I'm back because of your arrogant foreign policy towards the Islamic State, because of your insistence on continuing your bombings and in Amerli, Zumar and the Mosul Dam, despite our serious warnings," the masked man said in the video, addressing U.S. President Barack Obama.
"So just as your missiles continue to strike our people, our knife will continue to strike the necks of your people."
In the video, Sotloff describes himself as "paying the price" with his life for the U.S. intervention in Iraq.
The White House said late on Tuesday that Obama was sending three top officials - Secretary of State John Kerry, Defense Secretary Chuck Hagel and counterterrorism adviser Lisa Monaco - to the Middle East "in the near-term to build a stronger regional partnership" against the Islamic State militants.
U.S. officials also said Obama ordered 350 more U.S. military personnel to protect the large American embassy in Baghdad, bringing up to about 820 the number of U.S. forces working to bolster diplomatic security in Iraq.
Sotloff's mother, Shirley, appealed last Wednesday for her son's release in a videotaped message to Islamic State's self-proclaimed caliph, Abu Bakr al-Baghdadi.
In the video it released last month, Islamic State said Foley's death was in retaliation for U.S. air strikes on its insurgents who have overrun wide areas of northern Iraq.
The United States resumed air strikes in Iraq in August for the first time since the pullout of U.S. troops in 2011.
The raids followed major gains by Islamic State, which has declared an Islamic Caliphate in areas it controls in Syria and Iraq.
"We have seen a video that purports to be the murder of U.S. citizen Steven Sotloff by the Islamic State of Iraq and the Levant," White House National Security Council spokeswoman Bernadette Meehan said in a statement.
"The intelligence community is working as quickly as possible to determine its authenticity. If genuine, we are appalled by the brutal murder of an innocent American journalist and we express our deepest condolences to his family and friends. We will provide more information when it is available."
Iraq's outgoing foreign minister, Hoshiyar Zebari, condemned what he called "this savage killing ... an example of savagery and evil," and said it was evidence of the need for Iraq and the West to defeat Islamic State.
"We have a common enemy and the whole world is moving in the right direction to stop this savagery and brutality," Zebari said. "The whole world is standing united against IS. They must be defeated so these horrid scenes will not be repeated."
Iraqi Shi'ite Muslim politician Sami Askari, who is close to outgoing Prime Minister Nuri al-Maliki, said: "They are trying to scare the Americans not to intervene. I don't think Washington will be scared and stop...This is evil. Every human being has to fight this phenomenon. Like cancer, there is no cure. You have to fight it."
British Prime Minister David Cameron condemned Sotloff's apparent decapitation as "an absolutely disgusting and despicable act (by) barbaric terrorists". He said he would hold a meeting of his security crisis team on Wednesday.
French Foreign Minister Laurent Fabius called the killing a "further illustration of the barbarity without limit of this caliphate of terror that must be fought with the utmost determination".
Obama did not answer questions from reporters as he boarded his helicopter on the White House South Lawn en route to a military base outside Washington, before flying on Air Force One bound for Estonia.
The video triggered new calls from Obama's critics in the U.S. Congress for more decisive action against Islamic State forces. Critics accused the president of dithering after he said last Thursday: "We don't have a strategy yet," to confront the operations of the militant group in Syria.
"Whenever American air power has been employed, in coordination with reliable partners on the ground, ISIL has been devastated. It's a tactic that should be aggressively pursued both in Syria and Iraq," said Senator Lindsey Graham, a leading Republican voice on foreign policy, using an acronym for the Sunni militant group.
The U.S. military announced its latest air strike on Islamic State forces, saying U.S. aircraft on Monday destroyed or damaged 16 of the group's armed vehicles near the Mosul Dam in northern Iraq.
Sotloff's colleagues described him as a dedicated journalist and gifted writer who had filed in-depth reports from across the Middle East. He covered unrest in Libya for Time magazine in 2012 before his kidnapping in Syria.
Time Editor Nancy Gibbs said that Sotloff "gave his life so readers would have access to information from some of the most dangerous places in the world."
Filmmaker Matthew VanDyke, a friend of both Steven Sotloff and James Foley, said the two were aware of the dangers in Syria, but their passion to tell the story drove them to accept the peril.
"They believed that the story needed to be told and they weren't going to let the risks stop them," VanDyke said. "They took precautions and unfortunately even if you do everything right, sometimes in Syria, things go wrong."
On Aug. 24, al Qaeda-linked Nusra Front militants in Syria freed an American writer, Peter Theo Curtis, who had been missing since 2012, following what officials said were efforts by the Gulf Arab state of Qatar to secure his release.
A U.S. government source told Reuters that a criminal probe by the Justice Department into Foley's killing was certain to be extended to include Sotloff. (Additional reporting by Noah Browning, Mark Hosenball, Ned Parker, Andrew Osborn, Victoria Cavaliere, John Irish and Jennifer Atkinson; Writing by William Maclean and Will Dunham; Editing by Mark Heinrich, Peter Cooney, Eric Beech and Clarence Fernandez)
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