* U.N. Security Council crucial to allow mission broader scope

* Sweden and Austria wary but EU leaders want boats destroyed (Adds agreement reached)

By Robin Emmott and Alastair Macdonald

BRUSSELS, May 18 (Reuters) - European Union foreign ministers agreed on Monday to set up a naval mission in the Mediterranean to target gangs smuggling people from lawless Libya to Europe.

The EU's foreign affairs chief Federica Mogherini said the decision taken at a meeting of foreign and defence ministers in Brussels would "disrupt the business model of smugglers and traffickers networks in Mediterranean".

The European Union ultimately wants to capture smugglers and destroy their boats off the Libyan coast to help it tackle the rising number of migrants fleeing war and poverty in North Africa, but many EU countries want U.N. authorisation to act.

Mogherini had earlier said that an agreement would increase the chances of the United Nations Security Council giving the EU the backing many ministers want for a more aggressive mission.

NATO Secretary General Jens Stoltenberg urging Europe to take that step, partly because Islamic State militants might be "also trying to hide, to blend in among the migrants" in order to get to Europe.

Some 51,000 migrants have entered Europe by crossing the Mediterranean Sea this year, with 30,500 coming via Italy. About 1,800 have drowned in the attempt, the U.N. refugee agency says.

At an emergency summit in Brussels last month following the loss of hundreds of people aboard a single vessel, European Union leaders agreed to "identify, capture and destroy vessels before they are used by traffickers".

Mogherini flew to New York this month to seek support for a draft resolution by Britain, France, Lithuania and Spain under Chapter 7 of the U.N. Charter, which allows the use of force to restore international peace and security.

Without U.N. authorisation, the EU's naval mission, which will likely be headquartered in Italy, will not have the mandate to intervene in Libyan territorial waters and onshore in Libya to seize vessels.

"Nothing will happen without a U.N. mandate," said Austrian Defence Minister Gerald Klug.

But EU diplomats say that the EU can still agree its mission on Monday and start using ships and helicopters in the high seas to gather intelligence about people smugglers, although its impact will for now be limited.

A 19-page document prepared for EU ministers envisages four phases, starting with deployment and assessment, and culminating in a "disruptional phase". A U.N. Security Resolution "is not required for the first phase", the document said.

As part of its migrant strategy, the European Commission last week unveiled a plan to take in 20,000 more refugees over the next two years, a response to an emergency that saw over 600,000 people seek refuge in the EU in 2014. (Additional reporting by Alastair Macdonald, Philip Blenkinsop and Robert-Jan Bartunek; Editing by Kevin Liffey and Alastair Macdonald)