(Embargoed for release at 0001 GMT Feb 5) LONDON, Feb 5 (Reuters) - Military action against Iran would have disastrous consequences, according to a report released on Monday by a coalition of British-based think-tanks, faith groups and others who urged a new diplomatic push to avert conflict. The United States and Israel have stepped up their rhetoric against Tehran in recent weeks, prompting speculation they could be preparing for military attacks on the Islamic state. Washington has sent a second aircraft carrier to the Gulf, a move seen as a warning to Iran, which the United States accuses of seeking atomic arms and fuelling instability in Iraq and elsewhere in the Middle East. Iran denies the charges. The joint report by 15 organisations, including the Foreign Policy Centre, Oxfam and the Muslim Council of Britain, said an attack on Iran would, among other things, strengthen Iran's atomic ambitions, severely undermine hopes for stability in Iraq and damage global economic growth through higher oil prices. "The consequences of military action against Iran are not only unpalatable, they are unthinkable," said Stephen Twigg, director of the Foreign Policy Centre. "Even according to the worst estimates, Iran is still years away from having a nuclear weapon. There is still time to talk," he said. Sir Richard Dalton, Britain's ambassador to Tehran from 2002 to 2006, said it was "vital that the U.S. becomes fully involved in creative diplomacy". "Recourse to military action -- other than in legitimate self defence -- is not only unlikely to work but would be a disaster for Iran, the region and quite possibly the world," Dalton said. Among the unintended consequences of an attack on Iran, the report said, would be to bolster the position of hardliners within Iran's political system and set back the chances of reform. It could also inspire terrorist attacks in Western countries. "I think our decision makers have yet to appreciate the full consequences of a military attack against Iran," said Ali Ansari, director of the Institute of Iranian Studies at St Andrews University. "The view held by some in Washington that all diplomatic and political options have been exhausted is palpable nonsense that needs to be challenged," he said. The report's recommendations include removing or finding a compromise on preconditions to talks, such as the insistence Iran suspend uranium enrichment; seeking direct talks between Iran and the United States; and developing a "grand bargain" package of incentives made by major world powers to Iran last June in return for its suspension of sensitive nuclear work. "Only through direct U.S.-Iranian engagement can an agreement be found and the potentially devastating consequences of military action be avoided," it concluded.
