GENEVA, Jan 23 (Reuters) - Twenty years of conflict has cost the Middle East $12 trillion, a study showed on Friday.

Unless the region's conflicts are resolved, the costs will continue to mount, said the study by India's Strategic Foresight Group, backed by governments or other agencies in Norway, Qatar, Switzerland and Turkey.

"The choice they have to make is the choice between the danger of devastation and the promise of peace," said Sundeep Waslekar, the group's president and one of the report's authors.

The figures are all the more striking as global recession and slowdown forces governments to scramble for billions of dollars to shore up banks and economies.

The study looks at the costs of the failure to conclude peace after the 1991 Madrid conference -- an attempt by the international community to start Israeli-Arab peace talks in the wake of the Gulf War -- negating many of the region's advantages in location, resources and education.

The report looks at conflict in the entire region from Iran to Egypt, including between Israel and its Arab neighbours, the war in Iraq, tension between Iran and Israel and al Qaeda's activities in the Middle East. It also includes rivalry between the Palestinian organisations Hamas and Fatah.

Much of the discussion at Friday's presentation of the report centred on the Israeli-Palestinian conflict in the aftermath of Israel's 22-day assault on the Gaza Strip that killed 1,300 Palestinians, wounded 5,000 and left thousands homeless. Israel lost 10 soldiers and three civilians.

HALF AS RICH

The report estimates the opportunity costs of conflict in the region at 2 percent of growth in gross domestic product. It implies peace combined with good governance and sound economic policies would allow some countries to grow at 8 percent.

Some costs -- emotive ones such as the deaths of children and political intangibles such as the loss of America's credibility -- are difficult to quantify in monetary terms, but the study tracks them.

One conclusion is that individuals in most countries are half as rich as they would have been if peace had taken off in 1991.

Incomes per head in Israel next year would be $44,241 with peace against a likely $23,304. In the West Bank and Gaza Strip they would be $2,427 instead of $1,220.

For Iraq, income per head next year is projected at $2,375, one quarter of the $9,681 that would have been possible without the conflicts of the past two decades.

One intangible cost is the loss of human dignity. The study points to some economic consequences by calculating that negotiating checkpoints to and from Ramallah in the West Bank has cost Palestinians 100 million person hours since 2000.

All countries in the region are suffering from conflict, Waslekar said.

If instability drives the price of oil back to $100 a barrel once the recession ends, it would wipe out all the gains from trade liberalisation of the past 20-30 years, he said.

"Considering the enormity of the costs evidenced in this report which have direct or indirect negative consequences for the whole world, the urgent necessity of a stronger international engagement is inescapable," said Thomas Greminger, a senior Swiss diplomat who worked on the study. (For report details click on www.strategicforesight.com )