(Adds Obama, Kerry, McCain quotes)
* Obama: killing "shocked the conscience" of the world
* Says U.S. will do what it must to protect citizens
* Islamic State threatens the life of a second U.S. reporter
* Killing said to be revenge for U.S. air strikes in Iraq
By Alexander Dziadosz and Steve Holland
BAGHDAD/EDGARTOWN, Mass., Aug 20 (Reuters) - U.S. President Barack Obama expressed revulsion on Wednesday at the beheading of an American journalist by Islamist militants and vowed the United States would do what it must to protect its citizens as international condemnation of the insurgents grew.
Not long after Obama called Islamic State a "cancer" with a bankrupt ideology, the Pentagon said U.S. aircraft conducted 14 air strikes in the vicinity of Iraq's Mosul Dam, destroying or damaging militants' Humvees, trucks and explosives.
Islamic State posted a video on Tuesday that purported to show the beheading of journalist James Foley in revenge for U.S. air strikes in Iraq. It prompted widespread horror that could push Western powers into further action against the group.
Britain's prime minister cut short his vacation as UK intelligence tried to identify Foley's killer, while France called for international coordination against the Islamist militants fighting in Syria and Iraq.
U.S. officials said on Wednesday that intelligence analysts had concluded that the Islamic State video, titled "A Message to America," was authentic. It also showed images of another U.S. journalist, Steven Sotloff, whose fate the group said depends on how the United States acts in Iraq.
The gruesome video presented Obama with bleak options that could define American involvement in Iraq and the public reaction to it, potentially dragging him further into a conflict he built much of his presidency on ending.
Obama called the beheading of Foley "an act of violence that shocked the conscience of the entire world" and said the militants had killed innocent civilians, subjected women and children to torture, rape and slavery and targeted Muslims, Christians and religious minorities.
"So ISIL speaks for no religion. Their victims are overwhelmingly Muslim, and no faith teaches people to massacre innocents. No just God would stand for what they did yesterday and what they do every single day," Obama said in brief comments to reporters in Edgartown, Massachusetts, where he has been vacationing. He said he had spoken with Foley's family.
"ISIL has no ideology of any value to human beings. Their ideology is bankrupt."
U.S. Secretary of State John Kerry said the United States would "never back down in the face of such evil.
"ISIL and the wickedness it represents must be destroyed, and those responsible for this heinous, vicious atrocity will be held accountable," Kerry said in a statement.
British anti-terrorist police began an investigation of the video, in which Foley's killer spoke with a London accent.
Apparently a British national, the killer is just one of hundreds of European Muslims drawn to join Islamic State in Iraq and Syria, who authorities say pose a security threat to U.S. and European interests if they return home from the Middle East.
The video showed a high level of technical proficiency and the use of a British voice may have been intended to make its contents clear to audiences in the United States, Islamic State's declared enemy.
Foreign Secretary Philip Hammond said he was not surprised to hear the British accent and that large numbers of British nationals were fighting in Iraq and Syria.
"Our intelligence services will be looking very carefully on both sides of the Atlantic at this video to establish its authenticity, to try to identify the individual concerned and then we will work together to try to locate him," Hammond told Sky news.
France said it wanted the permanent members of the U.N. Security Council and regional countries, including Arab states and Iran, to coordinate action against Islamic State. President Francois Hollande called for an international conference to discuss how to tackle the group.
U.N. Secretary-General Ban Ki-moon condemned "the horrific murder of journalist James Foley, an abominable crime that underscores the campaign of terror the Islamic State of Iraq and the Levant continues to wage against the people of Iraq and Syria," U.N. spokesman Stephane Dujarric said.
Iraqi Foreign Minister Hoshiyar Zebari urged the world to back his country against Islamic State, which he described as a threat to the world, not just to the minority ethnic groups whose members it has killed in Iraq.
Germany and Italy said they were ready to send arms to bolster the military capabilities of Iraqi Kurds fighting Islamic State in northern Iraq.
Sending arms into conflict zones is a major departure for Germany, which has often shied away from direct involvement in military conflicts since World War Two due to its Nazi past.
The video's message was unambiguous, warning of greater retaliation to come against Americans following nearly two weeks of U.S. air strikes that have pounded militant positions and halted the advance of Islamic State, which until this month had captured a third of Iraq with little resistance.
Foley, 40, was kidnapped on Nov. 22, 2012, in northern Syria, according to GlobalPost. He had earlier been kidnapped and released in Libya.
Sotloff, who appeared at the end of the video, went missing in northern Syria while reporting in July 2013. He has written for TIME among other news organizations.
On Facebook, Foley's mother, Diane Foley, said: "We have never been prouder of our son Jim. He gave his life trying to expose the world to the suffering of the Syrian people.
"We implore the kidnappers to spare the lives of the remaining hostages. Like Jim, they are innocents. They have no control over American government policy in Iraq, Syria or anywhere in the world."
The video was posted after the United States resumed air strikes in Iraq this month for the first time since the end of the U.S. occupation in 2011.
U.S. Senator John McCain, a Republican, said Foley's death should serve as a turning point for Obama in his deliberations over how to deal with Islamic State. "First of all, you've got to dramatically increase the air strikes. And those air strikes have to be devoted to Syria as well," McCain said in a telephone interview.
Islamic State, which has declared a caliphate in the parts of Iraq and Syria it controls, opened the video with a clip of Obama saying he had authorized strikes in Iraq.
The words "Obama authorizes military operations against the Islamic State effectively placing America upon a slippery slope towards a new war front against Muslims" appeared in English and Arabic on the screen.
It showed black and white aerial footage of air strikes with text saying: "American aggression against the Islamic State."
A man identified as Foley, head shaven and dressed in an orange outfit similar to uniforms worn by prisoners at the U.S. detention camp in Guantanamo Bay, is seen kneeling in the desert next to a man holding a knife and clad head to toe in black.
"I call on my friends, family and loved ones to rise up against my real killers, the U.S. government, for what will happen to me is only a result of their complacency and criminality," the kneeling man says.
The man next to him, in a black mask, speaks in a British accent and says, "This is James Wright Foley, an American citizen, of your country. As a government, you have been at the forefront of the aggression towards the Islamic State."
"Today your military air force is attacking us daily in Iraq. Your strikes have caused casualties amongst Muslims. You are no longer fighting an insurgency. We are an Islamic army, and a state that has been accepted by a large number of Muslims worldwide."
Following his statement, he beheads the kneeling man. At the end of the video, words on the side of the screen say, "Steven Joel Sotloff," as another prisoner in an orange jumpsuit is shown on screen. "The life of this American citizen, Obama, depends on your next decision," the masked man says.
University of Virginia political scholar Larry Sabato said the killing was like the beheading of American journalist Daniel Pearl in Pakistan in 2002. He said it could help bolster a perception among Americans that the United States will have to be more aggressive in dealing with Islamic State militants.
Syria has been the most dangerous country for journalists for more than two years. At least 69 other journalists have been killed covering the conflict there and more than 80 journalists have been kidnapped in Syria.
The U.S.-based Committee to Protect Journalists estimates that approximately 20 journalists are currently missing in Syria. Many of them are believed to be held by Islamic State.
As well as taking territory, Islamic State has seized a number of oil wells in northern Iraq. The government in Baghdad said it was troubled by reports that Islamic State was smuggling oil to export markets and warned that the purchase of such supplies could help the group fund its operations.
(Additional reporting by Stephanie Nebehay in Geneva, Oliver Holmes and Tom Perry in Beirut, Sabine Siebold in Berlin, Costas Pitas and William James in London, Louis Charbonneau at the United Nations and John Irish in Paris; Writing by Giles Elgood and Jim Loney; Editing by David Stamp and Dan Grebler)