On the night of the Mumbai attacks I spoke to an old security source of mine, who has friends in SIS, MI5 and defence intelligence. There was only one thought on the minds of our security chiefs that night: ‘Are they British?’

In the bar of the Travellers Club and the pubs and tapas restaurants of Vauxhall Bridge Cross, drink was taken in double and treble measures amid grim assumption that the terrorists would turn out to have links to the UK. It was a fair assumption since, where international terrorism is concerned, Britain is no longer part of the solution; we are part of the problem. Where once we exported football hooligans, now we are among the world’s most prolific suppliers of Islamist extremists. Mercifully, the Mumbai terrorists had no discernible link to the UK. But as the industrial-scale intelligence arse-covering exercise groaned into action that day, no one would have been surprised to discover that another suicidal cell of British militants had slipped through the net.

Serving and former intelligence officers on both sides of the Atlantic say that the UK’s status as a hotbed of militancy and an exporter of terror means that obtaining intelligence, once a by-product of good international relations, has become a goal as much as an instrument of foreign policy. Take one recent example, the case of Binyam Mohamed, the British resident recently returned from Guantanamo Bay. Trying to discern the truth from David Miliband’s public pronouncements on the affair has been a little like preparing an intelligence assessment — the publicly available facts are sketchy and the true motives of the participants are concealed behind layers of cant, hypocrisy and not a little squirming embarrassment. The foreign secretary allowed critics to assume he is lying when he claimed the US threatened to cut off intelligence-sharing if the full details of the torture meted out to Mr Mohamed in a CIA black prison were laid bare in the High Court. Mr Miliband was more content with the suggestion (accurate as it happens) that he was concealing evidence of British complicity in the interrogations rather than admit that British intelligence has become dependent to an unprecedented and embarrassing degree on the CIA, a relationship he could ill afford to threaten.

By MI5’s own admission, there are 2,000 terrorists suspects in the UK, perhaps twice that number who are susceptible to recruitment. As Jonathan Evans, the director-general, put it in January: ‘We don’t have anything approaching comprehensive coverage.’ MI5 deserves great praise for thwarting numerous attacks but sources say the Security Service can monitor, at most, two live plots at a time.

Into the vacuum have stepped the Americans. The CIA is now running its own agent networks on an unprecedented scale in the British Pakistani community. A British security source told me that somewhere between 40 and 60 per cent of CIA activity designed to prevent a new terrorist spectacular on American soil is now directed at targets in the UK. This is a quite staggering number. I ran the figure by several former CIA officers in the US, all of whom still have close links with the intelligence community. The consensus was that the 40 per cent figure is about right. ‘If you’re talking about total global operations, that would be an exaggeration,’ one national security official said. ‘If you’re talking about operations to deal with threats against the US homeland, that’s the ball park.’ This has caused some tensions in what my old tutor Dr Chris Andrew, now the official historian of MI5, calls ‘the most special part of the special relationship’. A former CIA officer who still does freelance work for the agency, said: ‘Britain is an Islamist swamp. You don’t want to have to spend time spying on your friends.’

As far as our closest ally is concerned, Britain is not part of the problem, Britain is the problem. Bruce Riedel, a former CIA officer and Middle East expert on the NSC for three presidents, who has just been appointed to head Barack Obama’s overhaul of Afghan strategy, told me: ‘The 800,000 or so British citizens of Pakistani origin are regarded by the American intelligence community as perhaps the single biggest threat environment that they have to worry about.’

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In short, the US believes that if there is to be a repeat of 9/11, it is most likely to be carried out by British Muslim terrorists.Robert Mueller, the head of the FBI, used a speech to the Council on Foreign Relations in Washington this week to announce that the bureau is now specifically targeting extremist splinter groups seeking to enter the US through the visa waiver programme.

Intelligence gained by American operatives from British people in Britain has thwarted several attacks and helped locate Rashid Rauf, an al-Qa’eda operative who was implicated in Operation Overt, the alleged plot to blow up airliners over the Atlantic, who was killed in a US missile strike last November.

It’s understandable that the government’s response to the Binyam Mohamed affair was shaped by the need to protect this flow of information. But it is not an isolated example. Tony Blair’s decision to lean on the Serious Fraud Office and bring a halt, two years ago, to the corruption inquiry into BAE’s dealings with the Saudi government came after a Saudi threat to cut off intelligence co-operation.

The initial reluctance of the British government to point the finger at the Russians for the murder of Alexander Litvinenko owed a lot to anguish in MI6 at the likely loss of FSB intelligence on Muslim terrorist suspects, drug-smugglers and people-traffickers through the Balkans. British policy towards Pakistan is similarly defined by the desire to balance political reform with the need to maintain a steady flow of intelligence from the Pakistani military and those bits of the ISI intelligence agency that are not a wholly owned subsidiary of al-Qa’eda. Their information was vital in understanding how the London bombers of July 2005 were radicalised and trained.

Patrick Mercer, chairman of the Commons counter-terrorism sub-committee, said: ‘Once Britain has become seen as a net exporter of terror it’s understandable that other nations concentrate their intelligence efforts here and those links become increasingly important.’

The subordination of foreign policy to intelligence needs goes even further when it is shaped by the desire to avoid antagonising potential militants in the UK. Contrast Tony Blair’s support for Israel’s war in Lebanon with Gordon Brown’s immediate calls for a ceasefire in Gaza. Then listen to the security minister Lord West: ‘Tony Blair would never accept that our foreign policy actually had any impact on radicalisation; well, that is clearly bollocks. This business in Gaza has not helped us at all in our counter-radicalisation policy.’

You don’t have to support the Iraq war or Israeli aggression to know that governments need to be free to make decisions in the national interest without trimming their sails to avoid annoying potential homegrown terrorists. But the quest to prevent a new atrocity has become the secret driving force of British foreign policy. The reason is the debilitating fear of what would happen if British militants succeeded in an attack overseas. David Miliband’s trip to India after Mumbai was a diplomatic disaster. Imagine how much worse it would have been had British extremists, as was originally feared, been behind the attacks. British India policy now would be a protracted effort to placate and apologise.

Then consider the reaction in France, whose security services were first to coin the phrase ‘Londonistan&
#8217; to describe that Islamist swamp, if British Islamists ever struck across the Channel. We’d put even fewer past M. Sarkozy in the corridors of Brussels if that ever happened.

Finally, consider the case currently before Woolwich Crown Court, where eight British Muslims are on trial charged with plotting to blow up seven transatlantic airliners in August 2006. These men are innocent until proven guilty, but the knock-on effect of the case has already been felt in the intelligence world. It was the prospect of the airline bomb plot that initially persuaded the US to step up their espionage activities in the UK.

In the eyes of MI5, one British intelligence official said, ‘The fear is that something like this would not just kill people but cause a historic rift between the US and the UK. If an American aircraft carrying American passengers had been brought down out of the United Kingdom by British subjects, you can imagine the fallout. That is the sort of thing that brings governments down.’

That thought is why the spooks were downing double measures, David Miliband is dealing in half-truths, and somewhere in West Yorkshire the CIA is dining on chicken madras.

This article first appeared in the print edition of The Spectator magazine, dated