Paul Grecian is identified as an informant for the American intelligence agency in a confidential memo to be published in July by the Scott inquiry.
The CIA link may explain why an attempt by the US Justice Department to extradite Mr Grecian from South Africa failed last month. The department wanted Mr Grecian on charges of supplying ammunition parts to Iraq.
The memo was written by a senior Customs investigations officer and sent to the Foreign Office Middle East desk. Copies went to senior officials at the Department of Trade and Industry and the Ministry of Defence.
Mr Grecian, 41, was one of four businessmen who pleaded guilty in February 1992 to conspiring to smuggle an artillery fuse assembly line and ammunition components to Iraq via Jordan in the late 1980s. He was given a suspended prison sentence, but cleared on appeal. His company, Ordtec, was contracted to the Space Research Corporation, run by the late Gerald Bull. Ordtec ordered 155mm shell fuses from a US company, Rexon Technologies, and booster pellets from the British firm BMARC for the contract.
But Mr Grecian had been providing details of British arms supplies to Iraq, particularly the Supergun, to three intelligence agencies: MI5, MI6 and Special Branch.
The Ordtec case had similarities to the Matrix Churchill trial which collapsed in November 1992. Mr Grecian and his colleagues won their appeal because Customs failed to disclose documents to the defence showing the Government had turned a "blind eye" to their activities.
A month after his victory in the Appeal Court, Mr Grecian flew to South Africa for a Christmas break with his fiancee only to be arrested under an Interpol warrant at Johannesburg airport. He was remanded in custody after the court was warned that British Intelligence might try to rescue him.
Michael Prior, a British antiquarian book-dealer who led the campaign in South Africa to free Mr Grecian, claimed a senior CIA figure in Pretoria was instrumental in frustrating the extradition attempt.
Customs officers learned about Mr Grecian's contacts with British intelligence after interviewing him on 2 August, 1990.
Less than four weeks later, Pat Blackshaw, assistant chief investigation officer at Customs, wrote to David Hope, of the Foreign Office Middle East desk, about the investigation saying that Mr Grecian had "contact" with Special Branch.
The memo says Mr Grecian was reporting to the CIA: "I should mention that the Grecians first came to Customs [Investigations Department] attention during the Gulf War.
"At that time they were concerned with a UK company called Allivane Ltd which" - the memo alleges - "was engaged in avoiding export licensing restrictions by supplying explosives and propellant charges to Iran via Portugal. Paul Grecian gave information on the operation to the CIA."
In his inquiry report, Sir Richard Scott describes Customs investigators' belief that Allivane arms were to be diverted from Portugal to Iran as "compelling".
Mr Grecian, now back in London, denied working for the CIA, although admitted passing the agency on to his partner at Allivane, Terry Byrne.
Mr Grecian's campaign co-ordinator, Mr Prior, believes the CIA was behind the collapse of the extradition case in South Africa. He identified a friend in the US embassy in Pretoria, who undermined the extradition attempt, as a senior CIA officer.
Mr Grecian, meanwhile, is still wanted in America and is too frightened to travel abroad.Reuse content