The bomb plot has also been linked to the sudden firing of the head of the Czech counter intelligence agency (BIS), Karel Vulterin, late Wednesday night. It has been alleged that the Czech agency had failed to uncover the planned terrorist actions.
Czech television has claimed that the former Iraqi consul to Prague, Jaber Salim, had been instructed to blow up the offices of Radio Free Iraq in Prague's Wenceslas Square. Salim then informed British intelligence. The radio station is run by opponents of the regime of President Saddam Hussein and is beamed into Iraq. It is considered a thorn in the side of the Iraqi government.
There have also been reports that Salim was an Iraqi spymaster who has defected and is currently being debriefed in an MI6 safe house in the Home Counties.
Salim, 43, head of Iraqi intelligence operations in eastern Europe, disappeared late last year.
He is reported to have told colleagues at the Iraqi embassy in Prague that his daughter needed urgent treatment in Austria. Salim was said to have been an "agent-in-place", passing British intelligence on Iraqi arms purchases from former Eastern Bloc countries.
The Czech government announced on Thursday that it had fired Vulterin, citing "serious professional failure". It has refused to give details and secrecy surrounds the decision. Mr Vulterin was brought in to reorganise the agency in 1997 after it was heavily criticised. However, criticism has continued.
The agency has been blamed for a number of failures that have embarrassed the Czech government. Most notably, it failed to warn the government of the sale last year of nine top Czech hotels to Corinthia Group, a Maltese company which the US considers to be Libyan-owned. As a result, the US bans Americans from staying in these key hotels.
The Czech daily newspaper Mlada Front Dnes reported that Vulterin was fired for failing to recruit Salim.
The Foreign Office yesterday refused to confirm that British intelligence had foiled the bomb plot.
"We do not comment on intelligence matters," said a Foreign Office spokesman yesterday.