PRESIDENT Musharraf of Pakistan says that the CIA has secretly paid his government millions of dollars for handing over hundreds of al-Qaeda suspects to America.

The US government has strict rules banning such reward payments to foreign powers involved in the war on terror. General Musharraf does not say how much the CIA gave in return for the 369 al-Qaeda figures that he ordered should be passed to the US.

The US Department of Justice said: “We didn’t know about this. It should not happen. These bounty payments are for private individuals who help to trace terrorists on the FBI’s most wanted list, not foreign governments.”

The revelation comes from General Musharraf’s memoir, In the Line of Fire, which begins serialisation in The Times today and will further embarrass the White House at a time when relations between the US and Pakistan are already strained.

General Musharraf claimed last week that the Bush Administration threatened to bomb Pakistan “back to the Stone Age” if did not co-operate with the US after the 9/11 attacks.

The latest revelation will embarrass the White House days before General Musharraf is due to meet President Bush and President Karzai of Afghanistan to discuss how to combat a resurgent Taleban.

The disclosures are also causing consternation in Pakistan. Members of General Musharraf’s Cabinet and senior diplomats apparently did not know he was writing a book and are worried that relations with its allies and Western intelligence agencies will be damaged by the revelations.

The CIA refused to divulge the size of its bounty payments, saying: “Our relationships with international leaders is not something we are prepared to talk about.” One senior CIA figure added: “Nor do we expect these leaders to do so.”

Among the suspects surrendered to the US was Khalid Sheikh Mohammed, the alleged architect of the 9/11 operation and many other terror plots in the UK, including a planned attack on Heathrow airport, the plot never came to fruition.

General Musharraf does not explain why his intelligence chiefs only questioned al-Qaeda’s alleged operational mastermind for three days before handing him over to the CIA when he was allegedly responsible for so many attacks inside Pakistan and he alone knew the identities of the key figures in Osama bin Laden’s network.

General Musharraf says that in the Heathrow plot in 2002 Mohammed planned to use flights leaving European airports belonging to the national airlines of the Czech Republic, Croatia, Poland, Romania, the Slovak Republic and Malta because of their lax security.

The signal for the hijackers to seize the plane was when the “fasten seat belt” sign was turned on as the aircraft

was coming into land at Heathrow. Al-Qaeda had picked European Muslims, including a number of white converts, to fly the aircraft into terminal buildings and fuel dumps at London’s main airport.

Pakistani intelligence chiefs are concerned that General Musharraf may jeopardise their relationship with British intelligence agencies after claiming that a convicted terrorist was once an MI6 informer.

The President outlines the role played by a former London public schoolboy, Omar Sheikh, in the kidnap and murder of Daniel Pearl, the Wall Street Journal reporter, in February 2002.

General Musharraf says that Sheikh, who orchestrated the abduction, was recruited by MI6 while he was studying at the London School of Economics and sent to the Balkans to take part in jihad operations there. He alleges that Sheikh later double-crossed British intelligence. “At some point he probably became a rogue or double agent,” General Musharraf says.

Sheikh has been held since February 2002 and was sentenced to death. He is being held in a Karachi jail but British detectives have been denied access to him.

General Musharraf says that he decided to disclose details of covert operations and his country’s capture of 689 suspects since 9/11 to counter claims that Pakistan has not done enough to combat al-Qaeda.

A number of the men he handed to the Americans have been held in CIA-run secret detention centres. While Mr Bush has tried to play down reports of rising tensions between Islamabad and Washington, relations will not be helped by General Musharraf’s disclosures.

In the book he says that he was so angered at US attempts to bully Pakistan into supporting the White House that he had his military commanders study “war games” to see if they could take on the American forces should they try to operate inside his borders without permission. He insists that it wasn’t intimidation that led him to back the US, but because it was in Pakistan’s interest.

General Musharraf scorns what he calls “the ludicrous demands” from Washington after 9/11, including one insisting that he should suppress protests inside Pakistan against the US.

His revelations are also likely to cause upset in India after he insults the military prowess of his nuclear neighbour.

At home his political opponents say that the book is General Musharraf’s blatant attempt to bolster his own reputation before elections in October 2007 as he has signalled his determination to have another five years in power. They are also questioning what he intends to do with the reported six-figure sum he was paid by the publishers for his book.