It sounds like one of the best jobs in the Royal Navy. The commander in charge of the British Indian Ocean Territories (BIOT) is master one of the most remote colonies, a palm-fringed tropical paradise 1,000 miles from civilisation.

But as David Miliband, the Foreign Secretary, revealed yesterday, the main island of Diego Garcia is British only in name. A union flag may fly over the resident’s house and British laws might apply on paper, but the real masters are the US Navy and Air Force and their 3,000 personnel who run one of the most sensitive and strategic bases in the world.

Yesterday’s admission that Diego Garcia, nicknamed “the Footprint of Freedom” by the US military, was used as a refuelling stop for two rendition flights in 2002 is deeply embarrassing for both London and Washington.

It confirms, what many had long suspected, that when America needs Diego Garcia it will use the facility with little regard to the handful of British officials or their rules.

Underpinning the awkward relationship is the island’s troubled modern history. Britain removed the indigenous population of its Indian Ocean territories to make way for the construction of the US military base at the height of the Cold War.

Since then the Pentagon has not looked back. Diego Garcia air base has been used for long-range bombing missions against Afghanistan and Iraq. The air base can now accommodate B2 stealth bombers housed in their own air conditioned hangars. Its natural harbour is home to nuclear submarines and holds pre-positioned ships ready to deliver arms and ammunition at short notice anywhere in the Middle East, Africa or Asia. The base is also a key ground station for the Pentagon’s space operations.

In exchange for the rights to the base, Britain initially received a discount when it purchased Polaris nuclear submarines from America during the Cold War.

But the returns on the deal are diminishing. The Foreign and Commonwealth Office (FCO) is currently locked in a bitter legal battle with the Ilois, the former inhabitants of the islands, who have won two court rulings to be allowed to return to their ancestral homes. The High Court is currently considering an FCO appeal.

America’s lease over Diego Garcia does not expire until 2036, 70 years after it was signed. But either party can opt out of the agreement in 2016 if they are not satisfied.

A future Government may well consider that it would be worth renegotiating the terms of the deal, even if it means lowering the flag over one of our most beautiful possessions.

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