A LEAKED secret memo that sparked fevered speculation in Westminster last week records one of the most sensitive meetings between Tony Blair and George W Bush.

The Sunday Times has established that the meeting was a far-ranging discussion about the two leaders’ approach — and differences — towards policy throughout the Middle East.

The exact contents of the memo, allegedly leaked by a senior government official to an MP’s aide, have not been published because the government has threatened to prosecute anyone who does so under the Official Secrets Act.

A Cabinet Office official and an MP’s researcher who are alleged to have handled the memo and are due to appear in court this week could face prison sentences.

According to initial reports, the document records a discussion between Bush and Blair in which Bush suggested bombing an office of Al-Jazeera, the Arabic television station. The reference may well have been a joke, although yesterday a station executive delivered a letter to Downing Street urging Blair to clarify the reports.

The discussion, held at the White House in April 2004, is understood to have revealed fundamental differences between the Americans and British on the Middle East peace process, the reconstruction of Iraq and the possible use of Iranian help against the insurgency.

On April 16, 2004, Blair, accompanied by Sir Nigel Sheinwald, his foreign policy adviser, and Jonathan Powell, his chief of staff, met Bush and Colin Powell, the then US secretary of state, in the White House.

Two days before the meeting, Bush had endorsed Ariel Sharon’s plan for the Israeli withdrawal from the Gaza Strip. But the right of return for millions of Palestinian refugees to land seized by Israel since 1948 was blocked. The plan was met with fury in the Arab world. It also angered Blair as it ended two years of diplomatic efforts by the British on the “road map” to Middle East peace.

According to Anthony Seldon, Blair’s biographer, who has interviewed those briefed on the meeting, this marked a “significant” setback for Blair. The prime minister was also said to be angered by the US failure to consult him on their private negotiations with Sharon. However, in public Blair remained supportive of Bush.

The two leaders also clashed over the future of Iraq. Blair arrived at the White House from talks with Kofi Annan, the secretary-general of the United Nations. This is thought to have led to a “frank” discussion with Bush, who had to be persuaded of the need for the UN to “guide” the composition of the new Iraqi administration. However, the UN’s input has since been minimal.

Compounding Anglo-American tensions, Sir Jeremy Greenstock left his position as Britain’s special representative in Iraq just days before the meeting, after disputes with the US over reconstruction policy. Powell said Greenstock was “no shrinking violet” in articulating his concerns to the Americans.

Greenstock is currently barred by the Cabinet Office from publishing his memoirs detailing his experiences.

At the time of the White House meeting, the Americans were fighting in Falluja against Sunnis backed by foreign fighters linked to the Al-Qaeda leader Abu Musab al-Zarqawi. More than 600 Iraqi civilians were reported to have been killed in the offensive. A memo leaked to The Sunday Times last year revealed deep misgivings within the British government over America’s “heavy-handed” tactics.

The White House meeting is thought to have covered how the British were secretly liaising with Iranian “diplomats” in Baghdad in the hope that they would mediate with the Shi’ite leader Moqtada al-Sadr.

Iran is now suspected of funding and training insurgents in southern Iraq, so the disclosure of any evidence that Blair was prepared to negotiate with them in 2004 would be embarrassing.

This part of the discussion also revealed information about British and American intelligence sources in Iraq and military strategies. It is this material that the government is most concerned to prevent leaking into the public domain.

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