Mr Taylor is the power behind the rebel Revolutionary United Front which controls most of Sierra Leone's diamond producing areas and has used the proceeds from gem sales to buy arms, according to assessments in London and Washington.

"The name of the game for Taylor is control of the diamond producing areas in Sierra Leone," a western intelligence official said. "The Taylor enterprise is about the creation of wealth."

Mr Taylor fought a long guerrilla war in Liberia partly financed through sales of iron ore and timber. He was elected president in 1997.

The central role played by Mr Taylor in the brutal civil war in Sierra Leone explains why the European Union last month bowed to British pressure to suspend aid of $47m (£30.9m) to alleviate poverty in Liberia. It also explains why the UN Security Council last week agreed an 18-month embargo on the export of Sierra Leone diamonds.

Britain proposed the ban but the embargo did not extend to Liberia because the US, France and others believe Mr Taylor could still be useful in stabilising the region. The connection between Mr Taylor and the illicit diamond trade has emerged as part of a Financial Times investigation into how diamonds are fuelling conflicts in Sierra Leone, Angola and the Democratic Republic of Congo.

The investigation reveals how rebel forces in Africa are using diamond sales to buy weapons from a global network of arms traffickers from eastern Europe and the Middle East. The diamonds are smuggled from Africa's conflict zones via transit points such as Geneva to the main trading centre for uncut stones in Antwerp, according to several leading diamond dealers.

Peter Meeus, general director of Antwerp's Diamond High Council which co-regulates the industry, said the black market in illicit diamonds had been "marginalised". He said diamonds from Unita, the Angolan rebel movement, were no longer available in Antwerp.

But the FT has established that an international police investigation has been launched into sanction busters in Angola, where a UN embargo on Unita diamonds has been in force since June 1998.

Paul Higdon, director of criminal intelligence at Interpol, said a UN report on Angolan sanction busters had given his organisation about six "targets".

One of the main suspects is understood to be Victor Bout, a former Soviet air force officer-turned-arms dealer accused of flying weapons to Unita, which has thrived on illicit diamond sales. Antwerp's chief prosecutor is conducting a wide-ranging inquiry into possible breaches of the UN embargo on the purchase of Unita diamonds in Antwerp.

The inquiry is believed to include David Zollmann, an Antwerp diamond dealer who the UN alleged was "a longstanding and ongoing Unita contact for the sale of illicit diamonds". Mr Zollmann said he might have bought Unita diamonds before the UN sanctions were introduced. "I have not directly or indirectly breached the UN sanctions."

On Wednesday, Britain will urge the Group of Eight leading industrialised nations to support a global certification scheme for diamonds intended to prevent rebel movements selling stones and buying weapons with the proceeds.