The UN expressed outrage yesterday after an extraordinary claim by the former cabinet minister Clare Short that British intelligence services were involved in bugging the private office of its secretary general, Kofi Annan.
Mr Annan's team, after speaking to the British ambassador at the UN, launched an inquiry into the legal implications of the alleged bugging.
"We want this action to stop, if indeed it has been carried out," said Mr Annan's spokesman, Fred Eckhard. "It is not good for the United Nations' work and it is illegal."
It is believed to be unprecedented for covert action to have been taken against the UN secretary general.
Ms Short, the former international development secretary, delivered her blow to Tony Blair while Downing Street was still reeling from the collapse of the court case against Katharine Gun, the GCHQ officer-turned-whistleblower.
She claimed that the intelligence services had been bugging Mr Annan's private phone for years, especially in the pivotal period in the run-up to the Iraq war last year. She said she had seen the transcripts.
Mr Blair, at his monthly Downing Street press conference, accused her of behaving irresponsibly but did not deny the allegation. He claimed that he could not comment out of duty to protect the intelligence services.
Ms Short said later: "What is the PM going to say? Either he has to say it's true we are bugging Kofi Annan's office, which he doesn't want to say, or he's got to say it's not true and he'd be telling a lie, or he's got to say something pompous about national security.
"There is no British national security involved in revealing that Kofi Annan's private phone calls have been improperly revealed and there is no danger to anyone working in the British security services by making this public.
"What will happen is it will stop and Kofi Annan will have the privacy and respect he should have."
Her allegation wrecked Mr Blair's press conference, which he had hoped would be a showcase for a new initiative on Africa. Ms Short's claim was a particular embarrassment to him, given that he described Mr Annan as a personal friend.
Apparently furious, he said the "intelligence services were performing a vital task for our country and it really is the height of irresponsibility to expose them to this kind of scrutiny and questioning in a way that can do this country no good".
The combination of Ms Short's allegation and the collapse of the court case against Ms Gun has left the Official Secrets Act in tatters.
The government is to conduct a cross-departmental review to see if the legislation can be tightened to prevent further leaks. Its scale is not yet clear, and it may ultimately prove fruitless.
Mr Annan's officials opted yesterday to present a relatively calm exterior in public, but behind the scenes they were raging.
One UN official described the revelation as "outrageous".
Another said: "We're looking at the legal side, whether intercepting by satellite is as illegal as bugging under the Vienna convention.
"The initial reaction of the legal counsel was that it's against civil, criminal and international law.
"But we're still going over the books."
Mr Eckhard said Mr Annan's office was regularly checked for bugs but he did not say whether anything had been found.
Ms Short chose to unleash her latest attack on Mr Blair on BBC Radio 4's Today programme, the same forum that led to the allegation of Downing Street tampering with Iraq intelligence and the Hutton inquiry.
Asked whether Britain was involved in the bugging, she said: "Yes, absolutely." But in later interviews, she did not specify whether the intelligence gathering had been conducted by US or British agents.
Any bugging would have probably been conducted by US agents, given that New York is on the doorstep of the US national security agency.
Some cabinet ministers would like to discipline Ms Short for her repeated outbursts against the prime minister's integrity, but as she admitted yesterday, she is acting as a free agent. "I am not trembling in my shoes," she said.
Party disciplinary action against her is likely to backfire by making her appear to be a martyr.
The bugging row came as the government struggled with the fallout from the Gun affair. The attorney general, Lord Goldsmith, made an emergency statement to peers setting out the reasons the government dropped its case against the whistleblower.
He insisted that the decision had been taken solely on legal grounds "free from any political interference".
He also said the decision to abandon the case had nothing to do with his view on the legality of the war.
But lawyers familiar with the case pointed out yesterday that the legality of the war would have been an important feature of the case, had it gone ahead.