The misuse of a satellite phone registered with the British Embassy in Baghdad is being investigated by the Foreign Office (FCO), it has confirmed.
The FCO are fully behind the missing sat-phone investigation
A spokeswoman at the FCO could not confirm newspaper reports that the phone was stolen two years ago and has run up a bill of £500,000.
She was also unaware of any breaches of security involving the device.
The phone was barred in June when its operator - Thuraya - picked up abnormal billing information.
A foreign office spokesman said last night: "Following concerns over one of our satellite phones going missing in Baghdad it was debarred from use.
"An investigation into this is taking place. Until that is completed it's not possible to provide any further details".
Newspapers have speculated that the phone was intercepted as it was sent from Britain to Baghdad, via a courier.
There are also fears that the sat-phone fell into the hands of insurgents in Iraq and claims that invoices show thousands of calls made to Yemen and Saudi Arabia, where al-Qaeda are known to be active.
The Thuraya Satellite Telecommunications Company was founded in the United Arab Emirates in 1997 to provide a telephone service for over 100 countries in Europe, the Middle East and Africa.