. "Gaddafi is a cunning devil," confided one Whitehall deep throat. "Anything is possible."

Muammar Gaddafi has always flaunted the Great Man-Made River project as one of the many wonders of his 41-year rule – and as one of the wonders of the modern world. The largest and most expensive irrigation project in history, costing a whopping $33bn, it extracts water from beneath the Sahara at a depth of 1,600 to 2,500ft, purifies it and transports it to the Mediterranean coast where most of Libya's 6.5m people live. But are its huge concrete tunnels also coming in handy to keep Libyan tanks and missiles out of sight of Nato air attacks?

Not surprisingly, the Atlantic alliance is reluctant to reveal too much of what it knows about Libyan deployments. It claims to have already destroyed about a third of Gaddafi's military capabilities – though officials in Tripoli insist there is still plenty of lethal hardware left. Nato's biggest public beef is that the regime's armour and rocket launchers are being deliberately positioned in civilian areas next to mosques, schools and hospitals – especially in the besieged coastal city of Misrata – inhibiting air allied attacks for fear of causing "collateral damage". But western intelligence officials have now suggested that the concealment of heavy weapons in the 15ft-wide tunnels is causing them problems – not least because strategic targets like these, which Britain and France would like to hit, fall outside what was agreed by the UN security council to protect Libyan civilians.

Claims of weapons and, according to some reports, gold bullion hidden in the GMMR's tunnels conjures up a Bond villain-type scenario. But there is evidence that Gaddafi has gone underground before. In the mid-1990s facilities built by North Korean workers at Tarhuna, 50 miles south-east of Tripoli, were used to house chemical weapons factories in the side of a mountain and were protected by a thick layer of reinforced concrete. Libya claimed at the time that those tunnels were innocent and formed part of the GMMR.

Earlier this month, the Libyan government warned that Nato attacks on the project could result in a humanitarian disaster, especially in the area between Sirte and Benghazi, where water networks and gas pipelines overlap and many raids have taken place. So there will be alarm in Tripoli at suggestions that Libya's pride could now become a legitimate military target – and perhaps a suspicion that psychological warfare is being waged by Nato. "Gaddafi is a cunning devil," confided one Whitehall deep throat. "Anything is possible."