Echoes of the Cold War have returned to Nato headquarters in Brussels after an Estonian general was unmasked as a “sleeper” spy who passed top secret alliance information to Moscow.

Herman Simm (61), a retired official in Estonia’s defence ministry, has been arrested along with his wife on suspicion that they were recruited by KGB officers before the collapse of the Soviet Union.

After Estonia’s independence in 1991, state prosecutors believe Mr Simm made contact with the KGB’s successor foreign intelligence agency, the SVR.

The former police chief was the perfectly placed mole: between 1995 and 2006 he helped set up the high-security system for handling all sensitive Nato documents ahead of Estonia’s accession to the alliance in 2004.

That has alarmed Estonia’s Nato allies, who are talking about the greatest intelligence breach since the CIA counter-intelligence chief Aldrich Ames was exposed as a Soviet mole in 1994.

Mr Jaanus Rahumägi, chairman of the Estonian parliament’s security watchdog, admits that the spy has caused “historic damage” to the alliance.