Colin Powell has accused Iraq of systematically undermining the work of UN weapons inspectors.

He also warned that Iraq has the potential to develop smallpox as part of its arsenal of weapons of mass destruction.

In a presentation to the United Nations security council in New York, the American secretary of state said that Saddam Hussein had worked on a variety of biological weapons such as anthrax and cholera.

"He also has the wherewithal to develop smallpox," he warned.

"Saddam Hussein will stop at nothing until something stops him."

America and Britain have both said they are taking steps to ensure they have enough smallpox vaccines to make them available to their entire populations.

Powell also said there was also a "sinister nexus" between Iraqi intelligence and al Qaeda.

Denials of links with Osama bin Laden's network were "simply not credible".

Powell used his speech to accuse Iraq of failing to assist UN weapons inspectors in their search for banned weapons of mass destruction.

"It is an important day for us all," he told the assembled foreign ministers.

Powell said resolution 1441 had placed the emphasis on Iraq to cooperate with the weapons inspectors.

"Inspectors are inspectors, they are not detectives," he said.

"Saddam Hussein and his regime are concealing their efforts to produce more weapons of mass destruction."

He played tapes of two senior Republican Guard officers talking the day before inspections began. The tape appeared to show them discussing the "evacuation" of possibly prohibited equipment from a military base.

Another conversation, recorded on January 30, indicated military officials were attempting to "clean up" areas being inspected by the UN.

"This is part and parcel of a policy of evasion and deception that goes back 12 years, a policy set at the highest levels of the regime," said Powell.

He accused Iraq of having a senior committee for monitoring and "deceiving" the inspectors, with members including Saddam Hussein's son and the most senior Iraqi official working with the UN inspectors.

Iraq also has 18 mobile laboratories capable of producing biological weapons, he said.

Powell said his claims were based on "solid" intelligence sources, which also showed determined attempts to spy on the UN inspectors.

"Iraq today is actively using its considerable intelligence capabilities to hide its illicit activities," he said.

"From our sources we know that inspectors are under constant surveillance by an army of Iraqi intelligence officers. Iraq is relentlessly attempting to tap all their communications, both voice and electronic."

Scientists had also been warned that divulging information to the inspectors would be treated as an act of espionage and would be "punishable by death".

There was an "active and systematic" campaign to prevent any meaningful inspection work.

"I believe that Iraq is now in further material breach of its obligations," he warned.

"The issue before us is not how much time we are willing to give the inspectors...but how much longer are we willing to put up with Iraq's non-compliance before we as a council, we as a United Nations, say 'enough is enough'?"

Foreign secretary Jack Straw gave an uncompromising response in support of Powell, saying the dossier was "laying bare the deceit of Saddam Hussein".

It was clear, he told the security council, that Iraq had failed to comply with UN resolution 1441 and was in material breach of resolution 1441.

Straw accused the Iraqi regime of showing "the same contempt as to the previous resolutions" and "defying every single one of us".

"He is gambling that we will lose our nerve rather than enforce our will," Straw said, adding that time was now running short for compliance by Iraq.

Straw also drew historical parallels with the League of Nations, which had allowed "small evils to go unchecked" with disastrous consequences.

"We cannot allow for the same mistake to be made again," he said.

Britain's case against Saddam was undermined on Wednesday when the BBC obtained an intelligence document which dismissed any current link between Iraq and al Qaeda.

The document, which had been circulated to senior ministers, says the regimes had been in contact with Osama bin Laden's network in the past - but relations faltered almost as soon as they had begun.

Liberal Democrat leader Charles Kennedy challenged the prime minister at PMQs on Wednesday on whether the assessment was accurate.

Tony Blair said he was not among those who would have seen the internal MoD document and said its conclusions had to be "read in the round".

"What I have said to the liaison committee - which is backed up by intelligence reports - is that there are links. Just how far those links go is a matter of speculation," he said.

Kennedy warned that the public would not be convinced on the merit of a war with Iraq on tenuous assessments with Osama bin Laden.

The prime minister rejected the idea that the al Qaeda link was a key part of the case against Saddam Hussein.

"It would be wrong to say there are no links. I don't rest my case on this. It is not correct to say there is no evidence. I do not think it is fair to say that we are trying to push this to hide any weakness in our case on weapons of mass destruction," said Blair.

Jack Straw would not be drawn on the document but conceded he had seen no intelligence to prove that Saddam was harbouring al Qaeda operatives.

The foreign secretary told the BBC that he had "seen no evidence which directly links Iraq to al Qaeda, but I would not be surprised if it exists".

"The Iraqi regime appears to be allowing a permissive environment in which al Qaeda can operate, and we have seen links between al Qaeda and people in Iraq."

"We do not know the extent of those links."