Freddie Scappaticci, the man accused of being the IRA double agent 'Stakeknife', is to be questioned by detectives over claims that his army and police handlers allowed him to carry out up to 40 murders in Northern Ireland.
Scappaticci, who has consistently denied all allegations against him, is visiting relatives in Sicily and due back in Belfast on 8 August.
A senior security source confirmed that the Sir John Stevens inquiry into undercover operations by the security forces in Northern Ireland wants to ask Scappaticci about his alleged role inside the IRA's 'nutting squad', which roots out informers.
'There is panic not only among the Provos but also the army and Special Branch over Freddie,' the source told The Observer. ' Some ex-Branch men have moved to Spain to escape prosecutions. There is a brewing scandal here about whether his handlers let Scappaticci get away with murder.'
Stevens's inquiry wants to broaden its investigation into collusion between security forces and terrorists. Until now it has focused on the role of loyalists allowed by their army and police handlers to kill at will. The inquiry will now widen to include agents inside the IRA who were also allowed to engage in acts of terrorism while supposedly working for the British state.
Scappaticci's imminent arrest comes as the republican community in West Belfast increasingly believes he was a traitor working at the heart of the Provisional IRA.
The Observer has learnt that IRA units in Belfast have been briefed that the Provisionals' leadership has accepted that reports of Scappaticci's treachery are accurate.
The IRA leadership has come under tremendous pressure from their grassroots, who believe Scappaticci is 'Stakeknife'. A fortnight ago, transcripts of tapes from The Cook Report were read out on BBC's Panorama.
In them, Scappaticci disparages the Sinn Fein chief and former Northern Ireland Education Minister Martin McGuinness, telling reporters that McGuinness lured an IRA informer, Frank Hegarty, back from England to Ireland and to his death. Scappaticci describes McGuinness as cold-blooded and ruthless, managing to con Hegarty's mother, Rose, into believing he was helping rather than setting up her son for murder. McGuinness has denied any involvement with the case.
One important signal of a change of attitude towards Scappaticci has been a subtle shift in coverage by the republican newspaper, the Andersonstown News.
Last month the paper ran a double-page interview with Scappaticci riddled with denials that he was 'Stakeknife'. However, in the current edition, the paper's editor and former Sinn Fein councillor Mairtin O'Muilleoir, appears to indicate that its readers believe Scappatticci is 'Stakeknife'.
In his column, O'Muilleoir writes: 'Time will tell (and perhaps a very short time at that) whether Freddie Scap was or wasn't a Branch agent, though there's no getting away from the fact that the majority of our readers, who have been given the full story, are starting to reach their own sad conclusion.'
Republicans in Belfast expect further revelations about Scappaticci soon, although it is unclear if there will be an IRA communiqué confirming its belief that their former spycatcher was himself a double agent.
Meanwhile, Sinn Fein supporters yesterday picketed the home of a dissident republican shot and wounded by the IRA on Thursday night. Harry Pettigrew was shot while walking along the Oldpark Road in North Belfast. He claimed that he was targeted because he opposes Sinn Fein's peace strategy. Protesters outside his home in the Ardoyne area demanded that he leave after his outspoken attack on local TV against Sinn Fein and the IRA.
The IRA's move against anti-peace process republicans came as Gerry Adams and McGuinness held talks in Belfast with Tony Blair's chief-of-staff, Jonathan Powell.
On the same day, Adams spoke for three hours with embattled Ulster Unionist leader David Trimble. However, both meetings failed to produce a breakthrough. The IRA is understood to have told Powell it will not even begin to decommission more weapons unless London sets a firm date for elections.