Ever since the 1995 bombing of the Paris metro by the Algerian Armed Islamic Group (GIA) made France the first western European country to suffer so-called radical Islamist terrorism, its politicians and "terror experts" have consistently warned Britain to the dangers of welcoming Islamist political dissidents and radical preachers to her shores.

In the aftermath of the July London attacks, commentators were quick to argue that France's "zero tolerance" policy and campaign of "integration" in the name of republican values - embodied in the 2004 ban on the display of all religious symbols in schools - has spared the country from terror attacks, while Britain's failure to follow Spain and Germany in adopting the French model has proved a spectacular own-goal. However, as Tony Blair made clear in unveiling his government's proposed legislation on August 5, "the rules of the game have changed". Suddenly, the French recipe for dealing with Islamist terror has become feted by British politicians and media alike.

But how would we regard the virtue of the French model if, a decade after bombs ripped through the metro, enough evidence had been gathered to demonstrate that the attacks allegedly carried out by Islamist militants were not fuelled by fundamentalism, but instead were dreamt up and overseen by the Algerian secret service as part of a domestic political struggle that spilled over into Algeria's former colonial master? The most comprehensive studies - including Lounis Aggoun and Jean-Baptiste Rivoire's Françalgérie: Crimes and Lies of the State - argue that this is exactly what happened.

In 1991 Algeria's main Islamic party, the Islamic Salvation Front (FIS), won a first-round victory in the country's inaugural multiparty general elections, which threatened to strip away the power of the generals who had controlled the state from the shadows.

Exploiting Europe's fear of an Islamic government, the Algerian army intervened to halt the second round of voting, forcing the president to step down and a temporary commission to rule the country. But the legitimacy of this new arrangement could only be assured if the Islamic opposition could be discredited and crushed.

The DRS - the Algerian secret service - systematically infiltrated insurrectionary Islamist groups such as the GIA and from 1992 onwards launched its own fake guerrilla groups, including death squads disguised as Islamists. In 1994, the DRS managed to place Jamel Zitouni, one of the Islamists it controlled, at the head of the GIA.

"It became impossible to distinguish the genuine Islamists from those controlled by the regime," says Salima Mellah, of the NGO Algeria Watch. "Each time the generals came under pressure from the international community, the terror intensified". By January 1995, however, Algeria's dirty war began to falter. The Italian government hosted a meeting in Rome of Algerian political parties, including the FIS. The participants agreed a common platform, calling for an inquiry into the violence in Algeria, the end of the army's involvement in political affairs and the return of constitutional rule.

This left the generals in an untenable position. In their desperation, and with the help of the DRS, they hatched a plot to prevent French politicians from ever again withdrawing support for the military junta. As Aggoun and Rivoire recount, French-based Algerian spies initially given the task of infiltrating Islamist networks were transformed into agent provocateurs. In spring 1995, Ali Touchent, an Algerian agent, began to gather and incite a network of disaffected young men from north African backgrounds to commit terrorist attacks in France. The DRS's infiltrators, led by Zitouni, also pushed the GIA to eliminate some of the FIS's leaders living in Europe.

On July 11 1995 Abdelbaki Sahraoui, a FIS leader in France, was assassinated. The GIA claimed responsibility. Two weeks later the metro was hit by bombs, killing eight. After a further attack, Zitouni called on President Jacques Chirac to "convert to Islam to be saved". The resulting public hysteria against Islam and Islamism saw the French government abandon its support for the Rome accord.

So what happened to the perpetrators? The masterminds of the main attack were never caught. Despite being publicly identified by the Algerian authorities as the European ringleader of the GIA and by French investigators as the key organiser, Touchent evaded capture, returned to Algeria and settled in a secure police quarter of Algiers.

France's inability to bring to justice those genuinely responsible for the 1995 attacks was evidently more than an accident. According to Mohamed Samraoui, a former colonel in the Algerian secret service: "French intelligence knew that Ali Touchent was a DRS operative charged with infiltrating pro-Islamist cells in foreign countries." It has never been officially denied that in return for supplying the French authorities with valuable information, Touchent was granted protection.

This is not the only explanation for French collaboration with the Algerian government. Algeria is one of the main suppliers of gas and oil to France, and an important client. François Gèze of La Decouverte, a French publisher which exposed the involvement of the Algerian secret services in the dirty war, argues that at the heart of this economic relationship is a web of political cor ruption. "French exporters generally pay a 10 to 15% commission on their goods. Part of this revenue is then 'repaid' by the Algerians as finance for the electoral campaigns of French political parties."

What the true story of France's 1995 brush with "Islamic terror" reveals is that the attacks, while probably executed by a small number of Muslim extremists, were conceived and manipulated by vested interests. British policymakers would do well to understand the specific context and complex colonial legacy of French-Algerian relations before they go looking for direct comparisons. The 1995 case is also a warning against blaming "Islamists" for terror, while turning a blind eye to repressive actions of governments in the Arab world when they suit western governments' agenda.

· Naima Bouteldja is a French journalist and researcher for the Transnational Institute