James Critchfield, who has died aged 86, might have sprung straight from the pages of John le Carré. In the chaos of postwar Germany, he was picked by the Central Intelligence Agency to collaborate with Hitler's suddenly unemployed spies in a project to boost America's espionage against the Soviet bloc. The disclosure of his role came only a few years ago, after new congressional legislation at last obliged the CIA to admit to a project it had tried to keep secret for 50 years.
Critchfield joined the agency after being decorated for gallantry in France during the second world war and serving with military intelligence. His opposite number on the German side was Reinhardt Gehlen, whose brilliant intelligence work for Hitler had seen him promoted to general, though he had none of the required combat experience.
Gehlen had masterminded the Wehrmacht's intelligence gathering on the eastern front and, in 1945, surrendered with his entire archive to General Omar Bradley. When the Americans asked him to summarise this vast hoard he tacked on a proposal for a new organisation to conduct espionage against the Soviet Union and its allies in central Europe, which he would run and Washington would fund.
With Moscow repeatedly inquiring whether Gehlen had yet been captured, the spymaster was quietly spirited to the US. Allen Dulles, then with the Office of Strategic Services and later head of the CIA, agreed to the plan and an autonomous Gehlen Organisation sprang to life. It went down like a lead balloon in London, where Guy Liddell of MI5 warned that it might turn out to be the nucleus of a revived Abwehr.
The plan proceeded, however, and, with President Truman's creation of the CIA in 1948, Critchfield was made the agency's link with Gehlen. As he later acknowledged, he quickly discovered that the German had recruited some pretty unsavoury characters, many of whom had been senior officers in the SS or Gestapo. Gehlen had briskly furnished them with false papers so that they could carry on more or less where they had left off.
In spite of this discovery, Critchfield decided that the new enemy was more important than the old and recommended that Washington continue giving its full support to the network.
One of Critchfield's crosses in an already awkward situation was the constant bickering from the British. London's answer to Gehlen had been Otto John, a participant in the 1944 attempt on Hitler's life, who had fled to Britain after the plan failed. In 1950, John was appointed head of a newly created West German security service.
After America's experience of Nazi penetration, Britain devised what it thought an adequate safeguard by establishing an Office for the Protection of the Constitution to vet potential recruits. That worked well enough in excluding ex-Nazis, but was thrown into confusion when John suddenly vanished eastward in 1954. On his return to the west 18 months later, he claimed to have been kidnapped by the KGB. Since no one believed him, he was tried and jailed for treason.
Meanwhile, Critchfield's operation was undergoing parallel traumas. The most notorious case, which erupted at much the same time as the John fiasco, involved an employee at the Gehlen Organisation's headquarters in Munich, Heinz Felfe. After one of Gehlen's East German networks had been sensationally and comprehensively rounded up, a security check revealed that Felfe had been a senior officer in the SS. Apparently dissatisfied with his American pay, he had augmented it by spying for East Germany.
After his exposure, Neues Deutschland gleefully published full details of the Gehlen Organisation and its operations. When it became clear in a number of subsidiary scandals that the competing Anglo-American networks had been comprehensively penetrated, allied involvement ground to a halt.
With the advent of West German independence in 1955, Critchfield shed his European responsibilities and moved to a CIA station in the Middle East. Soon the area was reverberating from the 1956 Anglo-French-Israeli attack on Egypt and President Eisenhower's furious response to it, and his activities there remain obscure. He was in the region when the Iraqi monarchy was overthrown in 1958 and later showed considerable knowledge of the country in his published writings.
He also emerged from the assignment with a detailed understanding of the oil business, which he put to good use at a national level during the 1970s energy crises, when he worked at the CIA's Virginia headquarters.
He retired from the agency in 1975 and set up a consultancy on Middle East energy resources. He also served on a committee to advise on the publication of classified material on Nazi and Japanese war crimes. The agency gave him its Trailblazer award for "significant early accomplishments" and its Distinguished Intelligence medal.
He is survived by his third wife Lois, and by four children of his earlier marriages.
· James Hardesty Critchfield, intelligence officer, born 1917; died April 22 2003