Lady Thatcher, a diamond necklace and the request that shocked the Sultan

When the Sultan of Oman presented Margaret Thatcher with a diamond and sapphire necklace in 1981, she immediately fell in love with it.

When the Sultan of Oman presented Margaret Thatcher with a diamond and sapphire necklace in 1981, she immediately fell in love with it.

She wore it to grand occasions and was so bedazzled by it that six months after leaving office - and with the precious jewellery left behind in the vaults of No 10 - she asked the Sultan if he could make her a replica of the £200,000 necklace. He was "visibly shocked" and refused.

This - and the extraordinary sequel involving John Major and his wife Norma - is revealed in a new book, Sultan in Arabia: A Private Life by John Beasant, a former press secretary to heads of state in the Islamic world, and Christopher Ling, a former member of the Sultan's armed forces.

The story begins in 1981, when Lady Thatcher made a controversial trip to Oman. During her visit she lobbied the Sultan on behalf of Cementation, a British construction company that was bidding for a £300m contract to build a new university. (It subsequently emerged that her son, Mark Thatcher, was at that time a paid consultant to Cementation and was in Oman while his mother was lobbying for the business.)

The Sultan presented her with the necklace, which was made by Asprey, of which he was a major shareholder. Liberally set with diamonds and sapphires, it was described by one member of the Sultan's court as "spectacular". But when Lady Thatcher wore it, it looked more like "a collar than a necklace" and gave her the appearance of having won "best of breed" at Crufts, according to an Oman diplomat quoted in the book.

The then Prime Minister was captivated by the gift and often wore it on state occasions. But when she resigned in 1990, the necklace was placed in a special vault in 10 Downing Street. Under strict Cabinet Office rules for ministers, all presents valued at more than £125 become the property of the state unless the recipient buys them.

Barely six months later, shortly after the 1991 Gulf War, Lady Thatcher visited Oman to thank the Sultan for his support during the war, but also to drum up funds for the Thatcher Foundation. During a private dinner at Bait Al Falaj, the principal barracks of the Sultan's armed forces in Muscat, she asked the Sultan if a replacement necklace could be provided. He was, according to the book, "visibly shocked" by the request. The Sultan politely declined and suggested to the British ambassador that the necklace be discreetly returned.

The embarrassed pro-British Sultan let the matter drop, and the original necklace remained in the vaults at No 10. But in 1994 Lady Thatcher saw photographs of Norma Major wearing the necklace during a banquet that the Queen gave for the Polish leader, Lech Walesa, at Windsor Castle and was enraged. According to the book's authors, the Iron Lady "suffered a case of extreme metal fatigue and was seething with rage".

"That was given to me," the former premier told a friend at the time. "It really is mine."

She then telephoned John Major in a fury and told him that the necklace was "a personal favourite" and a private present to her from the Sultan and demanded that nobody else wear the necklace again.

Mr Major argued that the necklace was for the use of the incumbent Prime Minister and government of the day. But Lady Thatcher insisted that nobody else should wear it. In the end, Mr Major backed down. He agreed that his wife would wear a different necklace for future formal occasions.

The story of this row subsequently leaked via Tatler magazine, provoking headlines about "Necklacegate", and prompting the Labour MP Tony Banks to remark: "Lady Thatcher obviously believes that diamonds are for ever." It was not known, however, until revealed in the new book, that it was the Sultan's necklace that was at the centre of the row, nor that Lady Thatcher was so devoted to the bauble that she asked for a duplicate.

Lady Thatcher was well known for collecting jewellry from foreign heads of state. During 77 official trips to 54 countries, she amassed a vast collection, including a heavy coffee pot from the Sultan of Oman which perched on the sideboard at No 10 and a jewelled desk set from Abu Dhabi.

The "necklace affair" is a major feature of the book, which also discloses intimate details about the life of the enigmatic Sultan. The Oman embassy in London declined to comment on the biography. But a source close to the Oman ambassador insisted that "it was highly unlikely that Lady Thatcher would have behaved in this way". John Major said at the time that reports of his row with Lady Thatcher were "inaccurate". Lady Thatcher's office could not be reached for comment.

The revelations come at a difficult time for the Sultan. The 6,000 or so British nationals in Oman have been told to be vigilant by the Foreign Office after random shootings by Islamic militants. Last year a German tourist was shot and killed near the British embassy, and six weeks earlier a British national was shot and seriously wounded in the capital.

Anti-Western sentiment has increased in Oman, mainly because of opposition to the Iraq war. Foreign Office sources are perturbed about growing numbers of Islamic insurgents. During recent killings in Iraq, British and American schools in Oman received threatening phone calls and hoax bomb warnings. Britons have been told to keep to areas that are well-frequented by pedestrians.

Oman is a strategic ally in the Iraq war. It allowed the UK and the US overfly rights during last year's bombing raids. Oman also buys vast amounts of arms from the UK. Last year, Britain exported military equipment valued at £25.17m to the oil-rich sultanate.

Diplomats are anxious that Oman remains a stable, pro-Western ally. But they are concerned about growing support for Islamic militants who accuse the Sultan of indulging in an extravagant lifestyle. Last month the Sultan ordered a new Boeing private jet at an estimated cost of £150m and a £200m yacht. Critics say that the Sultan needs to implement meaningful democratic and economic reforms to avoid terrorist attacks of the sort that have recently taken place in Saudi Arabia.