A BIZARRE blackmail plot involving Nazi treasure and a kidnapped dog has been foiled in a major North-East police operation, it was revealed last night.

The dog was held to ransom for a £2m chalice, which once belonged to Nazi chief Hermann Goering.

The historic relic had been discovered in the loft of a house in Sunderland where it had lain after being smuggled out of Germany by an enterprising squaddie at the end of the Second World War.

Sources close to the inquiry said they believed it was handed over to the present owner last year as payment for a five-figure debt.

Ironically, the chalice is unlikely to be returned to its North-East owner after questions were raised about its future.

Recently, valued at £2m by Christie's in London, the chalice is now likely to be sent back to Germany.

Police said the blackmailer hatched an amazing plot to get his hands on the Goering treasure.

He grabbed a boxer dog belonging to the owner in the hope of ransoming it for the chalice.

The much-loved pet was snatched from a house in Seaburn, Sunderland, while its owner was in hospital and was held for five days.

The kidnapper phoned the owner and ordered her to hand over the treasure if she wanted to see the dog again.

But the audacious plan was scuppered when the owner went to the police.

Last night, a man was helping police with their inquiries and the chalice was under lock and key.

Nazi memorabilia collectors had long believed the chalice to have been lost after the Second World War.

In fact, it had been taken as an unusual memento by one of the soldiers who stormed Goering's Prussian lair in the dying days of the conflict.

It is believed the Sunderland sqauddie wrapped the inscribed goblet in a blue velvet curtain and carried it out of the Carinhall Lodge - named after Goering's wife Carin - in his Army backpack.

But when he got home to the North-East, the young soldier got cold feet and worried that he would be taken to task by his superiors if it was discovered he had snatched Goering's treasure.

He hid it in the loft of his home, and there it stayed, still wrapped in the curtain, for the rest of his life. It was only after he died in 1997 that the chalice was passed on.

The foot-high chalice is believed to have been made to mark the occupation of the Rhineland by German forces in 1936.

An inscription on the side reads, in German: "In memory of the great time 7.3.36" with Goering's name underneath.

Last night, Sunderland CID, who are investigating the theft and blackmail attempt, were believed to be liasing with Interpol to decide the chalice's future.

Detective Inspector John Watts said: "I can confirm that a man is in custody on suspicion of blackmail and theft and that an item has been recovered. Investigations are continuing."

Unlike the Nazi chalice, the dog has been returned to its owner