A British soldier working as an interpreter for the commander of Nato forces in Afghanistan began spying for Iran because he felt he was the victim of racism in the Army, a jury at the Old Bailey has heard.

At the start of one of the most high-profile espionage trials in recent times, the court heard that Cpl Daniel James, 45, used his position, working for General Sir David Richards, to offer secrets to an officer at the Iranian embassy in Kabul. The Iranian-born reservist of 18 years' service had become "aggrieved and bitter" at his treatment by the military, blaming his lack of promotion on prejudice, Mark Dennis, for the prosecution, told the court.

"The allegation in this case is that, during the latter part of 2006, the defendant's loyalty to this country wavered and his loyalty turned to Iran, the country of his birth," said Mr Dennis. "He turned his back on those with whom he was serving in Afghanistan and sought to become an agent for a foreign power... He began to complain to others about what he perceived as discrimination against him in the Army – linking racist attitudes to his lack of promotion."

The soldier's action, the court heard, "was the most grave example of wilful misconduct ... putting at risk the lives of UK and Allied soldiers".

Cpl James, from Brighton, Sussex, has been charged under Section 1 of the Official Secrets Act and with the offence of wilful misconduct in public office. He denies the charges.

Cpl James, born Esmail Mohammed Beigi Gamasai in Tehran, is alleged to have been in contact with Col Mohammed Hossein Heydari, an Iranian military assistant, who he may have met during a visit to Tehran's embassy in Kabul working for General Richards, who had been appointed the head of Nato's international Security and Assistance Force (Isaf), said Mr Dennis. A cryptic series of exchanges with Col Heydari had been traced with messages from Cpl James, said Mr Dennis, including, "in the north Iran/Iraq border, they are setting up a military camp. All the ground forces are there ... I don't know the exact situation, but it is possible that it is close to a city called Alamara" and "I have a very good present for you".

Cpl James was arrested on 18 December 2006 at RAF Brize Norton in Oxfordshire, as he was about to board a flight to Kabul and his belongings were searched. Mr Dennis said: "The defendant's USB device was found to have two Nato-confidential documents stored in it." The documents included details of operations, summaries of key events, movement of personnel and casualty figures, he said.

A search of Cpl James's room at isaf headquarters in Kabul unearthed a computer disc, the court was told, which included photographs of Predator spy-planes and a restricted military document which dealt with co-ordination of Nato air strategy.

The court heard that Cpl James came to Britain in his early teenage years and became a British citizen in 1986, keeping his Iranian passport as a dual national. in 1987, he joined the TA and, in 1997, changed his name by deed poll to Daniel James. in 2006, Cpl James, attached to the 30th Battalion, the Princess of Wales Regiment, was deployed to Afghanistan and appointed as translator for General Richards.

The case continues.