Straw letters fuel new Megrahi row

Leaked letters from the Justice Secretary appeared to show that he backed away from efforts to stipulate that Abdelbaset Ali Mohmed al-Megrahi was exempt from the agreement, citing "wider negotiations" with the Libyans.

Mr Straw's stance was set out in letters to Kenny MacAskill, the Scottish justice secretary who recently provoked anger by releasing Megrahi on compassionate grounds.

The bomber was not released as part of the prisoner transfer agreement. But the disclosure of Mr Straw's letters, by The Sunday Times, is likely to raise questions about the Government's position on Megrahi's return to Libya earlier this month.

But Mr Straw denied that trade deals with Libya had any bearing on the release of Megrahi. "The implication that, somehow or other, we have done some backdoor deal in order to release Mr Megrahi is simple nonsense," he told BBC Radio 4's The World This Weekend.

Ministers have also rejected suggestions that the release was tied in to Britain's commercial interests but have refused to state whether they agree with Mr MacAskill's highly controversial decision. The Sunday Times reported that Mr Straw's apparent change of stance came at a crucial time in negotiations about an oil exploration contract for BP in Libya. Six weeks after his change of heart, the deal was ratified.

In one of the letters, Mr Straw wrote: "I had previously accepted the importance of the al-Megrahi issue to Scotland and said I would try to get an exclusion for him on the face of the agreement. I have not been able to secure an explicit exclusion. The wider negotiations are reaching a critical stage and, in view of the overwhelming interests of the United Kingdom, I have agreed that in this instance the (prisoner transfer agreement) should be in the standard form and not mention any individual."

Liberal Democrat foreign affairs spokesman Ed Davey said the letters were the strongest evidence yet that the Government had been talking to the Libyans about Megrahi with a view to safeguarding Britain's commercial interests. But Mr Straw said that the proposed exclusion of Megrahi from the prisoner transfer scheme had been dropped because it "went beyond the standard form".

The Liberal Democrats also called for a public inquiry. Mr Davey said: "Labour ministers will not now escape the suspicion of a terrorist-for-trade deal unless they agree to the transparency of a full inquiry. The Prime Minister can no longer hide behind SNP compassion for a sick man when it seems compassion for commerce was at the centre of his Government's thinking."

Frank Duggan, president of the family group Victims of Pan Am Flight 103 Inc, described the disclosures as "shocking". He told BBC Radio 5 Live: "If there was a direct connection with trade, particularly oil, then the connection is with Britain not with Scotland, and I think the Brits will have something to answer for."