Oil behind Megrahi deal, admits Straw

His comment risks reigniting the row over Megrahi's release, after Prime Minister Gordon Brown claimed earlier in the week that there was "no conspiracy, no cover-up, no double-dealing, no deal on oil".

On Wednesday, Mr Brown insisted the dominant factor in the British government's policy towards Libya was the need to bring the former pariah state on board in the fight against international terrorism and nuclear proliferation, and not oil or commercial interests.

However, Mr Straw last night said the issue of trade played "a very big part" in his decision to include Megrahi in a prisoner transfer agreement (PTA) struck with Libya in 2007, citing a lucrative deal which was being sought by British oil giant BP at the time.

The admission comes after BP yesterday confirmed it had sought to apply pressure to a speedy conclusion to the PTA deal. The company revealed a BP consultant had contacted Mr Straw in October, and again in November of 2007, while Britain was negotiating the PTA. Libya went on to ratify a 550 million oil deal with BP weeks after the PTA was sealed in January 2008.

"BP did bring to the attention of the UK government in late 2007 our concerns about the slow progress in concluding a prisoner transfer agreement with Libya," the company said in a statement.

"Like many others, we were aware delay might have negative consequences for UK commercial interests, including ratification of BP's exploration agreement."

However, BP insists it did not single out Megrahi as part of the discussion. The Libyan, who has terminal prostate cancer, was sentenced in 2001 to life in prison, with a minimum of 27 years.

Documents released earlier this week show Mr Straw assured the Scottish Government in 2007 that Megrahi would be excluded from any PTA agreed with Colonel Muammar al-Gaddafi's regime as part of the normalisation of relations between the UK and Libya.

However, just weeks later, he informed Edinburgh he had not been able to secure an exemption for Megrahi and had decided to go ahead with the PTA as it stands "in view of the overwhelming interests of the UK".

Asked whether trade was a factor in his decision, Mr Straw said: "Yes … a very big part of that. I'm unapologetic about that.

"Libya was a rogue state. We wanted to bring it back into the fold. And yes, that included trade, because trade is an essential part of it, and subsequently there was the BP deal."

Mr Straw stressed Mr Brown was not involved in the decision to press ahead with the PTA, adding: "There is no paper trail to suggest he was involved at all." A Downing Street spokeswoman last night declined to give any further statement.

She said: "Gordon Brown himself spoke on this issue on Wednesday."

However, Angus Robertson, the SNP's Westminster group leader, said: "Jack Straw's admission that trade was at the heart of the UK government's actions over Megrahi confirms the wisdom of the Scottish Government in opposing this PTA from the start, and of the justice secretary (Kenny MacAskill] in rejecting the application."

Megrahi was eventually released from a Scottish jail – where he was serving life for the 1988 bombing of PanAm flight 103 over Lockerbie, which killed 270 – on compassionate grounds, and the PTA was not invoked. His return to a hero's welcome in Tripoli on 20 August sparked revulsion in Britain and the US, where most of the Lockerbie victims lived.

The Conservatives have already called for an independent inquiry into the handling of Megrahi's case. Leader David Cameron insists he should have been allowed to die in jail.

A spokesman for Mr Straw said: "Jack's position has been on the record for some days. He has never denied that seeking an agreement with Libya over a PTA was connected to a wider process of normalising relations with Libya, including on trade.

"Jack took this position in the certain knowledge there was an absolute veto on Megrahi being transferred to Libya, because the decision was always in the hands of the Scottish Executive."