Lockerbie: now it's payback time

Prospect of lucrative trade deals fuels anger at Megrahi's release

British businesses were poised for a Libyan windfall last night after the release of the convicted terrorist Abdelbaset Ali al-Megrahi completed a five-year rehabilitation for the north African state.

British trade leaders said the release of the man convicted of the Lockerbie bombing was a major breakthrough in relations between the two nations, which have progressed at breakneck speed since Tony Blair met the former pariah leader Muammar Gaddafi in a bedouin tent outside Tripoli in 2004.

Col Gaddafi's son, Saif al-Islam, last night said that Megrahi's release was linked to trade deals with Britain, with British oil, gas and water treatment companies, banks, security contractors, tobacco firms and even women's high-street clothing stores in line for hundreds of millions of pounds of business.

Lord Trefgarne, the former trade minister who chairs the Libyan-British Business Council, declared yesterday that there would be "benefits" for British firms from the decision to release Megrahi – adding to the row over the Scottish administration's decision to free him on compassionate grounds to return home to Libya.

John Mosey, whose 19-year-old daughter Helga was on Pan Am Flight 103, said: "It seems clear to me that some sort of deal was done between Libya, Britain and America to get Megrahi to drop his appeal. We know that these [trade deals] go on ... but if they come at the price of truth and justice, then I'm afraid we no longer live in a civilised society. It's obscene. If that is the case here, which does seem likely, it stinks."

The political fall-out of the decision to release Megrahi escalated yesterday, as he returned home to joyous scenes, with hundreds of Libyans waving flags and swarming his convoy. The White House said the scenes in Tripoli were "outrageous and incredibly offensive" and the US President Barack Obama described the homecoming as "highly objectionable".

Earlier the Tory leader David Cameron urged Gordon Brown to break his silence on Megrahi's release. In a letter to Mr Brown, Mr Cameron said: "I believe that the public are entitled to know what you think of the decision to release Megrahi, and whether you consider it was right or wrong."

Downing Street disclosed that the Prime Minister had personally appealed to Col Gaddafi, in a letter the day before Megrahi's release from Greenock prison, for the terminally ill former intelligence officer to be given a low-key return rather than a hero's welcome.

David Miliband, the Foreign Secretary, condemned the triumphant scenes in Tripoli as "distasteful". "Obviously, the sight of a mass murderer getting a hero's welcome in Tripoli is deeply upsetting, deeply distressing," he added.

But Mr Miliband strongly denied that Megrahi had been freed to improve commercial relations. "I really reject that entirely," he said. "That is a slur both on myself and the Government."

And in an interview with The Times, Megrahi said that he intended to produce evidence proving his innocence. "My message to the British and Scottish communities is that I will put out the evidence and they will be the jury," he said.

Lord Trefgarne, a defence minister at the time of the 1988 Lockerbie bombing, said: "In Libya, business matters and political matters are inextricably entwined."

Mr Islam, considered his father's most likely successor, declared: "I affirm that the Libyan people will not forget this brave stance from the governments of Britain and Scotland and that friendship between us will be enhanced forever."

The oil giant BP, which returned to Libya in 2007 after Mr Blair signed a deal with Col Gaddafi for a $900m joint venture, will be foremost among those UK companies expected to profit. Libya has the largest proven oil reserves in Africa, at 42 billion barrels.

"The potential is very large," said a spokesman for BP. "There's a lot of hope that new resources will be found there. You could be looking at an investment of $20bn over a couple of decades." BP is expected to now be able to push forward at speed with its geological study of the Sirte basin, an offshore area the size of Belgium.

UK Trade and Investment (UKTI), the government body that helps British companies win contracts abroad, is aggressively advising UK firms on how to succeed in Tripoli. Industry sources say that the sectors most likely to benefit from such a windfall include oil, gas, water and financial services.

Libya has $5bn to invest across Africa and is seeking British joint venture partners to match investment in hotels, oil and mineral extraction and banks. Even British high-street retailers are moving in to Tripoli: Next will open its first Libyan store on 8 October, joining Marks & Spencer, Bhs and Monsoon Accessorize.

The pest control company Rentokil was called in by the Libyan government this year to eradicate the infestations of desert rats which blight several cities. Rentokil uncovered an outbreak of bubonic plague in the north-eastern town of Tobruk, and is looking into setting up an office in Libya.

UK visible exports to Libya last year totalled £280m, up one-fifth on 2007. In the first five months of 2009, UK exports to Libya rose by 49 per cent to £166m. UKTI estimates that at least 150 British companies operate in Libya. The Duke of York, a trade ambassador for Britain, has visited Libya four times in two years and met Col Gaddafi and his son.

Lord Trefgarne said the "positive" decision on Megrahi would bring relief to the business community. There would have been a "distinct cooling" in commercial relations had he not been released. He said that British business links had initially developed more slowly than the council had hoped. "Perhaps now, with what I would assume to be the final resolution of the Lockerbie affair as far as the Libyans are concerned, maybe they will move forward a little more swiftly," he said.

The Scottish Parliament has been recalled next week and the Scottish Justice Secretary Kenny MacAskill is expected to come under fierce questioning. Alex Salmond, the SNP First Minister, hinted that political considerations played a part: "There is no doubt that politics came into it – but not from the Scottish Government."

British business interests in Libya

According to UK Trade & Investment, at least 150 British businesses operate in Libya. They include:

*BP

In 2007, the company signed a deal worth $900m with the Libyan government. It plans to explore an area of 54,000 sq km.

*Shell

Moments after Tony Blair concluded his talks with Colonel Gaddafi in March 2004, the Anglo-Dutch company announced that it had signed a deal worth £550m for the right to explore gas reserves off the Libyan coast.

*BG Group

The gas producer has been active in Libya since 2005, scouring an area of thousands of square kilometres in the country's onshore Sirt Basin.

*Marks & Spencer

The British retailer opened a store in Tripoli in 2008, a stone's throw from the British Council's headquarters.

*Rentokil

At the beginning of this year, the pest-control company won a £24m contract after the Libyan government became worried by desert rat infestations in several cities. A 32-strong team discovered an outbreak of bubonic plague in the north-eastern town of Tobruk.

* ... and the rest

Bhs opened a shop in Tripoli in April, Monsoon and Accessorise have a joint branch in the city and Next plans to open its first store in October.