A senior Whitehall official boasted that “high-level political interventions” had enhanced the prospect of arms sales to Libya, three weeks after Britain’s prisoner transfer deal with the regime was ratified.

Richard Paniguian, who runs the government organisation that promotes defence exports, used a speech on May 21 to highlight the backing it offered to British manufacturers of military equipment.

“There have been high-level political interventions, often behind the scenes, in places like Libya, Oman, India and Algeria,” the head of UKTI DSO said. “The key here is consistent support over time, delivered at key points in a campaign. You’d expect us to deliver Whitehall support and we are doing that.” His speech at a private symposium, also attended by Lord Mandelson, the Business Secretary, came during intense negotiations with Libya over Abdul Baset Ali al-Megrahi, the Lockerbie bomber, who was set free on compassionate grounds by the Scottish government last month.

The Government has denied that it tried to influence the decision or that the release was tied to trade deals with oil-rich Libya. As The Times disclosed yesterday, however, Jack Straw, the Justice Secretary, was lobbied by BP in 2007 before he abandoned efforts to exclude al-Megrahi from the Prisoner Transfer Agreement (PTA) — seen as a key measure for repairing relations with the once pariah state. BP has said that it was not the only British company pressing ministers for a speedy conclusion to PTA negotiations that were threatening to damage commercial interests in Libya.

However, BAE Systems, the defence manufacturer, denied that it had lobbied the Government on Libya. Mr Straw’s office said that it had no record of such contact, even though the firm has strong links to his Blackburn constituency.

Mike Turner, the former chief executive of BAE, said: “We always tried to be hand-in-glove with the UK Government in pursuing legitimate export opportunities and would do our best to ensure ministers were well briefed ahead of visits.” But he said neither the prisoner transfer deal nor al-Megrahi were ever mentioned.

BAE is one of several British defence manufacturers that have tried to gain some of Libya’s military spending — forecast to rise to $730 million (£445 million) next year — since sanctions were lifted against the regime five years ago.

However, for all the speculation that accompanied Tony Blair’s two visits to Libya in 2004 and 2007, negotiations on defence deals stalled in recent years while the fate of al-Megrahi was settled.

The UKTI DSO and British defence companies are expected to attend the Libyan Aviation Exhibition in October, while Libya is one of 53 countries invited to the DSEi arms fair in London next week.

A spokesman for UKTI DSO initially denied that Mr Paniguian had made a formal speech at the event on May 21 and that the remarks attributed to him had been made up.

When told the Campaign Against Arms Trade had obtained a transcript under the freedom of information rules, he said: “We have been working very hard with Libya for a number of years on normalising relations and looking at their defence requirements. It would be quite wrong to make any direct link between this and the PTA.”

Downing Street said: “It’s hardly surprising UKTI DSO are seeking to promote defence exports — that is their job.”

In Washington, the Obama Administration made clear its anger over how the PTA threatened to breach a deal that al-Megrahi would serve out his sentence in Britain. Senator Frank Lautenberg, called for an inquiry to “expose the truth”.

Doctors have moved al-Megrahi out of an emergency care unit at the Tripoli Medical Centre but he remains under close observation, a hospital source said last night.

Timetable to freedom

March 2004 Tony Blair visits Libya to seal its re-entry into the international community. Shell signs oil exploration contract. EU lifts arms exports ban later.

May 2007 Blair visits again and agrees prisoner transfer plan. BP signs near-billion-dollar oil deal with Libya.

October-December 2007 Jack Straw is lobbied by BP over prisoner deal; decides he cannot exempt al-Megrahi because of UK’s “overwhelming interests”.

May 2008 Libya ratifies BP deal.

May 2009 Libya applies for al-Megrahi’s transfer.

August 2009 Scottish government rejects application for transfer, citing decade-old deal betwen UK and US that he serve sentence in Britain. Instead, it releases him on compassionate grounds

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