Was Oil Part of a Deal for the Lockerbie Bomber?

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Libyan Abdel Baset al-Megrahi, who was found guilty of the 1988 Lockerbie bombing, center, is helped down the airplane steps on his arrival at an airport in Tripoli, Libya.

Was it an oil deal? Convicted Lockerbie bomber Abdel Basset Ali al-Megrahi flew home from a Scottish prison on Thursday, freed by the Scottish government on compassionate grounds because doctors say Megrahi's cancer will kill him within three months. But was that the real reason? Could Britain have traded Megrahi in return for lucrative deals with the energy-rich North African nation?

British officials strongly deny any such arrangement with Libyan leader Muammar Gaddafi, who has nevertheless thanked British Prime Minister Gordon Brown for the release of Megrahi and claimed that Brown "encouraged" the Scottish Government to take this decision. Gaddadi has also defied criticism from both the U.S. and U.K. by appearing with Megrahi on Libyan TV, where they were seen talking and hugging. On Friday, Libya watchers and oil analysts said they believed that the decision to free the only person convicted in the 1988 Pan Am Airlines bombing was connected to British investment interests. "It [Megrahi's release] was a matter of when, not if," says Molly Tarhuni, manager of the international security program at the London-based think tank Chatham House. "It's a very strong possibility" that a deal was struck, she says. "There are benefits to Britain having done it. This was the last in a long chain of deals."

That possibility is fueling a political row in London. Conservative Party leader David Cameron wrote to PM Brown Friday saying that "the public are entitled to know what you think of the decision to release Megrahi," which Cameron called "the product of some completely nonsensical thinking." Britain's Foreign Office ordered Buckingham Palace to reconsider a scheduled trade visit to Tripoli next month by Prince Andrew, according to the London Evening Standard. Much of the outrage was sparked by the jubilation in Libya after Megrahi's arrival. Foreign Secretary David Miliband told BBC Radio on Friday that "the sight of a mass murderer getting a hero's welcome in Tripoli is deeply upsetting."

And despite official British assertions that they had nothing to do with the decision, Gaddafi's son Seif al-Islam Gaddafi — his father's likely successor — said the British government was central to freeing Megrahi. "This is a courageous and unforgettable stance from the British and Scottish governments," Seif Gaddafi said in a statement published on the web site of the Gaddafi Development Foundation, which he heads. He also thanked "our friends in the U.K. government who had an important role to play to reach this happy end."

Megrahi was freed after serving only eight years of a life sentence for 270 counts of murder. U.S. officials had pleaded with Britain and Scottish officials in recent weeks to block his release, and Secretary of State Hillary Clinton said on Thursday that she was bitterly disappointed that he had been freed. There was also strong criticism from family members of some of the victims; 259 passengers were killed when a bomb exploded mid-air aboard the doomed aircraft over Lockerbie, Scotland, and 11 others who were on the ground died from falling debris.

Some oil analysts and Libya watchers on Friday said they suspected that British officials had tacitly made it known to Libyan officials that they would not object to Scotland releasing Megrahi — even if they stopped short of reassuring Libya that he would be freed. Scotland's Justice Minister Kenny MacAskill insists he made the decision alone, after meeting with Clinton and U.S. Attorney General Eric Holder, and holding a video conference with U.S. relatives. But the BBC reported last week that British business minister Peter Mandelson had held a brief conversation earlier this month with Seif Gaddafi, when the two men met on the Greek island of Corfu, where they were both vacationing. Mandelson's staff said the politician made no assurance of Megrahi's release. Still, says Mohammed-Ali Zainy, senior economist at the Center for Global Energy Studies in London, "There can be no dispute that this strengthens the relationship between Britain and Libya." Mandelson has since said that the allegation of a trade deal between the U.K. and Libya was "wrong, completely implausible and... quite offensive."

Libya sits atop massive energy reserves, much of which have languished through decades of sanctions. The British oil company BP last year estimated Libya's proven reserves at about 41.5 billion barrels of high-grade oil, and about 1.49 trillion cubic meters of natural gas, which makes it the 10th biggest oil and gas reserves in the world.

Gaddafi, who seized power in a bloodless coup in 1969, abandoned his pursuit of nuclear weapons earlier this decade. At the behest of his son Seif, Gaddafi opened talks with U.S. officials about renewing ties with Washington. The U.S. lifted sanctions in 2004; last year, Secretary of State Condoleezza Rice paid Gaddafi a visit.

Relations with London have also warmed. In 2007, former British Prime Minister Tony Blair held talks with Gaddafi in the Libyan leader's tent in Tripoli. Soon after, BP officials signed a $900-million exploration deal with Libya's state-run National Oil Company; BP believes the deal could ultimately earn it about $15 billion in oil revenues. But Blair has denied that there was ever a link between the deal and the release, telling CNN on Saturday that he didn't have the power to arrange Megrahi's release. "I wasn't in a position to say so-and-so should be released. That's not the way the British system works. And the release of Mr. Megrahi, as I understand it, has been done by the Scottish Executive which, obviously, not only myself, but my successor, has no influence over."

European companies are especially drawn to Libya because its so close to Europe; Italy, for example, avoids giant shipping costs involved in importing oil and gas from the Persian Gulf, by bringing in natural gas through a pipe under the Mediterranean. Libya is keen for investment to help fund much needed work in roads, rail links, telecommunications, and even on its oil rigs. Libya's Soviet-era military equipment is also in bad need of an overhaul, and France, Britain and Russia are all vying for multi-billion-dollar defense contracts. "Libya can offer a lot of investment opportunities," Zainy said. "There is construction, there is trade."

Italian companies signed deals for huge oil and gas investments in Libya in 1998, soon after the Italian government issued an official apology for its human-rights violations in Libya before World War II, when Libya was an Italian colony. Last year — the 10th anniversary of that apology — the two countries signed a friendship treaty involving $5 billion worth of infrastructure deals. And in 2007, while trying to negotiate a major deal to sell Libya French fighter jets, French president Nicolas Sarkozy secured the release of a group of Bulgarian nurses from a Libyan prison, where they were jailed for allegedly infecting patients with the HIV virus. When it comes to cutting deals with the former pariah state, "everyone is equally guilty," says Molly Tarhuni of Chatham House, adding that those countries with good relationships with Libya will reap large benefits. "There are enough resources in Libya to keep everyone happy."