Tony Blair discussed with Colonel Gadaffi how best to "find a way through" for the jailed Lockerbie bomber Abdul Baset Ali al-Megrahi after BP formally signed an exploration deal in 2007, according to Libya's Europe minister.
In an interview with The Sunday Times in Tripoli yesterday, Abdulati al-Obeidi, the minister, said that al-Megrahi had been on the agenda during Blair's visit that year.
"They (Blair and Gadaffi) discussed possible ways on how legally to bring al-Megrahi to Libya, whether through British or international laws or the Scottish system," the minister said.
"At that time they were merely exchanging ideas. The idea was discussed as a title. Everyone was looking for a relationship to continue and prosper into the future and to find a way out for Abdul Baset, but nothing was agreed."
Blair said last month the Libyans had raised the issue of al-Megrahi with him, but he had told them he did not have the power to release the prisoner.
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The minister said that Blair had made no promises to Gadaffi "but they only discussed possibilities of how to go about it".
However, he confirmed that if al-Megrahi had not been included in the Prisoner Transfer Agreement, raising the prospect of his eventual release, "this would have affected the negotiations on future prospects".
"People here would have then have sat down and reassessed trade issues," he said.
"Whether this would have cancelled the BP deal is highly unlikely because that was already signed and contracts drawn and there would have been many legal repercussions and penalty clauses involved. Libya also looks out for its interests and to cease the BP deal is not in its interests."
He said the British had tried to exclude al-Megrahi from the beginning of talks about the Prisoner Transfer Agreement, and had then tried to exclude any prisoner being held on a terrorism charge. "But we insisted that in any normal prisoner agreement, no one should be exluded."
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Otherwise, he said, "relations between the countries (the UK and Libya) would have deteriorated and it would have affected our relations both on the political level and trade levels and neither Libya nor the UK wanted that."
The minister, Libya's longest-serving politican, going back since 1968, said he had been asked by his government to become involved in the negotiations over al-Megrahi's release following the prisoner's cancer diagnosis.
It was he who first conveyed Libya's concerns to Bill Rammell, a Foreign Office minister at the time, about the possible consequences should al-Megrahi die in prison.
"I told Rammell and then (Ivan) Lewis, his successor, that al-Megrahi was very sick with cancer and that if he died in prison it would be disastrous in general, not just with regards to trade issues, but more importantly with public opinion, as people here and in the Middle East believed he was innocent, a hero.
"If he had died in prison they would also have believed that his illness was brought about intentionally and this would have been bad."
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He said he had conveyed the same message to Scottish officials.
It was then that Rammell had told him that neither Gordon Brown, the prime minister, nor David Miliband, the foreign secretary, wanted al-Megrahi to die in prison.
Legal experts were hired to explore ways in which to seek his freedom and they were made aware of possible release on compassionate grounds as well as under the Prisoner Transfer Agreement.
The minister said al-Megrahi had insisted on dropping his appeal against conviction for the Lockerbie bombing in order to give both options a better chance.
"He was a sick man, a dying man who wanted to return home, reunite with his family and see them before he died," he said. Al-Megrahi had declared when he made his decision: "I want to die among my family."
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A spokesman for Tony Blair said last night: "As we have always said, this was an issue the Libyans raised with everyone in the international community, but Mr Megrahi was convicted by a Scottish court, and Mr Blair was obviously not in any position to release someone who had already been convicted.
"As we constantly made clear to the Libyans when they raised this issue, Mr Blair had no authority to secure his release. In any event, Mr Megrahi's release had nothing to do with any of the bilateral negotiations Mr Blair started, such as the Prisoner Transfer Agreement. Rather, his release was a decision made on compassionate grounds by the Scottish Executive - conditions which didn't even exist in 2007.
"Mr Blair fully supports the decision to integrate Libya back into the international community. However, the decision on Mr Megrahi was not one Mr Blair had any role in whatsoever."