Megrahi casts a long shadow over Cameron's date with Obama

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David Cameron bowed to mounting pressure for a review of the decision to release the Lockerbie bomber yesterday as the affair cast a shadow over his talks with President Barack Obama at the White House.

The Prime Minister resisted calls by American politicians for a full-scale inquiry but gave ground by asking asked the Cabinet Secretary, Sir Gus O'Donnell, to review whether the Government should release any secret documents relating to BP's alleged role in the return of Abdelbaset al-Megrahi to Libya.

Mr Cameron was caught in the crossfire between American politicians, including the Secretary of State Hillary Clinton, who want an inquiry, and BP, which allegedly lobbied for Megrahi to be sent back to Libya to help the oil giant land a £550m oil exploration deal in his home country.

Megrahi, the only person convicted of the 1988 Lockerbie bombing which killed 270 people, was released by the Scottish government almost a year ago on the grounds that he had only three months to live. He has prostate cancer and is still alive.

Passions are running high over the case in the US, where BP is public enemy No 1 because of the Gulf of Mexico oil spill. Charles Schumer, a New York senator, has even called for Megrahi to be brought back to spend the rest of his life in a Scottish jail.

Mrs Clinton said: "That Megrahi is living out his remaining days outside of Scottish custody is an affront to the victims' families. We are encouraging the Scottish and British authorities to review again the underlying facts and circumstances leading to [his] release."

Mr Cameron is reluctant to order a new inquiry as it could weaken BP's share price at a time when the company is already on the ropes. He opposed moves in the US Congress for legislation to single out BP for the oil spill, which could land it with a crippling compensation bill of between $60bn and $100bn. And he called for an end to the "war of words" on BP, saying the President had agreed that "it is in the interest of both our countries that it remains a strong and stable company".

Later the Prime Minister made a concession in an attempt to cool the row, announcing: "I am asking the Cabinet Secretary to go back over all the paperwork to see if there is anything else that should be released, so that there is the clearest possible picture out there of what decision was taken and why." Mr Cameron added that he doesn't currently favour an inquiry: "I don't need an inquiry to tell me what I already know, which is that it was a bad decision."

Video: Don't blame BP for bomber's release

The documents under review are believed to include calls and letters between Jack Straw, the then Justice Secretary, and Sir Mark Allen, a former senior MI6 officer who was involved in talks with Libya and went on to work for BP.

Mr Cameron promised Britain would co-operate with a Senate inquiry into the affair from 29 July. At a White House press conference last night, Mr Obama stopped short of demanding a full inquiry, saying he had confidence in the Cameron Government to ensure "all the facts" were revealed.

On his first visit to the White House since becoming Prime Minister, Mr Cameron held more than an hour of one-to-one talks with Mr Obama, before a working lunch with their advisers. Afghanistan was the main subject of their discussions.

At their press conference it was first-name terms as "Barack" and "David" exchanged compliments. Mr Obama said his relationship with "my partner and friend" had got off to a "brilliant start." He added: "The US has no closer ally, no stronger partner, than Great Britain." The customary exchange of gifts saw Mr Cameron present the President with a painting, valued at £2,500, by the graffiti artist Ben Eine (real name Ben Flynn) entitled Twenty-first Century City.

He also handed over Hunter wellington boots for the President's children, Sasha and Malia, and Miller Harris candles for Mr Obama's wife, Michelle. In return, Mr Obama gave Mr Cameron an example of US pop art – a signed lithograph by Ed Ruscha, called Column with Speed lines.

The President and Prime Minister papered over their differences on the economy, despite fears in the Obama administration that European nations are cutting their deficits too quickly. Mr Cameron passed on to President Obama an invitation from the Queen for him to make a state visit to Britain.

* BP, whose shares are a major holding of British pension funds, last night moved to shore up its finances with a deal to sell $7bn (£4.6bn) of assets to the Texas firm Apache. The oil fields, in West Texas, Canada and Egypt, are "worth more to others than to BP", the company's chief executive, Tony Hayward, said, adding that the sales were "a good first step" in a bigger money-raising plan.

Q&A: Does the US have a case against BP over Libya?

Why is Lockerbie back in the news?

US senators have alleged that BP lobbied for the release of the Lockerbie bomber, Abdelbaset Ali al-Megrahi. David Cameron met them yesterday to discuss their concerns after making it clear that it was wrong for the Lockerbie bomber to be released.

What do the US senators want to happen next?

They are asking for an investigation into their central allegation that BP lobbied the UK to try to ensure Megrahi's release from a Scottish jail. They claim that BP pressed for an agreement that would lead to Megrahi's release in order to help secure an offshore oil deal with Libya.

What does BP say?

The oil giant has confirmed it made enquiries about a prisoner transfer agreement as the company was concerned a delay might have "negative consequences" for UK commercial interests. But it told the US that it did not express a view about the specific form of the agreement which was a matter for the UK and Libyan governments. It added that BP did not make representations over the Megrahi case, which was solely a matter for the Scottish Government.

PM raises hacker's case with President

Hopes rose last night that the computer hacker Gary McKinnon could escape extradition to the US after David Cameron raised his case with Barack Obama.

Although officials said no decision was reached by the two leaders, Mr Cameron's move could result in Mr McKinnon being tried and serving any sentence in Britain. Mr McKinnon, 43, suffers from Asperger's syndrome and could face a jail sentence of up to 60 years if he were tried in America. Authorities in the US want him to stand trial for hacking into secret military computers. He says he was looking for evidence of UFOs.

The Prime Minister told a White House press conference: "We completely understand that Gary McKinnon stands accused of a very important and significant crime. I have had conversations about this issue with the US ambassador as well as raising it today with the President, and I hope a way through can be found." The President added: "I trust that this will get resolved in a way that underscores the fact that we work together."

Theresa May, the Home Secretary, is reviewing Mr McKinnon's case. Mr Cameron and the Deputy Prime Minister Nick Clegg have opposed his extradition.