Obama and Cameron tread cautiously on BP

WASHINGTON (Reuters) - British Prime Minister David Cameron on Tuesday rejected calls for an inquiry into whether BP Plc influenced the release of the Lockerbie bomber, even as he sought to ease transatlantic tensions in talks with U.S. President Barack Obama.

Determined not to let the Lockerbie controversy and BP's role in the Gulf of Mexico oil spill overshadow their White House meeting, the two leaders reaffirmed the much-vaunted "special relationship" between their countries.

Cameron said he understood U.S. anger over BP's role in the spill and tried to defuse U.S. lawmakers' concerns that the company may have had a hand in Scottish authorities' release last year of a Libyan convicted in the 1988 bombing of Pan Am flight 103 over Lockerbie, Scotland.

But Cameron, under pressure at home to stand up for the British energy giant against the bashing it has faced in Washington, also insisted it was in U.S. and British interests for the company to remain strong and viable.

Obama, whose approval ratings have been undercut by public outrage over the spill, avoided the tough language he has often used against BP over its handling of Gulf disaster and also played down the simmering controversy over the Lockerbie case.

"I completely understand the anger that exists right across America. The oil spill in the Gulf of Mexico is a catastrophe," Cameron told reporters as he stood side-by-side with Obama in his first U.S. visit since taking power in May.

"It is BP's role to cap the leak, clean up the mess and pay appropriate compensation," Cameron said.

But he also cautioned, "Let us not confuse the oil spill with the Libyan bomber."

Cameron insisted BP had no role in the release of Abdel Basset al-Megrahi, which he opposed at the time, and pledged his government's aid in any U.S. Senate probe into the matter.

Steering clear of any public disagreement, Obama said he was confident the British government would cooperate to make sure all the facts are known.

In an apparent bid to assuage U.S. concerns, Cameron ordered his cabinet secretary to review documents in the case and agreed to meet U.S. lawmakers on the issue on Tuesday.

But he rejected in advance their demands for a full British investigation. "I don't need an inquiry to tell me what was a bad decision," Cameron said.

FIRST-NAME BASIS

Though problems swirling around BP have threatened to complicate U.S.-British ties, Obama joined Cameron in lauding the historic alliance between their countries as alive and well. Some critics see the concept as outdated in the 21st century.

The two leaders, calling each other by their first names, presented a united front on the war in Afghanistan, sanctions against Iran and efforts toward Middle East peace.

But they papered over differences on their governments' strategies toward renewing economic growth.

Cameron has led European attempts to cut budget deficits that have ballooned following the global financial crisis, while the United States has urged caution, arguing that reducing borrowing too fast could hinder the fragile recovery.

Scoffing at "endless British preoccupation with the health of the special relationship, Cameron wrote in the Wall Street Journal that he would be "hard-headed and realistic" about U.S. ties and said both countries must also strengthen bonds with rising powers like China and India.

Aides said the Obama-Cameron meeting was also aimed at building on a personal rapport they struck up at last month's Group of 20 summit in Canada.

But BP and its role in the worst offshore oil spill in U.S. history loomed large.

With an eye to British pensioners and other investors at home, Cameron had pledged to defend the embattled oil company in Washington.

Already under fire over the Gulf disaster, BP is in the crosshairs of U.S. lawmakers who want a British inquiry into whether it had a part in the Lockerbie bomber's release.

BP has confirmed it lobbied the British government in 2007 over a prisoner transfer deal with Libya for fear its commercial interests in the country were being damaged. But the company said it was not involved in talks on the release of Megrahi, sentenced to life for the deaths of 270 people, including 189 Americans.

Scottish authorities said they freed the intelligence officer -- over strong U.S. objections -- because he was terminally ill and they believed he had only three months to live. He is still alive in Libya.

Like their predecessors, Obama and Cameron had nothing but praise for their countries' special relationship, a phrase first coined by Winston Churchill after World War Two.

But Cameron has signaled that his new Conservative-Liberal Democrat coalition will work pragmatically without giving the appearance of being slavish to U.S. interests.

Obama has also demonstrated a desire to see relations evolve, although he has been careful to avoid offending British sensibilities as he did earlier when he returned a loaned bust of Churchill on display in the Oval Office.

(Additional reporting by Patricia Zengerle, Ross Colvin, Alister Bull and Steve Holland; editing by Patricia Wilson and Mohammad Zargham)