Documents released to the public reveal politicians' worries that shutting the Ravenscraig steelworks would be seen as a "betrayal".
The Lanarkshire site was closed prematurely in January 1992.
About 1,200 jobs were cut at the site soon after earlier closures had affected about 6,000 jobs in the area.
Officials were briefed on the "serious political consequences which will follow" for John Major's Conservative government.
Under an agreement on industry privatisation, British Steel were meant to keep the plant running until 1994. However, a fall in pre tax profits from £307m to £19m led to the decision to close the plant.
The revealed documents, some of which were copied to John Major, show how Scottish Secretary Ian Lang had tried to persuade British Steel chairman Sir Robert Scholey to leave the plant "ticking over" until the market conditions improved.
Having learned in secret about the planned closure, he wrote: "I was dismayed to learn of the recommendation which the board is to consider on 8 January concerning early closure of the remaining operations at Ravenscraig, and would welcome an early meeting to explore the implications, and in particular what alternatives to closure will be considered by the board."
Mr Lang told Sir Robert in a meeting "the public is likely to view this as a betrayal of a loyal workforce and a further example of discrimination against Scottish plants".
In one letter, raised with Mr Major, officials noted that British Steel chief executive Brian Moffat believed market conditions allowed for a get-out clause.
The official stated: "Prevailing commercial conditions were in his words 'bloody awful'.
"The remaining jobs at Ravenscraig - some 1,200 - would go."
Concern was also raised over what turned out to be substantial decontamination costs and hundreds of jobs put in risk on the railways.
As the plant closure became an impending reality, politicians and officials tried to find ways to best manage the political fallout.
To try and offset the inevitable surge in unemployment and economic trauma the government established a special Economic Zone (EZ) in the area.
In one letter to officials on behalf of the Lord President of the Privy Council, it was noted: "While there is unlikely to be a direct impact on political sentiment at the local level given established allegiances, Ravenscraig's significance to Scotland as a whole as the symbol of Scottish steel making strengthens his view that setting up the EZ is also extremely important in political terms, as the secretary of state argues."