Libya has given the United States an extra three months to end US economic sanctions and drop it from the US list of state sponsors of terrorism or it will reduce payments in the Lockerbie bombing settlement, a lawyer said on Tuesday.  

Under a compensation deal with families of the 270 victims of the 1988 bombing of Pan Am Flight 103 over Lockerbie, Scotland, Libya insisted the United States take both actions by Thursday or it would cut the amounts paid out to the families.

Jim Kreindler, a private lawyer who represents many of the Lockerbie families, said Libya agreed to extend the deadline by three months until July 22 apparently to give Washington more time to end the sanctions.

The United States is expected to soon end the main sanctions barring US companies from trading with or investing in Libya, possibly as early as next week, US officials said.

But the officials said Libya was not expected to be dropped from the US state sponsors of terrorism list, which bars it from receiving US arms exports and imposes other sanctions.

State Department spokesman Richard Boucher said the United States was "looking at" ways to normalize trade and investment but he would not be drawn on if or when this might happen.

Libya's surprise Dec. 19 announcement that it would abandon the pursuit of chemical, biological and nuclear weapons and its Aug. 15 admission of responsibility for the Lockerbie bombing have ushered in a new era in US-Libyan relations after decades in which Washington treated Tripoli as a pariah.

Boucher said a top US diplomat in March gave Libyan leader Col. Muammar Gaddafi an oral message from US President Bush that Tripoli had made "excellent progress" on getting rid of its weapons programs which "allowed us to look forward to continued improvements in our bilateral relations."

Libya frustrated

Kreindler, who traveled to Libya over the weekend, said Libyan officials believed it was useful to give the United States a little more time to remove the sanctions despite their frustration that they have not already been lifted.

"They understand that it would be catastrophic to blow up the process now," Kreindler said. "They told us that they were frustrated that they have done everything the US has demanded and nothing has happened yet."

When it took responsibility for the bombing, Libya turned over US$2.7 billion, or US$10 million per victim, to be paid out to the families under a phased deal tied to lifting sanctions.

The families received US$4 million last year after the UN Security Council ended its sanctions on the oil exporter.

Under the deal, they can receive another US$4 million if the United States lifts its own sanctions and US$2 million more if it drops Libya from the US list of state sponsors of terrorism.

If Washington does not do so by the new deadline of July 22, Libya pays only US$1 million more, bringing compensation to US$5 million per victim. Kreindler said if Libya has not been dropped from the state sponsors of terrorism list by July 22, he would seek another extension.

(China Daily April 21, 2004)