Libya's offer- $10m per victim

40% when UN sanctions lifted 40% when US sanctions lifted 20% when Libya taken off US terrorism list

Each victim's family would receive $10m, but the money would only be handed over piecemeal, as sanctions on Libya were lifted.

A Libyan intelligence agent has been convicted of causing the explosion of the Pan Am Flight 103 in 1988, which killed 259 mostly American passengers and crew, and also 11 residents of the Scottish town of Lockerbie.

But the Libyan Government has yet to admit responsibility, and without that admission, the BBC United Nations correspondent says that UN sanctions will remain in place.

Governments cautious

The US has indicated it will follow the UN line, with officials predicting that neither the White House nor Congress would be ready to lift sanctions in return for money alone.

UN demands that Libya must

Admit responsibility Disclose all it knows about Lockerbie case Compensate victim's relatives Renounce terrorism

"The compensation is something that the families have to work out with the Libyans," an American official told the AFP news agency.

"The sanctions are a governmental matter," the official said.

The UK Foreign Office welcomed the offer, if genuine, as "a sign that Libya wishes to respond to the requirements of the UN resolutions".

However, a Foreign Office spokesman said Libya had yet to meet all the UN's demands.

Pay plan

The New York law firm of Kriendler and Kriendler gave relatives details of the Libyan offer, which gives a breakdown of how the compensation would be paid.

When UN sanctions are lifted, 40% of the total will be disbursed, and another 40% when the US sanctions are removed.

Gaddafi is keen to put an end to the affair

The remaining 20% will be paid when Libya is removed from the US State Department's list of sponsors of international terrorism.

But the offer made no mention of any acceptance of responsibility.

Many of the US relatives view the offer with contempt, saying that financial compensation does not go far enough.

"If Libya is still not willing to acknowledge they planned and committed the mass murder of 270 people and issue and comply with all of the conditions of the US Government and UN security council - then everything given to the families would be blood money," said Vicky Cummock, whose husband was killed.

Relative's anger

Her views were echoed by Dan Cohen, whose daughter Theo was murdered in the bombing.

"Libya's got to do something else too, they have got to come clean on this," Mr Cohen said.

We could see Libya accept responsibility in the near future - perhaps in the next couple of weeks

Charles Kreindler

"I don't want Libya taken off the terrorism list in the United States, I'll be damned if I'm going to become a cheerleader to rehabilitate the person who murdered my daughter," he added.

But Charles Kriendler told the BBC that Libya may accept responsibility soon.

"We could see Libya accept responsibility in the near future - perhaps in the next couple of weeks," he said, speaking on The World Today programme.

"If that occurs and if the compensation is promptly paid, as it should be under the settlement agreement, then you would see UN sanctions being lifted," he added.

Independent inquiry

Last year, a Scottish court convicted a Libyan intelligence agent, Abdelbaset Ali Mohmed Al Megrahi, for the mass murder and for smuggling an explosive aboard the flight.

The Pan Am 103 exploded in the mid-air and crashed on Lockerbie

The other co-defendant, Al-Amin Khalifa Fhimah, was acquitted.

Officially, Libya has refused to admit liability, but Colonel Muammar Gaddafi is known to be keen for his country to return to the international fold.

In addition to demanding compensation for the families, the UN said it would lift the sanctions only if Libya acknowledged its responsibility, renounced terrorism and disclosed all it knew about the case.

Relatives said that compensation would close one chapter of the case, but they would still press for an independent inquiry.

US concern

The US has recently added Libya - alongside Cuba and Syria - to the nations it claims are deliberately seeking to obtain chemical or biological weapons.

In a recent speech, US Under Secretary of State John Bolton said that the three nations could be grouped with other so-called "rogue states" - Iraq, Iran and North Korea.

Mr Bolton said that those countries could be actively attempting to develop weapons of mass destruction.

He also accused Libya of continuing in its attempts to obtain nuclear weapons and warned that the US would take action.