The offer was reported to involve the payment of $10 million in compensation for each of the 270 people who died in the 1988 explosion of Pan Am flight 103 over the Scottish village of Lockerbie. Under the alleged offer, the payment would be made into a UN escrow account, but distributed in steps corresponding to the international rehabilitation of Libya. Thus, 40 per cent of the money would be distributed upon the lifting of UN sanctions, 40 per cent upon the lifting of US sanctions, and the final 20 per cent when Libya was removed from the US list of states sponsoring terrorism.

But neither UN nor US sanctions can be dropped until other demands are satisfied. Most notably, Libya must accept responsibility and disclose all it knows about the attack, and renounce terrorism. In 1999, it satisfied another key demand by surrendering for trial its two nationals accused of carrying out the attack. One of these, Abdel Baset al-Megrahi, was convicted in January 2001.

Libyan, US and UK officials are due to hold a long-scheduled meeting on 8 June to discuss the issues. 'That will provide us with a good opportunity to clarify the situation regarding this offer,' said a UK Foreign Office spokesman on 29 May. Both London and Washington have extended a cautious welcome to the reports. 'It certainly is a step in the right direction,' said US Secretary of State Colin Powell on 29 May. 'But I don't think it resolves. all the outstanding issues that have to be dealt with.'

Lee Kreindler, a senior partner at Kreindler & Kreindler, said on 28 May that he believed Tripoli was willing to accept responsibility for the attack soon. 'We could see Libya accept responsibility in the near future - perhaps in the next couple of weeks,' he said. '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.' US sanctions, which were rolled over for another five-year term last summer, are expected to take longer to disburse.