'The US is talking to Libya about normalising relations,' says a source. 'We are seeking a commitment from Tripoli that it will not get involved in the affairs of other states and we hope that we can normalise relations within six-12 months.'

Although US economic ties with Libya have improved rapidly since Tripoli renounced terrorism and abandoned its weapons of mass destruction (WMD) programme in 2003, the restoration of full diplomatic relations has remained problematic.

The normalisation of US/Libyan relations took a big step forward in August, when Saudi Arabia's King Abdullah pardoned two Libyans who had been imprisoned for their part in an alleged Libyan-backed plot to assassinate Abdullah in 2004, when he was crown prince. The pardon removed a major stumbling block between the US and Libya.

The key remaining issue, say sources, is the fate of five Bulgarian nurses and a Palestinian doctor, sentenced to death in 2004 for allegedly deliberately infecting 428 children in their care with the HIV virus. About 50 of the children have died.

Bulgaria, the EU and the US have all condemned the verdict as unfounded, and are pressuring Muammar Gaddafi to drop the charges. However, public opinion in Libya strongly backs the convictions. A decision on 15 November by Libya's Supreme Court to adjourn a hearing on the case until 31 January resulted in protests from victims' relatives. 'The government is in a difficult position,' says a Tripoli-based diplomat. 'The US and the EU are pushing one way, while the public opinion is pushing in the opposite direction.'

'The medics' issue is the key issue,' says the State Department source. 'The EU is taking the lead and we are right with them. But if it goes badly, it will be a big setback for the normalisation of relations.'