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US puts Lockerbie payouts in jeopardy

The families of people killed in the Lockerbie bombing are poised to lose millions of dollars in compensation because of the Bush administration's refusal to accept that Libya is no longer involved in terrorism.

The US has until midnight on Tuesday to remove Libya from the State Department's "state sponsors of terror" list and lift a number of trade sanctions. If not, more than $1.5bn (£800m) of outstanding compensation currently held in a special bank account in Switzerland, will be returned to Libya.

Officials from Libya, Britain and the US are due to meet today in London for urgent talks. The Rev John Mosey, whose daughter Helga was among the 270 victims who died in the 1988 bombing, said last night: "The feeling is that if the money has been put up in good faith by the Libyans then we would hope that the Americans would do their bit."

The compensation payments are part of a complicated deal agreed in the summer of 2003.

But it is unlikely that the State Department will remove Libya from the terror list. This is because Libya was accused earlier this year of being behind a plot of kill the Saudi leader Crown Prince Abdullah.